House Committee Approves FOM, Third-Party Vendor Bills

Approval could pave the way to allowing all credit unions to add underserved areas to their field of membership.

The House Financial Services Committee on Wednesday approved legislation that would allow all credit unions to expand their field of membership (FOM) to include underserved areas.

The panel voted, 27–22 to approve H.R. 7003, a bill sponsored by committee Chairwoman Rep. Maxine Waters, D-Calif. The bill also would exempt business loans by credit unions in underserved areas from the credit union member business lending cap.

In addition, it would expand the definition of an underserved area to include New Markets Tax Credit areas as well as any area that is more than ten miles from the nearest financial institution branch.

All of the members voting in favor of the bill were Democrats; all members voting in opposition were Republicans.

During a two-day markup, the committee also approved legislation that would provide the National Credit Union Administration (NCUA) oversight powers to police third-party vendors hired by credit unions and a bill that would allow smaller credit unions and banks to take advantage of a Community Development Financial Institutions (CDFI) bond program.

While Democrats pushed the measures, committee Republican Ann Wagner, R-Mo., denounced them for even bringing the bills before the committee.

“Not one of these bills will pass the House, the Senate, or be signed into law,” she said, as the committee began the markup Tuesday, adding, “This type of ‘check-the-box’ markup is something we typically see at the end of the year so members can go back to their districts and tout their wins.”

Field of Membership Expansion

In speaking in favor of her bill, Waters stated that in recent years, more and more communities have become banking deserts. She added, “I see no reason why all credit unions should not be able to serve these communities.”

Referencing the intense lobbying battle over the bill, Waters said, “I understand banks have concerns about this bill, but nothing stops them from reopening branches.”

However, Rep. Andy Barr, R-Ky., questioned the fairness of the bill, citing the credit union tax exemption. “What we don’t want is an unfair playing field,” he said, adding that all financial services providers should be encouraged to serve underserved communities.

The large credit union and bank trade groups have been lobbying for months on the bill and in recent days, others have weighed in on it.

“H.R. 7003 is critical in addressing the epidemic of unbanked and underbanked Americans by leveraging the success of the credit union model to foster financial well-being and provide access to capital to communities most in need,” wrote Renée Sattiewhite, president/CEO of the African American Credit Union Coalition, in a letter to committee members.

And Cathie Mahon, president/CEO of Inclusiv, claimed in a letter that, “The legislation would make important changes to the Federal Credit Union Act to enable credit unions to serve underserved communities at no cost to the taxpayer.”

The American Bankers Association and its state affiliates took a different view.

“What H.R. 7003 seems to provide is the ability for credit unions to expand out-of-market, which contradicts the credit union purpose of serving well-defined local communities and small groups of consumers of modest means,” they wrote in their letter to the committee.

Third-Party Vendor Authority

The committee further approved H.R. 7022, legislation that would give the NCUA the power to oversee third-party vendors on a 24–22 vote. Once again, all of the members voting to approve the bill were Democrats while all of the members opposing it were Republicans.

The NCUA, as well as the Government Accountability Office, the agency’s Inspector General and the Financial Stability Oversight Council have all asked for Congress to provide the agency with those powers.

However, Republicans expressed reservations about the legislation.

“The bill actually gives NCUA broad authority to supervise and regulate credit union third-party service providers,” Wagner said. “But it’s unclear whether NCUA has the appropriate expertise or resources to conduct this type of oversight.”

Another Republican, Rep. French Hill, R-Ark., said while it may make sense to grant the NCUA oversight powers, the legislation also would extend that authority to the Federal Housing Finance Agency, a move he opposes.

However, the bill’s sponsor, Rep. Bill Foster, D-Ill., noted, “There have been discussions about this for years and years.”

Credit union trade groups oppose the legislation.

CDFI Bond Program

The committee also approved, by voice vote, H.R. 7733, legislation that would decrease the CDFI Bond Guarantee Program minimum issuance threshold from $100 million to $25 million. The bill, introduced by Rep. Emanuel Cleaver, D-Mo., also would make the program permanent.

Waters said some small CDFIs have been unable to use the program without joining with another financial institution.

However, Rep. Blaine Luetkemeyer, R-Mo., claimed there is no evidence the bill actually will help CDFIs.

To learn more about underserved areas and how they can help your credit union expand its FOM, visit our Field of Membership page or contact us directly today!