110th CONGRESS, LEGISLATIVE ISSUES A - Z

April 17, 2007

Dear Colleague:

We write to request your support for H.R. 1537, the Credit Union Regulatory Improvements Act of 2007, a bipartisan bill to help credit unions that we recently revised and reintroduced. Often referred to by its acronym, the new CURIA is a greatly improved version of the legislation, H.R. 2317, that we introduced in the 109th Congress.

The new and improved CURIA consists of three major sections that address important issues for our nation’s credit unions and their 89 million members. Briefly, these titles would:

• Modernize credit union net worth and capital standards;
• Advance credit union efforts to assist small businesses and promote economic growth, especially in underserved communities; and
• Make several needed modifications to credit union regulatory standards by eliminating unnecessary, burdensome and outdated regulations, as well as by making other needed reforms to credit union oversight and governance.

More detailed information about the new CURIA and its many provisions is attached.

The new CURIA improves upon similar bipartisan legislation introduced in the 109th Congress in the area of credit union capital standards. In order to make these standards comparable to those now in place for FDIC-insured financial institutions, the new CURIA implements a risk-based capital system for credit unions. The bill’s provisions establish risk-based capital requirements and revise the minimum capital standards for credit unions. These changes are based on recent recommendations by the National Credit Union Administration (NCUA).

H.R. 1537 would also revise standards for allowing credit unions to expand their fields of membership in order to better serve underserved areas. The new version of CURIA updates current law to allow all types of credit unions to expand into underserved areas. The new bill also unifies and strengthens the definition of an “underserved area” within the Federal Credit Union Act.

Finally, the new CURIA would reform credit union conversion standards by increasing the minimum member participation requirement in a vote to approve a conversion to 30% of the membership. It would also require a credit union considering a conversion to hold a general membership meeting at least 30 days prior to sending out any ballots.

The new CURIA is greatly improved and builds upon recommendations made by many experts, including credit union regulators and executives. We are also very pleased that the new CURIA has been endorsed by the Credit Union National Association and the National Association of Federal Credit Unions.

In closing, we hope that you will join with us in supporting America’s 89 million credit union members by becoming a cosponsor of our bipartisan bill. If you would like to sign up as a supporter of the new CURIA or if you should have any questions about the bill, please feel free to contact either one of us directly or have your staff contact Kate McMahon in the Kanjorski office at 225-6511 or Michael Ahern in the Royce office at 225-4111.

Sincerely,

Credit Union Regulatory Improvements Act
Summary of Key Legislative Reform Proposals

The Credit Union Regulatory Improvements Act of 2007 (H.R. 1537) consists of three titles that (1) modernize credit union capital and net worth standards, (2) advance credit union efforts to promote economic growth, and (3) make needed modifications to credit union activities, governance, and oversight. The bill is often referred to by its acronym – CURIA.

The first title of CURIA would update current capital requirements for credit unions. The title incorporates the net worth and Prompt Corrective Action (PCA) reform proposals of the National Credit Union Administration (NCUA), the federal regulator responsible for the safety and soundness of the credit union system. In an April 2005 report, NCUA determined that the PCA system created by Congress in the 1998 Credit Union Membership Access Act was too inflexible and that a more fully risk-based system would both foster healthy capitalization levels and encourage more effective capital management.

CURIA would replace the current “one-size-fits-all” leverage capital requirement for credit unions with a more rigorous two-part net worth structure that would more closely monitor actual asset risk. The revised credit union capital/PCA structure would incorporate the relevant international risk-based standards for BASEL I and IA financial institutions and closely resemble the current risk-based capital standards for FDIC-insured banks and thrift institutions.

The second title of CURIA would help America’s credit unions promote local economic growth by providing for modest expansion in credit union business lending. The title would increase the 12.25% of assets limit on credit union business lending put in place by Congress in 1998. A 2001 Treasury study found that credit union business loans are “generally smaller and fully collateralized” and tend to more closely resemble consumer loans rather than traditional business loans. The study concluded that business lending “is a niche market” for credit unions that presents no threat “to the viability or profitability on business lending by other insured depository institutions.” In response, CURIA would replace the arbitrary 12.25% business lending cap with a higher 20% of total assets limit, which is comparable to the current limit on non-real estate commercial lending for thrift institutions.

The title also includes three provisions to permit credit unions to extend services to areas with high unemployment and below median incomes that are generally underserved by other depository institutions. It would reverse a recent NCUA rule change to restore the ability of all federally insured credit unions to expand their membership to designated underserved areas. It would permit a credit union with offices in an underserved area to lease excess space to other commercial businesses. It would also expand the criteria for determining eligible underserved areas.

The final title of CURIA would provide credit unions with limited relief from certain specific outdated regulatory burdens and make other necessary changes to the credit union regulatory system. Among other things, CURIA would provide NCUA with increased flexibility in setting maximum loan terms and interest rates, increase credit union investments in credit union service organizations, allow limited investments in securities, improve credit union governance, and increase credit union conversion voting requirements.

Copyright © 2008 - Credit Union National Association, Inc.