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Cornerstone and CUNA Get Behind Two Texas Credit Union Ballot Measures with National Advocacy Fund Support
Friday, September 15, 2017 6:50 AM

The 85th regular session of the Texas State Legislature ended on May 29, 2017, with numerous credit union victories to which we can point; it was a very successful legislative session for the Cornerstone Credit Union League and its member credit unions. Of note are two desired outcomes specific to credit unions, which will be impacted largely by high-level coordination between Cornerstone and the Credit Union National Association.

Seven constitutional amendments, out of 156 that were proposed, will be voted on as statewide ballot measures on Nov. 7, 2017, two of which are specific to credit unions.

The amendments represent the first time two constitutional amendments directly relating to credit unions have been on the Texas ballot. In addition to celebrating defeating numerous pieces of legislation that would have proven harmful to credit unions during the 2017 legislative session, we will be celebrating significant legislative victories that provide positive impact for credit unions operating in Texas.

Cornerstone and the CUNA will be working together to pursue passage of these ballot measures that are important to credit unions. As a result of our strong relationship with CUNA, on Aug. 17, CUNA’s National Advocacy Fund Steering Committee approved funds to support these ballot measures.

Additionally, Cornerstone will be asking credit unions to contribute to public campaigns to educate voters on why these amendments are beneficial to consumers that choose to do business with a credit union.

“This show of support from CUNA and from the National Advocacy Fund Steering Committee is reflective of the power of our interdependent credit union system,” explains Cornerstone President and CEO Caroline Willard. “Having a strong federal presence through CUNA with strong local influence from Cornerstone and its member credit unions and their members empowers our system with what CUNA calls its ‘advocacy army.’ And we intend to leverage our strengths in this system to pursue passage of these important ballot measures.”

Proposition 2 amends the home equity lending law, addressing four areas that provide credit unions more options for delivering this product. This is the first update in 20 years and was initiated in 2015 by Cornerstone at the request of credit unions to address the 3 percent fee cap. We worked with other financial institution trades and the Texas Association of Realtors (which has opposed changes in the past) during the interim to come up with the four changes on which everyone could agree.

  1. It addresses the 3 percent cap on fees that have made it difficult for credit unions to make home equity loans under $50,000, as the fees associated with the home equity loan are greater than 3 percent of the loan value, requiring the credit union to absorb the fees above the 3 percent or not make the loan. The fee cap would be reduced to 2 percent while excluding appraisals, surveys, and title policies from the new cap calculation.
  2. It provides more flexibility for borrowers to receive advances using a home equity line of credit.
  3. It allows access to home equity loans for farms and ranches that are homesteads. In the original resolution in 1997, these were specifically excluded to protect the agriculture homesteads from being seized by lenders.
  4. It allows borrowers the option to refinance a home equity loan into a new conventional loan or a home equity loan. The Texas Constitution currently limits borrowers to a single home equity loan, and a home equity loan currently must be refinanced into a home equity loan limiting borrowers’ options.

Proposition 7 is related to prize-linked savings accounts. The constitution prohibits raffles in Texas except for the state lottery and for charitable purposes. The governor vetoed a Cornerstone-supported bill in 2015 that allowed PLSAs in statute, citing the constitutional prohibition on raffles. As a result, Cornerstone supported legislation in 2017, requiring a constitutional amendment this session to address the governor’s concerns.

The PLSA measure has no active support other than from Cornerstone. Other financial services trades are not actively working on the measure. The primary concern is lack of voter awareness about PLSAs, which may equate to lack of support from voters. 

Also, there may be concerns that Prop 7 may be tied to gambling issues and that groups opposed to expanding gambling may engage through talk radio, social media, and email to oppose or create confusion that PLSAs would expand gambling through banks and credit unions, and that it is anti-consumer. 

The support from CUNA and the National Advocacy Fund Steering Committee paired with Cornerstone resources will work toward a positive outcome on these ballot measures.