Senate Defense Bill Omits Contentious Credit Union Proposals

Several pieces of legislation impacting credit unions were left out of the Senate’s defense authorization bill. Learn how the industry is reacting.

David Baumann


Oct 13



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David Baumann

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David Baumann

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Several pieces of legislation impacting credit unions left out of Senate’s defense authorization bill.

For credit unions, the items left out of the new Senate version of the defense authorization bill are more notable than the measure’s contents.

Yes, the bill takes up more than 560 pages of small type in the Congressional Record. And yes, it includes language that reauthorizes all sorts of non-defense programs.

But it does not include a provision in the House defense bill that would give the NCUA examination and supervision powers over third party vendors.

It also does not include controversial credit card interchange language that some senators want added to the bill.

Further, it does not include a provision of the original Senate bill that would mandate a study on financial services access on military bases.

And finally, it does not include marijuana banking provisions that are included in the House bill.

Where the Legislation Currently Stands

Senate Armed Services Chairman Sen. Jack Reed, D-R.I., on Tuesday released the updated defense bill. It differs from the bill approved by his committee in many important ways. Since it is considered one of the last must-pass pieces of legislation for the current Congress, Reed and the committee’s ranking Republican, Sen. James Inhofe, R-Okla., have loaded the bill up with bipartisan high-priority non-defense measures.

Reed introduced the proposal on the Senate floor Tuesday and made a few comments, shortly after which the Senate adjourned. It won’t vote on the Senate bill until after the mid-term elections.

The contentious issues could reemerge when the Senate debates the bill and senators have the opportunity to offer amendments. They also could be raised during a House-Senate conference.

Here’s the state of play of the financial services issues that have been considered as part of the House or Senate defense bill.

Credit Card Interchange

Sen. Richard Durbin, D-Ill., proposed adding his interchange legislation to the defense bill, but it was not included in the plan unveiled by Reed Tuesday. That proposal would require the Federal Reserve to issue rules that would ensure banks that currently use the four-party card processing system be required to use at least one affiliated network in addition to Visa and Mastercard.

The plan still could be added as an amendment when the bill reaches the Senate floor. And Durbin also has introduced the proposal as a standalone measure.

Financial services trade groups strongly oppose the bill, with credit union and bank groups even sending joint letters to lawmakers.

Meanwhile, credit union trade group officials breathed a sigh of relief Tuesday.

“We’re pleased the interchange amendments were not included in legislation to support America’s servicemembers. America’s heroes deserve a bill that is focused solely on defense priorities,” said CUNA President/CEO Jim Nussle. “We continue to believe the Marshall-Durbin interchange bill would cause severe harm to the card payments landscape, by itself, but especially attached to a larger bill without even a single hearing.”

“This is a big win for credit unions, but we need to continue the fight to make sure lawmakers fully comprehend the damage this bill would have on the financial services industry and American consumers,” NAFCU President/CEO B. Dan Berger added.

Third-Party Vendor Authority

The House-passed defense bill would give the NCUA power to supervise and examine credit union third-party vendors. The agency and other government agencies have requested that power be given to the NCUA, calling it a regulatory blind spot.

Credit unions have opposed the proposal for several years.

The Senate bill does not include a provision giving the NCUA the oversight power. However, because it is in the House bill, conferees on the defense measure will have to revisit it.

Marijuana Banking

As with vendor authority, the House bill includes Rep. Ed Perlmutter’s, D-Colo., plan to provide a regulatory safe harbor for financial institutions doing business in states where cannabis is legal. But the Senate bill does not contain marijuana banking language.

Perlmutter, who is retiring this year, also succeeded in including marijuana banking language in last year’s defense authorization bill, but the Senate never has accepted it.

This year, Senate Democrats introduced comprehensive marijuana legalization legislation that has little chance of enactment this Congress. However, in recent weeks, the Democrats have expressed a willingness to accept a scaled-down version of the bill.

Whether that scaled-down version includes marijuana banking provisions and is enacted this year is still unclear.

In any event, since the House-passed version of the defense bill contained the marijuana banking provision, conferees will have to decide whether to accept it.

Military Installations

For years, banking trade groups have pushed Congress to provide them with the same free rent benefits that credit unions now receive on military bases.

Last year, the House Armed Services Committee report on the defense bill mandated a study on the issue.

This year, the Senate Armed Services Committee report on the bill required that the Pentagon brief lawmakers on whether servicemembers had easy access to financial services.

In August, after the Senate report had been released, the Defense Department released its own report clearly stating that servicemembers have no problems gaining access to financial services.

The Senate bill, released by Reed this week, no longer required the briefing.

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