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					Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE Michigan Business Tax (MBT) BACKGROUND With the State of Michigan currently running a deficit, and with the opposition to the newly enacted Michigan Business Tax (MBT) which many feel is overly burdensome, there have been calls from the Speaker and other legislators to revisit the structure of this tax. Now more than ever, credit unions need to be vigilant in ensuring that the business tax exemption remains in place if the MBT is revamped. STATUS Current versions revising the MBT do not tax credit unions and does not appear to be interested in doing so. MCUL POSITION The MCUL will vigorously oppose any effort to impose new taxation on credit unions by altering the MBT.

Allow for Direct Auto Lien Placement with Secretary of State (SOS)

In a new vehicle transaction, the dealer assembles all documents, including lien information and files with SOS. For used vehicle transactions, it is incumbent upon the borrower to bring the title back to the lender that shows that they are listed as the lien holder. With more borrowers defaulting on loans, it is critical for the lender to be listed on the title in order to have the legal right to repossess the auto and sell it, to recover sums owed. Financial institutions may place liens and have new title sent directly to them using the TR-114 form.

The MCUL has been in discussions with the SOS on this issue to determine whether legislation is necessary to make this process more fluid or if there is another avenue to explore. The MCUL conducted a conference call to discuss direct auto lien placement with credit union people, the SOS office and MCUL.

The MCUL supports developing a more streamlined, electronic mechanism to enable direct placement liens on vehicles with the SOS.

Last Updated: 11/3/2009

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Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE Zero-Dollar PAC Reporting BACKGROUND In 2000, changes were made to the Michigan Campaign Finance Act that require political action committees (PACs) to report a donor’s personal information (name, address and employer) to the Secretary of State’s office regardless of contribution level. Subsequently, donations to PACs that specialize in low dollar fundraising have been negatively impacted, including MCULAF. STATUS Last session, a bill passed the House of Representatives sponsored by State Rep. Fred Miller (D-Mt. Clemens) which would raise the reporting threshold to $20, restoring the limit to the pre-1999 first dollar reporting change. Although the House passed HB 4628, State Sen. Michelle McManus (R-Lake Leelanau) Chair of the Senate Campaign and Election Oversight Committee, opposed the bill and did not support taking up the issue for consideration.
This session, State Rep. Doug Geiss (D-Taylor) introduced HB 4997 that would increase the reporting threshold to $20. The MCUL turned in a testimony card in support of the bill at the recent House Ethics and Elections Committee meeting. The bill was not voted on.

MCUL POSITION The MCUL will actively pursue passage of any legislation to raise the zero dollar reporting threshold.

Credit Card Fraud Liability

Several states including Minnesota, Texas and California are looking at or have already adopted laws shifting costs of data breaches from financial institutions to merchants when the merchant’s mishandling of consumer information caused the breach. These proposals give retailers added incentive to protect consumers' information. These various proposals put into state law the already existing payment card industry data security standards that merchants are required by contract to follow but are often not enforced by credit card companies. State Sen. Randy Richardville (RMonroe), Banking Chair, introduced SB 1022 last session on this issue.

The MCUL has been working with CUNA on draft language. Senator Richardville is supporting the issue this session and has expressed interest in sponsoring the legislation again.

The MCUL will advocate for legislation that has been successful in other states to increase liability on the part of merchants for their role in credit card fraud as well as pushing credit card companies to enforce their existing merchant liability agreements.

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Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE CDARS Investment Option BACKGROUND The Certificate of Deposit Account Registry Service program (CDARS) is a funding tool for financial institutions to offer customers insurance on deposits greater than $100,000. In 2008, legislation was enacted to allow municipalities and school districts to invest in CDs with financial institutions participating in CDARS. Since CDARS only allows FDIC insured institutions to participate in the network, the legislation also restricted participation to FDIC insured institutions. Although the MCUL worked to change this restriction before passage, the bills were fast tracked. The MCUL is seeking the change in state law to be prepared in the event CDARS is opened up to credit unions or a similar registry is created for CUs. STATUS Sen. Tony Stamas (R-Midland) introduced SB 195 and 196 to include credit unions in the legislation. In the House, Rep. Jeff Mayes (DBay City) also introduced similar bills with HB 4397 and 4398. The Senate passed SB 195-6 in February and the House passed HB 4397-98 in March. Based on House and Senate Leadership negotiations to split the bills between sponsors, SB 195 and HB 4397 ultimately passed the Legislature and were signed by the Governor as Public Acts 21 and 22 of 2009, respectively. Sen. Stamas recently introduced SB 583 that would allow community colleges to invest in CDs with financial institutions participating in CDARS. SB 583 has advanced to second reading in the House. MCUL POSITION The MCUL will work with the House and Senate Banking Committee Chairs who have committed to include credit unions in new bills in 2009.

Encourage state tax deductions for interest paid on new vehicle loans

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 the availability of financing for consumers wishing to purchase a new automobile. Credit unions have access to capital and can help consumers by making affordable auto loans.

A number of bills have been introduced to give consumers incentives to help spur purchases of new autos. There are various tax bills such as exempting the sales tax on a new auto purchase, allowing for the sales tax on the difference between a trade-in and purchase price of a new auto, and income tax credit for purchase of new auto. The MCUL continues to support these bills as they are considered in the Legislature.

The MCUL will advocate for initiatives, such as tax incentives, to help spur new auto purchases.

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Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE Penalize Unscrupulous Advisors BACKGROUND With so many people upside down in their mortgages, there may be the temptation for prime borrowers with assets and income to walk away from a negative equity mortgage to instead buy another home at a low price. It has been suggested that realtors who want to make a sale, may also be encouraging this practice. Lenders are ultimately hurt most by this practice and given that there is likely negative equity, losses could be significant. House Bill 6589 (Rep. Richard LeBlanc, DWestland) from last session provided an income tax credit to buyers who purchase foreclosed property. The credit would have been equal to the difference between the property tax liability with and without the Principal Residence Exemption applied. In the case of a home with a Taxable Value of $100,000, the income tax credit would be $1,800. The bill did not move before the end of the session. Foreclosure 1. Shortening the Foreclosure Redemption Period. Under the Foreclosure by Advertisement statute [Chapter 32 of PA 236 of 1961], foreclosed properties larger than 3 acres are entitled to a 1-year redemption period. This protection was granted to protect agricultural property, but many such properties are not being used for agricultural purposes. The MCUL continues to advocate for a shortened redemption period. The MCUL will pursue legislation to streamline the foreclosure process and protect lenders from additional costs due to property damage caused by the borrower. STATUS The MCUL will continue to monitor this issue to see if credit unions do feel there is a cause for concern and if legislation should be pursued. MCUL POSITION The MCUL will advocate for fines for realtors (and other licensed parties such as brokers) or others who encourage people to walk away from their mortgages to buy a new home.

Income Tax Credit for Purchase of Foreclosed Property

According to Rep. LeBlanc’s office, he will be reintroducing this legislation again.

The MCUL will encourage the adoption of legislation to help spur the purchase of foreclosed property by utilizing an income tax credit as an incentive.

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Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE BACKGROUND STATUS MCUL POSITION On June 29, the MCUL hosted a Foreclosure webinar to discuss the new requirements for the Mortgage Mediation law that is effective July 5. A borrower is eligible for a loan modification under the Act if a combination of adjustments to the interest rate and/or loan term, a deferral of some portion of the principal, or a reduction or elimination of late fees can lower the borrower's housing-related debt to income ratio to 38%. For more information, click here.

2. Shortening the Foreclosure Redemption The MCUL continues to advocate for a Period for Abandoned Homes. There are two shortened redemption period for abandoned sections in the Foreclosure by Advertisement homes. law that deal with redemption periods for abandoned property. The first provides for 3month redemption (mailing, no response, inspection, no notice within the 3-month redemption period that the property is in fact occupied [or will be]). The second provides for a 30-day redemption period for properties not exceeding 4 units (mailing, no response, inspection, posting of accelerated redemption, no response after 15 days of notice that the property is in fact occupied [or will be]. 3. Early Inspection and Liability for Borrower Damage to Property. It often happens that troubled borrowers intentionally damage the property they know they will lose. This ultimately is a cost to the lender. Borrower should be made to pay criminally for their actions. The MCUL continues to advocate for this issue with lawmakers and will work on possible legislation.

MCUA

1. Allow credit unions to invest in venture capital funds. Currently equity investments by credit unions are not permitted and they also cannot own stock in companies. In this troubled economy, allowing for more investment options by credit unions could seek to assist businesses looking for other lending opportunities.

The MCUL met with OFIR in April to discuss a comprehensive review and refresh of the MCUA and will begin to work with the Legislature on those issues as well. The MCUL met with the State and Federal Issues Working Group in June to discuss MCUA. In July at the AC&E, the decision was made not to review and refresh this year.

The MCUL supports amending the MCUA to allow credit unions to be part of the solution to the current economic and financial crisis.

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Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE BACKGROUND 2. Empower SCUs to participate in 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/micro business needs. Credit unions should be empowered on a limited basis to participate in these programs. 3. Empower SCUs to purchase any of the assets and liabilities of a commercial bank or thrift. Due to the current economic crisis, troubled financial institutions other than credit unions may be looking for buyout or merger partners. Why should this other financial institution not be a state chartered credit union, especially if the credit union is community based and where fields of membership would not be an issue? MCUA Section 401(2)(q) 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. 4. Allow SCUs to offer trust services. Because of the Lehman Bros. debacle and the remoteness of mutual funds only available via an 800 number, SCUs should be permitted to offer trust services to their members as a more local, and trustworthy alternative. While many
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MCUL POSITION

Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE BACKGROUND credit unions would not be able to offer trust services, a limited number may desire this for their members. 5. Expand Credit Union Investment Authority. Creativity in making some higher risk business loans to include an equity interest especially for start-ups or other appropriate situations may make good sense. 6. Allow Non-members to Assume Member Mortgages and Other Loan Products. NCUA Part 701.21(g)(7) permits FCUs to allow nonmembers to assume a member’s mortgage provided the assumption is only for the unpaid balance, the loan terms remain unchanged, and there is no extension of the original maturity date specified in the loan agreement. In a down market with rising interest rates, potential buyers might be more willing to purchase a member’s home at the current interest rate provided to the member (with some additional cash paid to the member), than to take out a new mortgage at a higher rate. The member would then be able to “walk away” from the property with some cash in hand, the nonmember would be able to get a good deal on a home, and the credit union would not suffer a loss or have to deal with a potentially abandoned, or otherwise foreclosed, property. 7. Increase Borrower Loan Limits. Under the MCUA, the loan limit for borrowers and any
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MCUL POSITION

Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE BACKGROUND affiliates of the borrower is the greater of $20,000 or 25% of the credit union’s net worth. No exception is made for fully secured loans. In these difficult economic times, it might be necessary for members to borrow in amounts that exceed these limits. 8. Empower Credit Unions as Investors in Commercial Real Estate. The MCUA currently does not provide credit unions with the authority to invest credit union funds in the development of commercial or residential REO real estate for the purposes of sale or lease. This new authority could enhance the involvement of credit unions located in blighted areas. Banks currently have this power. 9. Converting Troubled Borrowers to Renter Status. Depending on the financial calculation, it might be beneficial to both a financial institution and a troubled borrower to permit a borrower to become a renter of a house it is buying, if the amount of the lease payments can be structured to be significantly less, and thus more affordable, than when structured as a loan. The goal would be to keep a borrower in the home if possible. 10. Fixed Asset Cap Flexibility and Relief. The 5% fixed asset investment/contractual obligation limit in section 401(2)(hh) is too low. A reasonable increase should be considered. STATUS MCUL POSITION

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Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE ID Theft BACKGROUND Identity theft is reported to be the fastest growing crime in the United States. With the use of the Internet, identity theft becomes easier with the use of “phishing” and other methods. These tactics lure individuals into divulging personal information. This information is then used to open fraudulent accounts. Last session, a package of bills was moved by the House to require additional reporting regulations. However, credit unions were ultimately exempted from the bills. The bills died in the Senate. STATUS A bi-partisan package of bills has been introduced in the House to address the issue of identity theft. This package mirrors legislation from last session which passed the House but died in the Senate. HB 4732 sponsored by State Rep. Mary Valentine (D-Muskegon) is similar to HB 6102 from last session which requires certain financial institutions to establish a written identity theft prevention program. The MCUL was successful in receiving an exemption from this requirement for credit unions that comply with the FACT Act. HB 4734 sponsored by Rep. Robert Dean (D-Grand Rapids) is similar to HB 6105 from 2008 which provides that disposal of any data from a database which included any unencrypted, unredacted personal information would have to be destroyed. The MCUL turned in a neutral testimony card for HB 4732 in the House Judiciary Committee. Since then, HB 4732 and 4734 have passed the House and advanced to the Senate Judiciary Committee. Predatory Lending The high foreclosure rate in Michigan and the issue of sub-prime lending nationally has led lawmakers and the Granholm Administration to begin looking at a number of proposals that call for sweeping changes to the mortgage lending industry in an effort to go after “bad actors”. Legislation was passed by the House with greater regulations on mortgage lenders; State Rep. Tim Melton (D-Auburn Hills) and Rep. Jon Switalski (D-Warren) are the leads on the predatory lending package which includes HB 4066-67 and HB 4585-93. The legislation mirrors bills from the 2007-08 session which passed the House but were not considered in the Senate. The bills would prohibit certain actions by creditors, including giving out a loan if the
The MCUL supports efforts to deter predatory lending and remove “bad actors” from the marketplace including providing OFIR with the resources it needs to enforce existing statutes.

MCUL POSITION Though there are already state ID Theft laws addressing this issue, the MCUL agrees that ID Theft is a serious problem. The MCUL was supportive of the package last year based on changes made in the House passed versions including exemption from the written program. The MCUL will continue to lobby to have state-chartered credit unions exempted from any legislation.

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Michigan Credit Union League 2009 State Legislative Issues Agenda
ISSUE BACKGROUND however, credit unions and banks were exempted. The Senate did not report the bills from committee. STATUS borrower isn't reasonably determined to be able to pay it back and giving out a high-cost home loan without documenting whether a borrower received counseling on the advisability of that loan. The legislation exempts depository institutions from the act just as the bills did last session. The MCUL has already met with Sen. Kuipers who is again interested in sponsoring the bill. In addition, the MCUL has met with House Judiciary Chair Mark Meadows (D-East Lansing). The Governor’s staff has sat down with the MCUL to discuss the issue and a workgroup will be held with key stakeholders to assess what level and timeframe the Governor is willing to support on this issue. The MCUL sent a comment call letter in May. To view the letter go to, Michigan Credit Union League: Legislative Comment Calls. The MCUL will continue to advocate for legislation that raises the current threshold for filing in small claims court. MCUL POSITION

Small Claims Court

The $3,000 threshold for suing in small claims court has not risen in years. Increasing this limit would provide credit unions with a less expensive alternative to pursuing claims in the civil division of district or circuit courts. In 2008, Sen. Wayne Kuipers (R-Holland) sponsored a bill to raise the ceiling to $6000. A compromise was reached in the Senate for $5000. After much opposition from the judges, trial lawyers, and State Bar, the bill ultimately passed the House the last day of session with a tiered increase over three years. However, the bill was subsequently pocket vetoed by the Governor. The Governor reportedly supports smaller increases in the ceiling over longer periods of time.

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