CUNA urges passage of H.R. 3240, the Regulation D Study Act

WASHINGTON, DC (December 1, @014) — CUNA sent a letter to the U.S. House of Representatives today urging passage of H.R. 3240, the Regulation D Study Act, which would direct the Governmental Accountability Office (GAO) to conduct a study of the impact of the Federal Reserve’s regulation setting reserve requirements for depository institutions. This study would include the impact that the regulation has on depository institutions and well as consumers.  This legislation was included in the list of regulatory relief proposals that CUNA submitted to the House Financial Services Committee and Senate Banking Committee at the beginning of the Congress and CUNA testified in support of this legislation in July.

See the full letter below:

The Honorable John Boehner


U.S. House of Representatives

Washington, D.C. 20515


The Honorable Nancy Pelosi

Minority Leader

U.S. House of Representatives

Washington, D.C.  20515


Dear Speaker Boehner and Leader Pelosi:

On behalf of the Credit Union National Association (CUNA), I am writing in support of H.R. 3240, bipartisan legislation scheduled for consideration this week by the House of Representatives.  CUNA is the largest credit union advocacy organization in the United States, representing America’s state and federally chartered credit unions and their 100 million members.

H.R. 3240, sponsored by Representatives Robert Pittenger (R-NC) and Carolyn Maloney (D-NY), directs the Government Accountability Office (GAO) to study the impact of the Federal Reserve Board’s monetary reserve requirements, implemented through Regulation D, on depository institutions, consumers and monetary policy. The House Financial Services Committee favorably reported this bill to the House on July 20, 2014 by voice vote.

Regulation D impacts credit union members by limiting the number of automatic withdrawals from a member’s savings account to six transactions per month. The impact of this limit is to unnecessarily cause credit union members to overdraft their checking accounts when a debit draws the checking account balance below zero and the member has already had six automatic transfers during the month. When this happens, members who may have the funds in a savings account to cover the debit are hit with nonsufficient fund fees (NSF) from their financial institution and, when a check is involved, a returned check fee from the merchant. This is not a result of an overdraft protection program – this happens because of a regulatory cap on automatic transfers. It is difficult for credit union members affected by the cap to understand that this is out of the control of the credit union when the funds to cover the debit are sitting in their account at the credit union.

We believe the cap should be increased or eliminated, but we understand that one of the reasons the regulation is in place is because the Federal Reserve Board is authorized to use it as a tool to conduct monetary policy. As a first step toward a possible change in this cap, the legislation directs the GAO to study the issue. This effort will make more information available for Congress to determine whether an increase in or the elimination of this cap would substantially affect the Federal Reserve Board’s ability to conduct monetary policy.

Specifically, H.R. 3240 directs the GAO to examine and report within one year of enactment on the following topics: an historic overview of how the Federal Reserve Board has used reserve requirements to conduct monetary policy; the impact of the maintenance of reserves on depository institutions, including the operations requirements and associated costs; the impact on consumers in managing their accounts, including the costs and benefits of the reserving system; and, alternatives to required reserves the Federal Reserve Board may have to effect monetary policy. The bill also directs the GAO to consult with credit unions and community banks.

According to former Federal Reserve Board Chairman Ben Bernanke, “…reserve balances far exceed the level of reserve requirements and the level of reserve requirements thus plays only a minor role in the daily implementation of monetary policy.”1 A GAO study will allow an objective assessment of whether the rarely changed monetary reserves imposed on depository institutions and consumers are necessary in order for the Federal Reserve Board to implement monetary policy in the 21st century. CUNA strongly supports this bill.

On behalf of America’s credit unions and their 100 million members, thank you for scheduling H.R. 3240 for consideration. We look forward to working with you and members of the House of Representatives to swiftly enact this legislation.


Jim Nussle

President & CEO

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