Credit Unions Generally Ignored, As Congress Tackles Hot-Button Issues

CUNA says credit unions offer solution for consumers left behind by bank consolidation, pushes for FOM expansion legislation.

As Congress aims to tackle hot-button issues in the sprint to its August recess, credit unions—at least so far—have emerged unscathed.

House and Senate committees are juggling issues ranging from bank mergers to climate change, but members of Congress and witnesses testifying are barely mentioning credit unions.

In fact, credit unions are being ignored so much that CUNA President/CEO Jim Nussle had to interject himself into the bank merger issue, offering credit unions as a solution to the decrease in bank branches as a result of consolidation.

Following are some of the thorny issues the House and Senate will be juggling this week and in the weeks ahead.

Bank Mergers

The Senate Banking Committee’s Economic Policy Subcommittee on Wednesday held a hearing on bank mergers and consolidation—a huge issue for subcommittee Chairwoman Sen. Elizabeth Warren, D-Ma.

Warren recently sent a letter to the banking regulators—but not the NCUA—expressing her concern that those regulators do not do an effective job in evaluating bank mergers.

The absence of the NCUA probably should not be surprising since there is a merger process for banks that does not include credit union mergers.

Under federal law, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Reserve are charged with reviewing mergers, in conjunction with the Department of Justice.

The agencies currently are reviewing the bank merger process, which critics say routinely results in a rubber-stamp approval of the deals.

“To put it bluntly: in recent decades, bank regulators have failed to enforce antitrust laws and these statutes in the banking sector, to the detriment of small businesses, consumers, entrepreneurs and the stability of our economy overall,” Morgan Harper, director of advocacy and policy at the American Economic Liberties Project, said in her testimony presented at Wednesday’s hearing.

“Bank mergers have reduced availability of credit, increased fees for basic banking services, and lowered the interest rates offered to depositors,” Alexa Philo, senior policy analyst at Americans for Financial Reform, told the panel. “These adverse effects are even more pronounced in communities of color and [low- and moderate-income communities] where bank consolidation has led to significant branch closures.”

Credit Union Response

Although he was not invited to testify, Nussle wrote in a letter to the committee that credit unions offer a solution for those communities.

“The decrease in bank branches demonstrates bankers’ profit over people approach to financial services,” he stated.

And he put in a plug for legislation that would allow credit unions to expand their fields of membership.

“Despite credit unions outperforming banks with regard to branch growth, credit unions still face challenges in reaching consumers abandoned by banks due to outdated field of membership restrictions,” Nussle wrote. “We believe that credit union field of membership expansion will successfully alleviate financial burdens placed upon consumers as a result of bank branch closures.”

When they held majority control last year, Democrats on the House Financial Services Committee approved legislation that would have allowed all credit unions to expand their fields of membership to serve underserved areas.

All committee Republicans opposed the bill, and with the GOP now controlling the House, that legislation would be dead on arrival.

Climate Change

The House Financial Services Committee is holding a series of hearings on the climate issue—with Republicans blasting regulators, contending that they are putting their own political belief ahead of protecting investors.

Investors at for-profit companies, that is. And of course, as non-profit cooperatives, credit unions are not included in that criticism.

But Republicans are taking aim at the SEC and other regulators of for-profit companies—accusing them of meddling in areas that are none of their business.

“This misguided approach has led to increased costs and burdens for those participating in the U.S. public markets,” Financial Services Committee Rep. Patrick McHenry, R-N.C., said, as he opened a hearing Wednesday.

McHenry has also scheduled a hearing next week entitled, “Climate-Risk: Are Financial Regulators Politically Independent?” Witnesses for that hearing have not been announced.

Defense Authorization Legislation

When it comes to the annual defense authorization bill, credit unions generally care about one issue—their free rent access on military installations. Banks have argued that they should be offered the same benefit.

The House and Senate will be considering their versions of the annual defense bill this week; neither bill extends the rent benefit to banks.

And so far, among the huge pile of amendments to the bills that may be offered, nobody has proposed an amendment to do so.