For a dozen years, I've attended events like NAFCU's Congressional Caucus and CUNA's Governmental Affairs Conference. Every year, wise members of Congress play to their audience, smile and shake hands. If there were babies there to kiss at a credit union conference, they'd be doing that too. Politicians stay politicians by telling the people what they want to hear. Actually doing something is an entirely different question.
One of the hot topics during the caucus was the Consumer Financial Protection Bureau. Many of the members acknowledged that credit unions were simply collateral damage in the legislative maelstrom occurring in kneejerk reaction to the financial crisis. GOP Rep. Randy Neugebauer noted, “We understand what CFPB is going to mean. We understand what impact interchange is going to have and everything that's pouring out of this administration.”
That's very understanding, and I'm sure many in Congress, Republicans and even Democrats, feel the same way. But the fact remains that nothing is being done by them to mitigate yet another layer of regulatory oversight for credit unions and the added expense to the NCUA as the primary regulator.
On top of that, NCUA Chairman Debbie Matz has promised regulatory relief paired with new safety and soundness focused constraints. In particular, the chairman plans to issue proposals for loan originators to maintain some skin in the game, as well as increased due diligence on the buyers' end and investment concentration limits. Simultaneously, she said she wants to allow credit unions to use derivatives to hedge interest rate risk and count subordinated debt toward risk-based net worth.
The echo in the halls of the Mayflower Hotel where the announcement came was that the details would be crucial to its livability. Most industry observers don't see a rush to mutual savings bank conversions or even private insurance, though some are eyeing their options, but what would it take?
Chairman Matz echoed her previous support to increase the member business lending cap. So did myriad members of Congress. At least since 2003, regulators and members of Congress have been ineffective in increasing the cap.
It takes more than Rep. Kurt Schrader saying, “The increase in the small business lending cap–that's got to happen,” or Rep. Tim Scott during his motivating address stating, “We need to empower the people making good decisions to keep in making good decisions.” Rep. Scott made a much more important point: Credit unions must keep their members engaged in the process.
Credit union executives visiting members of Congress is critical, but getting the credit union members involved is priceless. That hasn't happened since the Campaign for Consumer Choice.
Credit unions as a whole have not done a good job of keeping members informed of issues that are important to them and framing them so that they become important to the members as well. Interchange was a prime example. If credit unions had been in regular contact with their members about various issues or candidates or just get out the vote efforts, calling them to action to defend against the Durbin amendment could have been seamless and more effective.
It all starts with an informed board that understands the ramifications of negative legislation and is willing to make engage members a priority. The board can also work the issues in other organizations they participate in and so on from there talk can grow exponentially. The credit union doesn't even have to take a side, though it would be more effective; it just needs politically aware and involved members.
If you don't advocate for yourself, nobody else will, or at the least it makes it that much more difficult for those who are paid to lobby for you to make a case. That means bringing members (read: voters) into the fight for what's right because another topic of discussion in the halls at caucus was the tax exemption.
As a standalone, the repeal of credit unions' federal tax exemption would be a hard sell–at least without some significant trade-offs, such as the business lending cap. However, if it's swept up in the rush to the deficit reduction deadline there may not be an opportunity to fight it as a single piece and negotiate for expanded powers. The deficit reduction super committee deadline for recommendations is looming. Credit unions must have a true member movement ready in time for the possible fight.
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