CUNA News Now: Elliott says PCA reform would support recovery efforts

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CUNA witness Charles Elliott, center, president/CEO of the Mississippi Credit Union Association, listens to opening statements.

WASHINGTON (9/15/05)--Charles Elliott, testifying on behalf of the Credit Union National Association (CUNA) before a House subcommittee, said Wednesday that the most meaningful thing Congress can do to support credit unions trying to help victims of Hurricane Katrina is to ease capital restraints caused by current prompt corrective action rules.

"We have serious concerns that the recovery effort will be significantly limited by restraints imposed on credit unions under prompt corrective action," Elliott told members of the House Subcommittee on Financial Institutions and Consumer Credit. The subcommittee was conducting a hearing on the response of the financial services industry to the disaster that swept the Gulf Coast states during and after Hurricane Katrina.

"Countless individuals and businesses across the Gulf Coast thought they were fully secured and insured--their property was not in a flood plain and had never flooded," Elliott told the subcommittee. "Now they have lost everything and are facing payments on a home or business that no longer exists."

He told the committee that, of the 14 Mississippi credit unions in the direct path of the storm, eight received major water damage. Only one had flood insurance. "Now those credit unions, which were not located in a flood zone, are not only struggling to re-establish financial services to the area, but they are also facing significant losses."

Elliott said the housing problem was compounded because those same 14 credit unions reported nearly 100 employees who no longer have a place to live due to storm damage. "The majority of those employees are also facing a lack of flood insurance, as their residences were not located in flood zones," he said.

Members of the subcommittee said in opening statements that they were ready to act quickly to develop legislation that would support credit unions and other financial service providers in their efforts to help the hurricane victims cope with a broad array of financial challenges.

Rep. Richard H. Baker, a Louisiana Republican, said the issues surrounding the disaster caused by Hurricane Katrina demand a "regulatory view never before required" and that federal financial regulators should recognize that "at least until the water recedes" depository institutions need a "generous granting of operating authority."

Baker said financial services providers taking such measures as cashing checks without proper identification need to be assured that there will not be later regulatory consequences. Panel members said they would research any legislative changes that would support this, as well as lenders' ability to defer loan payments without penalties.

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