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					Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE Preserve the Credit Union Federal Tax Exemption BACKGROUND Now more than ever, it is critical for the corporate credit union tax exemption to remain in place. It provides pricing advantages that translate into a lower cost of financing for consumers and small businesses. It also keeps credit unions focused on value and service versus profit. STATUS Included in letter to Dan Mica, CUNA President, on January 8, 2009. MCUL POSITION The MCUL will work with CUNA to oppose all attempts to subject credit unions to taxation, as well as efforts to use the tax debate to prevent credit unions from gaining much needed changes to the Federal Credit Union Act (FCUA) Provide for a federal income tax benefit for creating and contributing to a Home Savings Account.

Establish Home Savings Account with Tax Deductible Contributions for Homeowners

The savings rate among Americans is critically low or non-existent. Offering incentives to save could reverse this dangerous trend, and in the process help to build wealth for life’s largest investment and also provide financial depositories with an additional stable source of funds. Our domestic automakers have for decades been the engine of growth for our nation’s economy. As the effects of the subprime mortgage crisis have spread to the broader financial system, there has been a significant decrease in lending activity for the purchase of new automobiles. Incenting consumers with a tax credit for purchasing a new automobile will not only help consumers, but also the auto companies, lenders, and the economy generally.

Included in letter to Dan Mica, CUNA President, on January 8, 2009.

Federal Tax Incentives for the Purchase of New Automobiles

Included in letter to Dan Mica, CUNA President, on January 8, 2009. The federal stimulus bill provided a deduction to all taxpayers for any sales and excise taxes on the purchase of new cars bought in 2009. This deduction phases out for taxpayers incomes over $125,000 ($250,000 for couples). In addition, the Cash for Clunkers program has provided consumers with the opportunity to trade in their older, less efficient vehicles and receive up to $4500 towards the purchase of a new vehicle.

Amend the Internal Revenue Code to provide tax incentives for the purchase of new automobiles. This could come in the form of a tax deduction for interest paid similar to the mortgage interest deduction, or in the form of an income tax credit for a percentage of the purchase price.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE Allow Consumers Greater Flexibility in Accessing Funds in IRAs and 401K Accounts BACKGROUND Due to the economic crisis, many consumers are in need of emergency access to cash. IRA and 401k accounts represent a possible temporary solution. STATUS Included in letter to Dan Mica, CUNA President, on January 8, 2009. MCUL POSITION Amend the Internal Revenue Code to permit consumers to temporarily (up to 3 years) tap into their IRAs and 401ks and deferred contribution retirement accounts without penalties for certain functions. Change federal law to allow third party marketers like American Education Services (AES) to re-enter the student loan market as affiliate marketing agents. Continue to support the funding of federal student loan guarantee programs

Student Lending and Loan Guarantee Programs

Student loan programs have become the Included in letter to Dan Mica, CUNA exclusive province of large commercial banks. President, on January 8, 2009. Credit union involvement has diminished due to lesser negotiating power with universities and a recent change in federal law prohibiting payment of fees that had helped all lending institutions market their products through third parties. These factors have proportionately had a higher impact on smaller higher educational institutions as well as many credit unions.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE Regulatory Restructuring BACKGROUND The Treasury Blueprint for revising the regulatory structure of financial institutions puts the federal credit union charter at risk. An independent credit union regulator can more easily understand and focus on the unique, notfor-profit role of credit unions. Both credit union regulations and deposit insurance guidelines should take into account and encourage credit unions’ investments in their members and communities. This would be diminished or lost under a bank focused super regulatory/deposit insurance structure. STATUS Included in letter to Dan Mica, CUNA President, on January 8, 2009. MCUL POSITION

Oppose any plan that would weaken or eliminate the federal credit union charter NCUA Chair Mike Fryzel testified to the Senate and its independent Banking Committee on March 19, 2009 that the regulatory structure. independence of the NCUA and NCUSIF should be preserved. The MCUL and CUNA continue to monitor the The U.S. Treasury's report on financial development of CFPA regulatory reform, released on June 17, would legislation as it is expected to allow the NCUA to maintain its safety and be considered in early soundness authority over credit unions. The September. Administration’s proposal also calls for the creation of a Consumer Financial Protection Agency (CFPA). Modeled after the Consumer Products Safety Commission, the administration is proposing a single federal agency to supervise, examine and enforce financial protection. Some issues CUs hope to resolve with the CFPA are to retain NCUA authority, reduce and streamline regulation, and provide a preemption of state consumer protection law.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE Community Reinvestment Act (CRA) BACKGROUND
Congress enacted the Community Reinvestment Act (CRA) in 1977 in response to the unjustified “redlining” of lower income and minority neighborhoods by banks and thrift institutions during the 1960s and early 1970s. The purpose was to ensure that for-profit financial institutions (including both federal and state-chartered 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.

STATUS U.S. Rep. Eddie Bernice Johnson, (D-Texas) introduced HR 1479 that would, in part, apply Community Reinvestment Act (CRA) requirements on credit unions. The MCUL sent letters of opposition to the bill to all 17 members of Michigan’s Congressional Delegation on March 16, 2009. It is possible that the House Financial Services Committee will hold a hearing in September on H.R. 1479 or more generally, the Community Reinvestment Act.

MCUL POSITION
The MCUL will continue to defend credit unions against the banker lobby attacking credit unions and suggesting that CRA be applied to them.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE FCUA BACKGROUND 1. Member Business Lending - Remove Federal Cap. Credit unions have been making member business loans (MBL) since their inception in the early 1900s. Throughout most of this period there were no limits on the 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 restrictive FOM laws and regulations with the 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. STATUS Included in letter to Dan Mica, CUNA President, on January 8, 2009. Sen. Chuck Schumer (D-NY) has announced his intention of introducing legislation to eliminate the MBL cap. H.R. 3380, the "Promoting Lending for America's Small Business Act," was introduced by co-sponsors Rep. Paul Kanjorski (D-Pa.) and Rep. Ed Royce (R-Calif.). The bill would increase the current statutory MBL cap of 12.25% to 25% and would exclude from the new cap loans of less than $250,000, business loans in underserved areas, and loans to nonprofit religious institutions. Included in letter to Dan Mica, CUNA President, on January 8, 2009. MCUL POSITION The MCUL supports meaningful FCUA modernization and regulatory relief for credit unions.

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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 and small business loan pools. As credit 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. Michigan credit unions are permitted to invest 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 startups or other appropriate situations may make good sense. Included in letter to Dan Mica, CUNA President, on January 8, 2009.

Included in letter to Dan Mica, CUNA President, on January 8, 2009.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND 6. Investment - Housing Cooperatives for Members. The Michigan Credit Union Act (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 Investment Authority. The MCUA permits a 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 and Hold Venture Capital Investments. 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. STATUS Included in letter to Dan Mica, CUNA President, on January 8, 2009. MCUL POSITION

Included in letter to Dan Mica, CUNA President, on January 8, 2009.

Included in letter to Dan Mica, CUNA President, on January 8, 2009.

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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 President, on January 8, 2009. Membership Share Class (Class B Shares). 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 in Commercial Real Estate. The FCUA 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 Status. Depending on the individual 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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Included in letter to Dan Mica, CUNA President, on January 8, 2009.

Included in letter to Dan Mica, CUNA President, on January 8, 2009.

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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.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE Interchange Fee Caps BACKGROUND An interchange fee is one of the fees retailers pay to credit card issuers (including credit unions) and to the payment networks. The card issuers and the payment network provide the operational framework for credit card transactions. Interchange fees are payable to the credit union (or other card issuer) and the payment network operator, with respect to each credit card sales transaction as a contractuallyfixed percentage of the amount of the sale, a flat fee, or a formula with both factors. Merchants contract with an acquiring bank, aggregator, or independent payment processor to provide payment processing services for card 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. STATUS Rep. Pete Hoekstra (R-Holland) has indicated possible support and co-sponsorship for a bill to limit the interchange fee. H.R. 2382 has been introduced to regulate interchange. In addition, Rep. Conyers (DDetroit) recently introduced H.R. 2695 to address interchange fees. Recent attempts by the merchants to utilize vehicle bills, such as the credit card reform legislation, to address interchange have been unsuccessful. The MCUL and CUNA oppose this issue as the belief is that any legislation would interfere with essentially a market-driven process. Because Conyers Chairs House Judiciary which has jurisdiction over his bill, a hearing and a mark up of the bill could be scheduled any time. MCUL POSITION The MCUL and CUNA will oppose this issue as the belief is that any legislation would interfere with essentially a market-driven process. Consumer options, competition and innovation would be adversely effected.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE BACKGROUND STATUS The U.S. House had passed H.R. 627, the Credit Cardholders' Bill of Rights Act which largely paralleled the Reg Z and Unfair and Deceptive Practices Act (UDAP) rules that NCUA and the Fed adopted. The U.S. Senate Banking Committee had reported S. 414, the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act). However, there were concerns since this legislation went much further than the Reg Z and UDAP rules. The Senate amended H.R. 627 to look more like S. 414 but did not consider interchange amendments to the bill. The bill requires card issuers to notify a cardholder at least 45 days in advance of increasing the APR or fees. In addition, the APR generally will not be allowed to increase on existing balances, unless covered by an exception in the bill. The President signed H.R. 627 on May 22. One piece of the signed Act which is proving problematic for CUs is a provision in which periodic statements must be sent 21 days in advance to all open-end consumer credit, not just credit card accounts. The issue has been raised with the Federal Reserve Board and CUNA is investigating a legislative remedy while continuing to advocate for a delay in the effective date. MCUL POSITION Although the MCUL and CUNA support banning deceptive practices, there was a concern that legislation could result in unintended consequences such as restricting the range of products and services that credit card issuers currently offer, which may cut off credit to some and raise the price of credit for all. Credit unions did not support the consideration of interchange amendments in conjunction with the credit card reform bill.

Credit Card Reform As credit cards are rarely collateralized, the risk of borrower default rises with this type of credit line. This forces credit card issuing financial institutions to impose relatively higher costs, fees, and repricing practices on credit cards. Perceived abuses in the credit card industry have prompted Congress to hold hearings and introduce legislation to curb industry practices viewed as deceptive or abusive. The Credit Cardholders' Bill of Rights Act, H.R. 5244, was reported out of the House Financial Services Committee last session to ban a number of unfair card practices. The NCUA has recently approved stricter rules to ban unfair and deceptive credit card practices, many which were encompassed in H.R. 5244.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE Internet Gambling BACKGROUND Under the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA), financial institutions must establish and implement policies and procedures to identify and block certain online gambling transactions, or rely on those established by the payments system. On November 12, 2008, the Treasury Department and Federal Reserve issued a joint final rule that implements the UIGEA. The final rule requires U.S. financial firms that participate in designated payment systems to establish policies and procedures that are "reasonably designed" to prevent payments to gambling businesses in connection with unlawful Internet gambling. However, CUNA continues to work with Chairman Frank and others on the Committee to resolve this issue legislatively. STATUS Rep. Barney Frank (D-Mass.) is launching a new attempt to revise conditions imposed by a controversial 2006 law that, in part, forces financial institutions to block restricted Internet gambling transactions. H.R. 2266 and 2267 would delay the implementation of UIGEA rules for a year beyond their current effective date of Dec. 1, 2009 and create the Internet Gambling Regulation, Consumer Protection, and Enforcement Act of 2009. This act would establish a federal regulatory and enforcement framework under which Internet gambling operators could obtain licenses authorizing them to accept bets and wagers from individuals in the United States. MCUL POSITION
While the MCUL and CUNA support enforcement of reasonable laws to prohibit unlawful Internet gambling, the UIGEA and the proposed rules would inflict a set of unreasonable policing requirements which will undoubtedly prove difficult for financial institutions to meet.

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Michigan Credit Union League 2009 Federal Legislative Issues Agenda
ISSUE Mortgage Bankruptcy BACKGROUND Given the high number of mortgage related bankruptcies, legislation is being pushed that would allow a mortgage holder to ask a bankruptcy judge to reduce the interest rate and extend the length of a mortgage if the foreclosure process has been started. Primary residence mortgages are treated differently under Chapter 13 proceedings compared to other types of secured debts, such as vacation homes and car loans. Many lenders have stated that changing existing mortgage terms would cause mortgage premiums to increase as much as 2 percent because lenders would have to factor these potential losses into future 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. STATUS The U.S. House of Representatives passed H.R. 1106, the Helping Families Save Their Homes Act, with language permitting bankruptcy courts to modify the terms of loans secured by a debtor's principal residence (cramdown). However, over concerns regarding the cramdown provision, the Senate introduced S. 896, a new housing bill which did not include the controversial language. When the Senate considered S. 896, an amendment allowing for judicial mortgage modification was defeated but an amendment adding the NCUA Corporate Stabilization Plan was adopted. The President signed the bill on May 20. MCUL POSITION The MCUL will continue to advocate that CUNA oppose any legislation that unnecessarily burdens credit unions with restrictions and changes relative to mortgage bankruptcies. The MCUL and CUNA did support S. 896 which enacted the NCUA Corporate Stabilization proposal and did not include cramdown language. It is possible that Congress will revisit the issue in the Fall of 2009.

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