Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
Preserve the Credit Now more than ever, it is critical for the Included in letter to Dan Mica, CUNA The MCUL will work with
Union Federal Tax corporate credit union tax exemption to remain President, on January 8, 2009. CUNA to oppose all attempts
Exemption in place. It provides pricing advantages that to subject credit unions to
translate into a lower cost of financing for taxation, as well as efforts to
consumers and small businesses. It also keeps use the tax debate to prevent
credit unions focused on value and service credit unions from gaining
versus profit. much needed changes to the
Federal Credit Union Act
(FCUA)
Establish Home The savings rate among Americans is critically Included in letter to Dan Mica, CUNA Provide for a federal income
Savings Account low or non-existent. Offering incentives to save President, on January 8, 2009. tax benefit for creating and
with Tax Deductible could reverse this dangerous trend, and in the contributing to a Home
Contributions for process help to build wealth for life’s largest Savings Account.
Homeowners investment and also provide financial
depositories with an additional stable source of
funds.
Federal Tax Our domestic automakers have for decades Included in letter to Dan Mica, CUNA Amend the Internal Revenue
Incentives for the been the engine of growth for our nation’s President, on January 8, 2009. The federal Code to provide tax
Purchase of New economy. As the effects of the subprime stimulus bill provided a deduction to all incentives for the purchase of
Automobiles mortgage crisis have spread to the broader taxpayers for any sales and excise taxes on the new automobiles. This could
financial system, there has been a significant purchase of new cars bought in 2009. This come in the form of a tax
decrease in lending activity for the purchase of deduction phases out for taxpayers incomes deduction for interest paid
new automobiles. Incenting consumers with a over $125,000 ($250,000 for couples). In similar to the mortgage
tax credit for purchasing a new automobile will addition, US Rep. Miller (R-Harrison) interest deduction, or in the
not only help consumers, but also the auto introduced a bill that would give car buyers form of an income tax credit
companies, lenders, and the economy generally. thousands of dollars in vouchers for replacing for a percentage of the
vehicles at least eight years old with fuel purchase price.
efficient vehicles.
Last Updated: 12/19/2011 1
Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
Allow Consumers Due to the economic crisis, many consumers Included in letter to Dan Mica, CUNA Amend the Internal Revenue
Greater Flexibility are in need of emergency access to cash. IRA President, on January 8, 2009. Code to permit consumers to
in Accessing Funds and 401k accounts represent a possible temporarily (up to 3 years)
in IRAs and 401K temporary solution. tap into their IRAs and 401ks
Accounts and deferred contribution
retirement accounts without
penalties for certain
functions.
Student Lending Student loan programs have become the Included in letter to Dan Mica, CUNA Change federal law to allow
and Loan exclusive province of large commercial banks. President, on January 8, 2009. third party marketers like
Guarantee Credit union involvement has diminished due to American Education
Programs lesser negotiating power with universities and a Services (AES) to re-enter
recent change in federal law prohibiting the student loan market as
payment of fees that had helped all lending affiliate marketing agents.
institutions market their products through third
parties. These factors have proportionately had Continue to support the
a higher impact on smaller higher educational funding of federal student
institutions as well as many credit unions. loan guarantee programs
Last Updated: 12/19/2011 2
Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
Regulatory The Treasury Blueprint for revising the Included in letter to Dan Mica, CUNA Oppose any plan that would
Restructuring regulatory structure of financial institutions puts President, on January 8, 2009. weaken or eliminate the
the federal credit union charter at risk. An federal credit union charter
independent credit union regulator can more NCUA Chair Mike Fryzel testified to the Senate and its independent
easily understand and focus on the unique, not- Banking Committee on March 19, 2009 that the regulatory structure.
for-profit role of credit unions. Both credit independence of the NCUA and NCUSIF
union regulations and deposit insurance should be preserved.
guidelines should take into account and
encourage credit unions’ investments in their CUNA believes regulatory restructuring could
members and communities. This would be become a frequent topic of discussion for both
diminished or lost under a bank focused super House and Senate committees during the work
regulatory/deposit insurance structure. periods on Capitol Hill.
U.S. Treasury Secretary Timothy Geithner has
promised to present a comprehensive blueprint
for regulatory reform; however, differences in
regulatory approach may prevent lawmakers
and other government officials from completing
any substantive regulatory reform in the near
future. President Barack Obama's
administration has not yet spelled out how it
thinks the current regulatory structure should be
reformatted, although it has been reported that
senior administration officials are considering a
single agency to regulate the banking industry.
Last Updated: 12/19/2011 3
Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
Community Congress enacted the Community Reinvestment U.S. Rep. Eddie Bernice Johnson, (D-Texas) The MCUL will continue to
Reinvestment Act Act (CRA) in 1977 in response to the unjustified introduced HR 1479 that would, in part, apply defend credit unions against
(CRA) “redlining” of lower income and minority Community Reinvestment Act (CRA) the banker lobby attacking
neighborhoods by banks and thrift institutions requirements on credit unions. The MCUL sent credit unions and suggesting
during the 1960s and early 1970s. The purpose letters of opposition to the bill to all 17 that CRA be applied to them.
was to ensure that for-profit financial institutions members of Michigan’s Congressional
(including both federal and state-chartered Delegation on March 16, 2009.
commercial and savings banks) were adequately
meeting the financial service needs of all parts of
the communities from which they draw deposits.
Credit unions, as not-for-profit, community based
institutions, have been exempt from CRA
requirements. On March 14, 2008, Chairman
Frank stated next year the House Financial
Services Committee would re-examine whether to
require credit unions and insurance companies to
comply with Community Reinvestment Act
requirements.
Last Updated: 12/19/2011 4
Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
FCUA 1. Member Business Lending - Remove Included in letter to Dan Mica, CUNA The MCUL supports
Federal Cap. Credit unions have been making President, on January 8, 2009. Sen. Chuck meaningful FCUA
member business loans (MBL) since their Schumer (D-NY) has announced his intention modernization and regulatory
inception in the early 1900s. Throughout most of introducing legislation to eliminate the MBL relief for credit unions.
of this period there were no limits on the cap.
volume of member business loans credit unions
could originate or hold. In fact, statutory limits
on credit unions’ member business lending did
not appear until passage of the Credit Union
Membership Access Act in 1998. Now more
than ever when small businesses are struggling
to get financing due to the current credit crunch,
credit unions can provide an alternative source
of capital, which will not cost the government
or taxpayers a penny.
2. Field of Membership. FCUs operate under Included in letter to Dan Mica, CUNA
restrictive FOM laws and regulations with the President, on January 8, 2009.
constant threat of banker lawsuits. FCUs
should be able to expand into underserved
geographical areas as was permitted prior to
1998. A number of states already allow for
flexible FOM for state-chartered credit unions,
including the Michigan.
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Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
3. Risk-Based Capital. The Credit Union Included in letter to Dan Mica, CUNA
Membership Access Act mandated a capital and President, on January 8, 2009.
PCA system for federally insured credit unions
that has proven to be too restrictive. In an April
2005 report, the NCUA determined that the
PCA system created by the 1998 CUMAA was
too inflexible and that a more risk-based
approach would both foster healthy
capitalization levels and permit better capital
management.
4. Investments – Community based housing Included in letter to Dan Mica, CUNA
and small business loan pools. As credit President, on January 8, 2009.
unions continue to evolve and become more
integrated into their broader communities,
opportunities will arise to cooperate with other
financial institutions to pool funds that will be
loaned to local citizens in community-based
programs to assist with housing and/or small
business needs. Credit unions should be
empowered on a limited basis to participate in
these programs.
5. Investments in Corporate Bonds. Included in letter to Dan Mica, CUNA
Michigan credit unions are permitted to invest President, on January 8, 2009.
in non-speculative corporate bonds that meet
certain requirements. In addition, flexibility in
making some higher risk business loans to
include an equity interest especially for start-
ups or other appropriate situations may make
good sense.
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Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
6. Investment - Housing Cooperatives for Included in letter to Dan Mica, CUNA
Members. The Michigan Credit Union Act President, on January 8, 2009.
(MCUA) permits a SCU to invest in
cooperative housing and related facilities for its
members with an investment cap of no more
than 5% of the SCU’s unimpaired capital,
provided the interest in the property is disposed
of within 3 years and the purchase price does
not exceed the appraised value of the property
as determined by a competent disinterested
appraiser retained by the SCU. These
provisions allow for one or more SCUs to act in
combination.
7. Investments - Expand FCU CUSO Included in letter to Dan Mica, CUNA
Investment Authority. The MCUA permits a President, on January 8, 2009.
larger percentage of a SCU’s assets to be
invested in a CUSO (up to 6% of assets without
regulator approval, and not to exceed 12% of
the SCU assets unless approved by the state
regulator). FCUs have a lower percentage.
8. Investments - Empower FCUs to Make Included in letter to Dan Mica, CUNA
and Hold Venture Capital Investments. President, on January 8, 2009.
Equity investments by FCUs are generally
prohibited. In this troubled economic
environment, allowing for broader investment
options could help stimulate the economy by
assisting businesses looking for additional
lending sources.
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Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
9. Investments - Allow CUs to Create a Included in letter to Dan Mica, CUNA
Membership Share Class (Class B Shares). President, on January 8, 2009.
Currently credit unions may not share capital by
investing in another credit union. Allowing
financially strong credit unions to invest in
other CUs would provide a low-cost source of
funding. It would also allow the borrowings to
be treated as regulatory capital, thus protecting
the NCUSIF from exposure. It would also
create additional yields for the lending CU that
has excess capital. The lending credit union
would also be a potential acquisition partner in
the event of failure.
10. Investments - Empower FCUs to Invest Included in letter to Dan Mica, CUNA
in Commercial Real Estate. The FCUA President, on January 8, 2009.
currently does not provide credit unions with
the authority to invest funds in the development
of commercial or residential real estate for the
purposes of sale or lease. This new authority
could enhance the involvement of community
based credit unions located in blighted areas.
Banks currently have this power.
11. Convert Troubled Borrowers to Renter Included in letter to Dan Mica, CUNA
Status. Depending on the individual President, on January 8, 2009.
circumstance, it might be beneficial to both the
financial institution and a troubled homeowner
to permit the borrower to stay in the home by
becoming a renter or a rent-to-own option if the
lease payments can be structured to be
significantly less and thus more affordable than
when structured as a loan.
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Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
12. Purchase Assets and Assume Liabilities Included in letter to Dan Mica, CUNA
of a Commercial Bank or Thrift. Due to the President, on January 8, 2009.
current economic crisis, troubled banks and
their regulators will be increasingly looking for
buyout or merger partners. The MCUA permits
a domestic credit union to purchase the assets of
another domestic credit union, or with the
approval of the commissioner, assume any of
the liabilities. Why shouldn’t credit unions be
allowed to assume assets and liabilities of a
local community bank if it’s in the best interest
of both the CU members and the bank’s
depositors?
13. Trust Services. With recent Wall Street Included in letter to Dan Mica, CUNA
sandals and financial bailouts, consumers would President, on January 8, 2009.
probably like the option of receiving trust
services through their local, trustworthy
member-owned institution. While many credit
unions would not desire this power, a limited
number of larger CUs would desire this for their
members.
14. Alternative Capital. Unlike other
financial institutions, credit unions have been
able to increase their capital only by retaining a
portion of their net earnings. NASCUS firmly
believes that credit unions should have access
to alternative capital and that it can be done in a
safe and sound manner.
Last Updated: 12/19/2011 9
Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
Interchange Fee An interchange fee is one of the fees retailers Rep. Pete Hoekstra (R-Holland) has indicated The MCUL and CUNA will
Caps pay to credit card issuers (including credit possible support and co-sponsorship for a bill to oppose this issue as the
unions) and to the payment networks. The card limit the interchange fee. belief is that any legislation
issuers and the payment network provide the would interfere with
operational framework for credit card H.R. 2382 has been introduced to regulate essentially a market-driven
transactions. Interchange fees are payable to the interchange. The proposed legislation would process. Consumer options,
credit union (or other card issuer) and the give merchants an antitrust exemption in competition and innovation
payment network operator, with respect to each interchange negotiations. However, the would be adversely effected.
credit card sales transaction as a contractually- merchants attempt to utilize vehicle bills, such
fixed percentage of the amount of the sale, a flat as the credit card reform legislation, to address
fee, or a formula with both factors. Merchants interchange have been unsuccessful. The
contract with an acquiring bank, aggregator, or MCUL and CUNA will oppose this issue as the
independent payment processor to provide belief is that any legislation would interfere
payment processing services for card with essentially a market-driven process.
transactions and negotiate terms with the
payment networks on their behalf. Among the
costs covered by interchange fees is a credit risk
premium earned by card issuers to cover losses
resulting from card users’ failure to pay their
accounts. Several bills were introduced last
session to cap these fees.
Last Updated: 12/19/2011 10
Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
Credit Card Reform As credit cards are rarely collateralized, the risk The U.S. House had passed H.R. 627, the Although the MCUL and
of borrower default rises with this type of credit Credit Cardholders' Bill of Rights Act which CUNA support banning
line. This forces credit card issuing financial largely paralleled the Reg Z and Unfair and deceptive practices, there
institutions to impose relatively higher costs, Deceptive Practices Act (UDAP) rules that was a concern that legislation
fees, and repricing practices on credit cards. NCUA and the Fed adopted. The U.S. could result in unintended
Perceived abuses in the credit card industry Senate Banking Committee had reported S. consequences such as
have prompted Congress to hold hearings and 414, the Credit Card Accountability, restricting the range of
introduce legislation to curb industry practices Responsibility and Disclosure Act (CARD products and services that
viewed as deceptive or abusive. Act). However, there were concerns since credit card issuers currently
this legislation went much further than the offer, which may cut off
The Credit Cardholders' Bill of Rights Act, Reg Z and UDAP rules. The Senate credit to some and raise the
H.R. 5244, was reported out of the House amended H.R. 627 to look more like S. 414 price of credit for all.
Financial Services Committee last session to but did not consider interchange amendments
ban a number of unfair card practices. The to the bill. The bill requires card issuers to Credit unions did not support
NCUA has recently approved stricter rules to notify a cardholder at least 45 days in the consideration of
ban unfair and deceptive credit card practices, advance of increasing the APR or fees. In interchange amendments in
many which were encompassed in H.R. 5244. addition, the APR generally will not be conjunction with the credit
allowed to increase on existing balances, card reform bill.
unless covered by an exception in the bill.
The President signed H.R. 627 on May 22.
Last Updated: 12/19/2011 11
Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
Internet Gambling Under the 2006 Unlawful Internet Gambling Rep. Barney Frank (D-Mass.) is launching a While the MCUL and CUNA
Enforcement Act (UIGEA), financial new attempt to revise conditions imposed by a support enforcement of
institutions must establish and implement controversial 2006 law that, in part, forces reasonable laws to prohibit
policies and procedures to identify and block financial institutions to block restricted Internet unlawful Internet gambling,
certain online gambling transactions, or rely on gambling transactions. the UIGEA and the proposed
those established by the payments system. rules would inflict a set of
H.R. 2266 and 2267 would delay the unreasonable policing
On November 12, 2008, the Treasury implementation of UIGEA rules for a year requirements which will
Department and Federal Reserve issued a joint beyond their current effective date of Dec. 1, undoubtedly prove difficult
final rule that implements the UIGEA. The final 2009 and create the Internet Gambling for financial institutions to
meet.
rule requires U.S. financial firms that Regulation, Consumer Protection, and
participate in designated payment systems to Enforcement Act of 2009. This act would
establish policies and procedures that are establish a federal regulatory and enforcement
"reasonably designed" to prevent payments to framework under which Internet gambling
gambling businesses in connection with operators could obtain licenses authorizing
unlawful Internet gambling. However, CUNA them to accept bets and wagers from
continues to work with Chairman Frank and individuals in the United States.
others on the Committee to resolve this issue
legislatively.
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Michigan Credit Union League
2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION
Mortgage Given the high number of mortgage related The U.S. House of Representatives passed H.R. The MCUL will continue to
Bankruptcy bankruptcies, legislation is being pushed that 1106, the Helping Families Save Their Homes advocate that CUNA oppose
would allow a mortgage holder to ask a Act, with language permitting bankruptcy any legislation that
bankruptcy judge to reduce the interest rate and courts to modify the terms of loans secured by a unnecessarily burdens credit
extend the length of a mortgage if the debtor's principal residence (cramdown). unions with restrictions and
foreclosure process has been started. Primary However, over concerns regarding the changes relative to mortgage
residence mortgages are treated differently cramdown provision, the Senate introduced S. bankruptcies.
under Chapter 13 proceedings compared to 896, a new housing bill which did not include
other types of secured debts, such as vacation the controversial language. When the Senate The MCUL and CUNA did
homes and car loans. Many lenders have stated considered S. 896, an amendment allowing for support S. 896 which enacted
that changing existing mortgage terms would judicial mortgage modification was defeated but the NCUA Corporate
cause mortgage premiums to increase as much an amendment adding the NCUA Corporate Stabilization proposal and
as 2 percent because lenders would have to Stabilization Plan was adopted. The President did not include cramdown
factor these potential losses into future signed the bill on May 20. language.
mortgage loans. Lenders also argue that
secondary mortgage market investors may flee
from these investments if loan terms can be
changed at a judge’s discretion.
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