House Mistake Could Kill Rent Deal for Military Credit Unions, Banks

An error in drafting legislation could kill a fragile deal that would allow banks and credit unions to have branches on military bases without paying rent—a benefit that only credit unions now enjoy.

The deal would have settled a longstanding battle between financial institutions over a provision of federal law that currently allows military officials to offer free rent to credit unions if 95% of the members served by the branch are members of the military.

Banks have long sought that benefit.

This year, for the first time, military credit unions and banking groups agreed that banks would have the same benefits, according to Steven Lepper, president/CEO of the Association of Military Banks of America.

In drafting the bill, the House Legislative Counsel’s office said the benefit would be extended to insured depository institutions. However, the definition cited was one that covered banks instead of credit unions.

“The original version would have applied to both banks and credit unions,” said Anthony Hernandez, president of the Defense Credit Union Council.  “Unfortunately, the House legislative counsel inadvertently limited its scope to banks when trying to define ‘depository institutions.’”

The House passed that bill with that language intact.

And so rather than extend the benefit to banks as well as credit unions, the House bill actually takes it away from credit unions, but extends it to banks.

The Senate version of the annual defense authorization does not address the issue, so under that bill, credit unions alone would retain the benefit.

CUNA President/CEO Jim Nussle on Thursday urged conferees on the legislation to address the issue.

The House bill “was intended to treat Federal or State chartered insured depository institutions equally with respect to the financial terms of leases, services, and utilities,” Nussle wrote. “Unfortunately, the definition of ‘insured depository institutions’ excludes credit unions.”

Nussle voiced his opposition to the House proposal.

Lepper said there are some efforts afoot to add language that would specify that financial institutions would be required to leave military bases under certain circumstances.

Hernandez said banks and credit unions should operate on military bases under the same rules.

“Having both a military bank and defense credit union promotes choice and competition for the benefit of the servicemembers,” he said.

He added that he hopes that language can be added in conference that will afford banks and credit unions the same rent benefits.

“I am sure the Senate will listen to our concerns,” he said.  “There are advantages in working with military banks under the auspices of a healthy Military Banking Program.  However, having credit unions stripped from the amendment –or added back with strings attached–is a non-starter.”