Cornerstone legislative briefing emphasizes telling real CU stories

Cornerstone credit union leaders met for the annual legislative briefing during the CUNA GAC to discuss issues important for the coming Hill visits. While the current issues are familiar to credit unions, Cornerstone Chief Governmental Relations Officer Jim Phelps suggested a slightly different approach on how credit unions communicate with them, including telling specific, individual stories that will also lay the foundation for legislation on key issues.

"One quarter of Congress is brand new," Phelps said. "They weren’t working here during HR 1151 or subsequent grassroots campaigns we’ve engaged in. That means many of them know little to nothing about credit unions and how we’re different than other financial institutions." 

In the Cornerstone region, Oklahoma has two new members and Texas has 10. Phelps noted several Cornerstone-region representatives on key committees of jurisdiction, including several new members.

"All these changes are why education factors so prominently in this GAC,” Phelps said.  

Community Reinvestment Act

A key messaging component this year concerns keeping credit unions out of the Community Reinvestment Act (CRA), which Congress originally enacted as part of an effort to encourage banks to meet the credit needs of their communities, including low- and moderate-income communities. It's designed to encourage commercial banks and savings associations to help meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods. The Act is also intended to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.

"Credit unions already have a mission to promote thrift and provide access to credit to all persons within their fields of membership," Phelps said. "By statute, credit unions already operate to achieve the purposes of the CRA."

Data clearly shows that credit unions equitably and successfully serve their members and deliver more than $15 billion in benefits to all consumers each year in the form of lower rates on lending and higher dividends on deposits.

The Independent Community Bankers of America released its “Community Focus 2020” legislative agenda last week, singling out credit unions and the National Credit Union Administration for criticism, focusing on the credit union tax exemption, and subjecting credit unions to the CRA.

The argument that CRA should apply to credit unions has been largely driven by Wall Street banks in an effort to undermine the credit union tax status, and ultimately, eliminate the credit union charter as a form of banking competition, Phelps said. Placing credit unions under CRA would also increase regulatory requirements, causing the National Credit Union Administration to increase its staff and resources for examination. 

Phelps pointed to a recent CUNA white paper that shows, due to their low-risk profile, credit unions increased their lending during the financial crisis, even as banks pulled back from the same markets. From June 2007 to December 2017, small business loans at credit unions more than doubled, growing by over 128.3 percent or an average of 11.7 percent per year. By contrast, these loans at banks grew only 6.2 percent (or 0.6 percent per year).

Extending the CRA to credit unions would represent a significant step backward in achieving expanded access to affordable mortgage credit and other financial services – keep credit unions out of the CRA. 

Credit Union Tax Status

Phelps said that credit unions will want to discuss the tax status with lawmakers. Even though the exemption remained intact during Congress' comprehensive tax reform last year, there were provisions related to the excise tax for nonprofits. 

While there may not be a threat federally, some state-level threats have arisen amid fights with banks. Bankers haven't had much success at the federal level, so they’re working with their state-level associations to put pressure on state legislatures. Phelps encourages credit union leaders to reinforce the fact that credit unions do pay taxes, including property taxes and payroll taxes. State charters can also pay unrelated business income tax (UBIT). And credit union members pay taxes on dividends (interest) that their accounts earn.

"The message we’re trying to convey is, we’re tax exempt for a reason, and we return those benefits to members," Phelps said. "The bottom line is, credit unions are different than other FIs in that we help our members in good times and bad, and we earn our tax status every day. Subjecting credit unions to CRA would only set us back."

Data Security and Data Privacy

Another key issue concerns data security and data privacy, which go hand in hand; you can’t get one without the other.  Banks and credit unions do agree on this issue.

"We think there are opportunities in this Congress on data breach," Phelps said. "There is bipartisan interest in enacting a federal data privacy law to govern how companies can use data."

Regulatory Relief

Credit unions have incurred $6.1 billion in regulatory costs, about 75 percent of which is human resources (hiring new staff, repurposing loan officers into compliance officers, training, and so on). That comes out to about $115 per credit union member household.

"The cost to comply with new regulatory burdens is rising approximately three times faster than inflation," Phelps said.

"The bottom line is, we don’t think credit unions should be punished for the actions of the big banks, and regulations need to be tailored to the financial institution," Phelps said. "Making credit unions subject to the same rules as Chase Bank doesn’t make sense."

CFPB Exemption

In addition, Phelps asked credit union leaders to urge members of Congress to support an exemption from the CFPB. "With new director Kathy Kraninger, we now have the opportunity for a look-back on existing regs," Phelps said. "We need to visit with our representatives about the CFPB using their exemption authority that's granted to them in Dodd-Frank."