WASHINGTON (6/24/08)—Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan said he expects today’s House vote on an important credit union regulatory relief bill to proceed without a hitch. Donovan noted Monday that the bill, known as the Credit Union, Bank and Thrift Regulatory Relief Act (CUBTRRA, H.R. 6312), was placed on the House Suspension Calendar for a vote, an action reserved only for noncontroversial legislation. As its name suggestions, the bill contains measures that would benefit credit unions unions, as well as banks and thrifts. CUNA noted the bill offers significant relief for credit unions. Among provisions for credit unions, the bill proposes to:
* Allow all federal credit unions to apply to serve underserved areas , reversing the effect of a banker lawsuit that has prevented community and single-sponsor CUs from reaching out to underserved areas; * Provide increased member business lending (MBL) ability by exempting MBLs made in underserved areas from a statutory 12.25%-of-assets cap; CUNA estimates more than 40% of the nation's census tracts are located in underserved areas; * Grandfather previously approved underserved fields of membership for credit unions; * Allow short-term payday loan alternatives within a credit union's field of membership; * Raise the current investment limit in credit union service organizations (CUSOs) and to 3% of unimpaired capital and surplus, up from 1%; * Enhance the 2006 regulatory relief provisions that allowed the National Credit Union Administration (NCUA) to increase the 12-year maturity limit on non-real estate secured loans to 15 years, Section 104 would further permit the agency to issue regulations providing for loan terms exceeding 15 years for specific types of loans; * Give the NCUA greater flexibility to respond to market conditions; * Clarify existing law that permits credit unions to participate in loan programs secured by the insurance, guarantees, or commitments of State or Federal governments, such as the Small Business Administration's 504 program. The section provides that the loan maturities, terms, and conditions on these loans may be specified in applicable regulations; and * Encourage small business development in underserved urban and rural communities by excluding from the statutory cap any member business loans made to members in underserved communities. The bill's language clarifies that business loans made to businesses operating on a nationwide basis would not be exempt from the cap, but business loans made to locally owned franchises of businesses operating on a nationwide bases would be exempt if in an underserved area.
H.R. 6312 was introduced just last week by Reps. Paul Kanjorski (D-Penn.), Ed Royce (R-Calif.), and Dennis Moore (D-Kan.) and was backed by Rep. Barney Frank (D-Mass.), who is chairman of the House Financial Service Committee. For commercial banks, the House bill proposes to allow the payment of interest on business checking accounts. For thrifts, CUBTRRA would remove the current caps on auto and business lending. Just as the credit union provision of the newly introduced legislation were based on the Credit Union Regulatory Relief Act (CURRA), the bank and thrift provisions also were based on a currently pending bill, the Bank and Thrift Regulatory Relief Act of 2008 (H.R. 5841), introduced in April. Left behind from that bill, however, were sections that would have allowed banks and thrifts to reorganize more easily as LLC or Subchapter S organizations (Section 101, 102 and 206 of H.R. 5841). “But for credit unions, I think the important part of the bill is not what the banks got or didn't get, the important thing is to look at the relief that the bill provides credit unions,” Donovan advised. “This is a good bill that includes the underserved areas FOM provision and member business lending relief." He also noted that some provisions benefit credit unions, as well as banks and thrifts. One example is the proposed change in Gramm-Leach-Bliley privacy notification requirements. Under this bill, financial institutions would not be required to send annual privacy notifications under certain circumstances if it has not changed its policies and practices with respect to disclosing nonpublic personal information since its last disclosure. If approved by the House, as expected, the bill faces a tougher road in the Senate, according to Donovan. "The Senate just is not as far along in the process as was the House, but we will continue to make our case there," the CUNA vp said.. Both the House and Senate adjourn at the end of this week for a July 4 District Work Period and will return to session the week of July 7. Donovan said CUNA will work to garner support in the Senate, and also will continue to work with House lawmakers on additional relief measures. CUNA continues to pursue provisions contained in the Credit Union Regulatory Improvements Act (CURIA, H.R. 1537), which propose a higher cap on member business lending , as well as prompt corrective action reform.