The Time is Right for NAFCU’s Five–Point Regulatory Relief Plan for Credit Unions

By. Fred Becker, NAFCU

Credit unions are suffering under an overwhelming regulatory burden.  They need broad-based regulatory relief to enable them to enhance their efforts in reviving our economic stagnation and the anemic middle-class jobs market. The time is right for action on NAFCU’s five-point plan which will provide broad-based regulatory relief for credit unions.

The plan’s five-points

• Administrative improvements for NCUA’s powers. NAFCU wants changes to strengthen and enhance NCUA.  Among the measures we propose are allowing individual federal credit unions  to seek parity under broader state rules; directing NCUA and the CFPB to conduct a cost/benefit analysis of rules and rule fixes if costs are unexpectedly high, and giving NCUA the authority to delay or modify  CFPB rules. We also want better access for credit unions to the Central Liquidity Facility.

• Capital reforms. The capital standards for credit unions need to be modernized to allow them to compete and thrive in today’s marketplace. Our proposal includes access to supplemental capital, a risk-based net worth requirement that more accurately reflects a credit union’s risk profile and takes into account material risks, and directing NCUA, with input from the industry, to conduct a study and report recommended changes to Congress on prompt corrective action.
• Structural improvements. NAFCU is continuing its long-standing push to strengthen the federal charter. These improvements include an easier process for expanding a credit union’s field of membership and more flexibility when adding underserved areas. We also urge Congress to direct NCUA to conduct a study of its corporate governance rules and report back with suggested changes.

• Operational improvement. Credit unions are hampered by outdated restrictions on their lending, that’s why we continue to press for greater member business lending authority. We also want an end to yearly mailings of privacy notices when policies do not change, revised investment powers, more-flexible loan rules, and federal share insurance for Interest on Lawyers’ Trust Accounts.
• Data security reforms. Cyber security and data breaches continue to make headlines, with credit unions bearing significant costs. We want 21^st century legislation that holds merchants accountable for the costs of data breaches on their end; sets national standards for safekeeping of all financial and personal information; requires merchants to disclose their data security policies to customers; and requires timely disclosures in the event of a breach.

How is the plan being received?

Already our efforts are gaining traction. In the days immediately following NAFCU’s letter to Congress, three new bills were introduced that addressed key proposals from our plan.

First, Reps. Ed Royce, R-Calif., and Carolyn McCarthy, D-N.Y., stepped forward once again to promote credit union business lending by introducing H.R. 688, The Credit Union Small Business Jobs Creation Act. The bill would increase the member business lending cap to a maximum 27.5 percent of assets for eligible institutions.

Second, Reps. Peter King, R-N.Y., and Brad Sherman, D-Calif., introduced H.R. 719, The Capital Access for Small Businesses and Jobs Act, which addresses supplemental capital for credit unions.

Third, Reps. Blaine Luetkemeyer, R-Mo., and Brad Sherman, introduced H.R. 749, The Eliminate Privacy Notice Confusion Act. This measure would remove the requirement for credit unions to mail privacy notices yearly to members even when they don’t change their policies.

In addition, President Obama issued an executive order on cyber security, which is a good first step, but we need much more to truly protect our financial system.

The swift introduction of these legislative remedies affirms the confidence Congress has in credit unions – and the timeliness of NAFCU’s call to action.

This is great news. But with all the talk on tax reform, protecting the federal credit union tax exemption matters most to me.

Protecting the credit union federal income tax exemption is still job #1 at NAFCU.  It is so important that last year we undertook a landmark study on the economic benefits of the credit union federal income tax exemption. The study found that without credit unions, all Americans—regardless of credit union membership—would face higher interest rates on loans, lesser rates on deposit and higher fees. The study also demonstrated that the loss of the credit union tax exemption would result in a loss, on average, of 150,000 jobs each year over the next decade, cost the federal government $1.5 billion in lost tax revenue and shrink the GDP.

And with Congress recently announcing new efforts on comprehensive tax reform, making legislators aware of this study and the value the credit union tax exemption provides to the economy as a whole, is more important than ever before.

But as important as protecting the tax exemption is, we know that regulatory burden is crippling credit unions and their ability to help their members. We know that if it continues, consumers will face higher costs and fewer options for affordable financial services because some credit unions will give up the battle.

We need Congress to act now. The three new bills are a good start, but we need them to move forward to passage and we need more measures introduced. Passage of the five points of NAFCU’s regulatory relief plan, individually or as a whole, will move us closer to real relief for credit unions and their members.

I encourage you to use the tax exemption study and advance the proposals within the five-point plan. It will take all of us, working together, to advance credit unions and help make the legislative measures we want law!