OVERLAND PARK, Kan. (8/24/10)--The Kansas Credit Union Association and Lenexa, Kan.-based Mainstreet CU testified Monday about how credit unions have stayed strong through the recession, helping members while facing increased regulatory burdens, during one of two hearings held in Kansas this week before a U.S. House Committee on Financial Services' subcommittee. Marla Marsh, president of the Kansas Credit Union Association (KCUA), and John D. Beverlin Sr., president/CEO of Mainstreet CU, testified during Monday's hearing before the subcommittee on oversight and investigations, which is conducting a series of "End of Excess" hearings. Chairman of the subcommittee is Dennis Moore(D-Kan.). Both noted that credit unions have a strong role to play in the financial services marketplace, urging Congress to recognize the challenges faced by credit unions as they address increasing compliance burdens and to allow flexibility and increase options for credit unions to continue to serve members and put capital back into the economy. They encouraged Congress to increase credit unions' member business lending cap to 27.5% of assets from the current 12.25% limit--at no cost to taxpayers. Marsh noted that Kansas credit unions are generally healthy and well capitalized, but "they have not been immune from the effects of the downturn." She cited statistics on how Kansas credit unions stand out when compared with their credit union peers and banks. "We hope the committee will be mindful of and will monitor how the new Dodd/Frank law is implemented, including the overall impact new and current regulations will have on the operations" of credit unions, she said, citing two risks. "The greatest risk for credit unions comes from the collateral damage caused by the 'too big to fail' institutions," she said. The second "is the rise in regulatory burden and examiner 'one size fits all' approach that stifles our efforts to do what we do best--provide solutions to meet the financial needs of our members and help grow local economies," Marsh told the subcommittee. A number of lessons can be learned from the state's credit unions, she said. The key lesson: "relationships matter. The biggest difference between the Wall Street business model and the credit union business model is the member ownership component," Marsh said. She also noted credit unions' focus on making decisions that are in the mutual best interest of both parties and their solid underwriting processes. In his testimony, Beverlin discussed how his credit union's auto loans increased 195% and mortgages rose 75% last year. "It was not because more members felt confident in their future; it was a result of larger lenders exiting the lending market." Mainstreet CU survived 2009 because of its conservative approach to business and diversified loan portfolio and because the nature of a member-owned credit union is to "work with members when they are faced with financial difficulty," Beverlin said. "What was unique for us this past year and what will pose additional concerns for us in the future are legislative and regulatory burdens," he told the subcommittee. While there is agreement that Midwest banks and credit unions did not cause the financial crisis, "we all seem to be grouped together when any attempt is made to look for solutions to the crisis." Legislated changes impacted the credit union's credit card portfolio. "While not one of the abusers of fees on overdraft protection, we spent almost $50,000 educating our members because of the imposed regulatory change. The recent passing of financial reform legislation with an amendment on debit/credit card interchange will result in additional lost revenue," he said. "We are concerned with where it will all stop." He noted one area credit unions can help in the future: member business lending. Because of the arbitrary business lending cap of 12.25%, Mainstreet CU, which doesn't do business loans, finds it "hard to justify putting everything needed in place with the cap at the current level." "The impact of these regulatory changes will ultimately fall on the shoulders of our members and Kansas consumers." Yesterday's hearing was in Overland Park. Today's hearing, which is in nearby Lawrence, will feature testimony from Chris Wolgamott, Meritrust CU community development liaison.