Kansas Credit Union Association, Mainstreet CU testify before House
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Officials representing Kansas credit unions were among witnesses testifying at a congressional hearing held yesterday by the U.S. House of Representatives Committee on Financial Services Subcommittee on Oversight and Investigations. Subcommittee Chairman Rep. Dennis Moore (Kansas Third District) presided.
As part of the Subcommittee’s “End of Excess” hearings, Marla Marsh, President/CEO of the Kansas Credit Union Association, headquartered in Wichita; and John Beverlin, President/CEO of Lenexa-based Mainstreet Credit Union, discussed how credit unions are faring and what lessons Wall Street can learn from those who serve main street America. Other testifiers included Thomas Hoenig, President of the Federal Reserve Bank of Kansas City; Charles Stones, President of the Kansas Bankers Association; and representatives of three area banks.
KCUA’s Marsh said a primary lesson for the financial industry is that relationships matter. “The biggest difference between the Wall Street business model and the credit union business model is the member ownership component. When the institution is owned by the “customer,” there is mutual responsibility to act in the best interest of each party.”
Marsh also noted that credit unions are closer to the end user than large institutions that caused the crisis.
“Credit unions recognize that to protect the interest of their member/owners they need to be partners with their members,” she said. “Credit unions still adhere to lending principles that consider more than just a credit score or collateral, but also weigh the character and personal capacity of the borrower to handle the terms of the loan. Having skin in the game results in financial institutions that care about whether the loans are successfully paid back.”
Mainstreet’s Beverlin also spoke to the importance of knowing the people you serve. “As a financial cooperative, a member is an owner of their credit union, and we know our member/owners,” he said. “We work with members when they are faced with financial difficulty.”
Beverlin said Mainstreet CU’s conservative approach to business allowed it to push through the financial crisis and continue serving its members. “Some good things happened in 2009,” he said. “Loans grew. It was not because more members felt confident in their future, it was a result of larger lenders exiting the lending market.”
Mainstreet CU saw a 195 percent increase in auto loans and a 75 percent increase in mortgages made, Beverlin said.
Both Marsh and Beverlin emphasized that while credit unions did not cause the financial collapse on Wall Street, they nonetheless have an important role to play in the recovery. But some legislative and regulatory leeway is needed for this to happen.
“What was unique for us this past year and what will pose additional concerns for us in the future are legislative and regulatory burdens,” Beverlin said. “It seems to me that the mere presence of this Subcommittee and the topic of today’s discussion [means] there is agreement that Midwest banks and credit unions did not cause the financial crisis we are all dealing with. Yet, we all seem to be grouped together when any attempt is made to look for solutions to the crisis.”
Referencing provisions in the “The Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act),” Beverlin said, “While not one of the abusers of fees on overdraft protection, we spent almost $50,000 educating members because of the imposed regulatory change. The impact of regulatory changes will ultimately fall on the shoulders of our members and Kansas consumers,” he said.
Marsh urged Congress to allow flexibility and increase credit unions’ options so they can continue to serve members and add capital back into local economies. “Congress could help create hundreds of jobs and make thousands of dollars of capital available to Kansas small businesses with zero expense to taxpayers by increasing the statutory credit union member business lending cap.” She reminded the Subcommittee that credit unions have asked Congress to raise the limit on member business lending to 27.5 percent of assets, up from the 12.25 percent limit currently allowed.
Marsh said the greatest risk for credit unions comes from the collateral damage caused by Wall Street, noting that one damaging impact has been “the rise in regulatory burden and examiner ‘one size fits all’ approach that stifles our efforts to do what we do best – provide solutions to meet the financial needs of our members and help grow local communities.”
About the Kansas Credit Union Association
The Kansas Credit Union Association is the trade association for credit unions in Kansas, serving more than half -million Kansas consumers.
Established in 1934, the Association’s mission remains the same – to assist member credit unions in meeting the needs of their members and potential members to further the success of the credit union movement. Strategies center on this mission: to unify the credit union movement, provide operational assistance to credit unions, promote growth and advocate on behalf of the membership.
For more information, visit www.kcua.coop.