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Yesterday, the House Appropriations Subcommittee on Financial Services and General Government released its Fiscal Year 2018 draft legislation. Today, the Subcommittee will mark up the bill and expect it to be considered by the full House Appropriations Committee on Thursday, July 13th. Today’s Subcommittee markup starts at 3 p.m. and can be viewed here.
The bill includes a number of provisions that were included in H.R. 10, the Financial CHOICE Act. It includes significant regulatory relief and brings the CFPB under the appropriations process, reforms its UDAAP authority, and makes some of the other changes found in CHOICE that add more checks and balances to the CFPB rulemaking process. Other relief provisions include the repeal of the CFPB Small Business Loan Data Collection program. It also repeals the CFPB’s authority to write rules for arbitration. In addition, the draft provides for community financial institution mortgage relief as well as “safe harbor” for certain loans held on portfolio.
However, the draft bill includes several provisions of serious concern to credit unions. First and foremost, it puts federal banking regulators, including the NCUA, under the appropriations process.
CUNA opposes bringing the NCUA under the appropriations process. The money that funds the NCUA comes solely from credit unions and their members, not the taxpayers in general. Maintaining a separate, independent federal regulator and insurer is critically important to the credit union system, and the structural and mission-driven differences between credit unions and banks necessitate such a regulatory scheme. Subjecting NCUA to the appropriations process will adversely impact the independence of NCUA. Also, credit unions and their members remain willing to pay for their own regulator provided there is sufficient transparency with respect to the agency’s budget and the overhead transfer rate. Finally, credit unions fear that in the future, credit union funds could be a piggy bank for the federal government’s general fund, resulting in more credit union dollars going to the government than they receive back in the form of examination and supervision services.
CUNA is also very concerned that the Community Development Revolving Loan Fund, funded at $2 million last year, has been defunded in this bill. Created in 1979 and transferred to NCUA administration in 1986, the CDRLF assists credit unions serving low-income communities to: 1) provide financial services to their communities; 2) stimulate economic activities in their communities, resulting in increased income and employment; and 3) operate more efficiently. CDRLF funds a revolving loan program and a technical assistance program. For the revolving loan program, CDRLF had outstanding loans of $9.1 million (25 loans outstanding to 25 credit unions) as of September 30, 2016. For the technical assistance program, the CDRLF made 309 technical assistance awards totaling $2.5 million in 2016 from the multi-year appropriations. These small credit unions offer services like free income tax preparation and financial literacy classes. Since FY 2001, Congress has recognized the importance of CDRLF, and has provided annual appropriations for the program. The CDRLF usually receives requests that greatly exceed available funds and CUNA is concerned that an elimination of this fund will result in fewer low-income credit unions having access to needed capital to provide critical services to low income credit union members.
CUNA is also disappointed that the bill includes a $58 million cut to the Community Development Financial Institutions Fund. The CDFI Fund was established in 1994 by the Riegle Community Development and Regulatory Improvement Act and is administered by the Treasury Department. It makes capital grants, equity investments and awards for technical assistance to community development financial institutions (CDFIs). Examples of CDFIs include community development banks, community development credit unions, community development loan and venture capital funds, and microenterprise loan funds. CDFIs are required to provide a 1:1 match for most of the awarded funds, which are offered on a competitive basis. CDFIs finance community development initiatives such as small businesses, community facilities, and low-income housing. CDFIs such as Community Development Credit Unions (CDCUs) are charged with supplying low-income, distressed communities with traditional banking services such as savings accounts and personal loans, and offering individuals the tools needed to become self-sufficient stakeholders in their own future. The CDFI Fund uses small amounts of federal dollars to leverage significant amounts of private and non-federal dollars, and has added a tremendous boost to the CDFI industry (which relies heavily upon private sector funds from corporations, individuals, religious institutions, and private foundations).
CUNA is already in preliminary talks with Hill staff regarding items of concern to credit unions. More information on the bill will follow as we further analyze it. Please remember that this is the first step in a long process and the likelihood that this bill will be enacted as stand-alone legislation is highly unlikely. If it is included in an omnibus appropriations bill, as is more the rule than the exception, legislative riders are often curtailed significantly before passage.
Letters to Appropriators Regarding the CDRLF and the CDFIF:
Community Development Revolving Loan Fund
Community Development Financial Institutions Fund
Champion for the Credit Union Movement
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