A 360-degree approach—engaging at all levels and from all directions—will advance advocacy efforts.
Regulatory relief for credit unions has been a top advocacy priority for CUNA for several years, but it can be easier said than done.
While CUNA has seen several victories leading up to 2017, including privacy notice modernization and credit union parity regarding the Federal Home Loan Bank program, CUNA is always thinking big.
To keep the big picture in mind, CUNA reorganized its advocacy staff and goals, evolving into a 360-degree approach designed to advance credit union priorities at all levels and from all directions, says Ryan Donovan, CUNA’s chief advocacy officer.
“In creating a 360-degree advocacy approach, we wanted it to be all-encompassing, attacking credit union issues at all levels—legislative, regulatory, legal—whatever is needed,” he says. “This approach gives us the benefit to take advantage of regulatory relief opportunities as they come, but more importantly to create our own opportunities and engage on as many fronts as needed to produce credit union victories.”
Heading into 2017 with a new Congress and a new administration presented a fresh opportunity for CUNA and credit unions. This led CUNA to kick off 2017 by launching its bipartisan, pro-consumer Campaign for Common-Sense Regulation.
“Credit unions aren’t, and have never been, against regulation in the financial services industry,” Donovan says. “But ‘common sense’ is the key part of our campaign. We’re seeking fixes to a one-size-fits-all regulatory regimen that treats credit unions the same as the biggest Wall Street banks—only it’s the credit unions struggling to keep up.”
Keeping our tax status
CUNA dedicates its advocacy, and its very existence, to one primary priority: defending the credit union tax status.
As a new Congress and administration took office in January 2017, priorities began to emerge that included the first major reform of the tax system since 1986.
“CUNA, with the help of the outstanding member services and products offered every day to 110 million members, has amply demonstrated how the credit union tax status is sound public policy, and that any so-called ‘loss’ to the tax base is vastly outweighed by billions in benefits to both credit union members and nonmembers,” Donovan says. “But when issues such as a total tax revamp are discussed, that means everything is on the table, making it incumbent on us to once again show that the credit union tax status continues to serve the purpose for which it was created.”
CUNA and credit unions have discussed the importance of the credit union tax status with members of the new Congress through Hike the Hill visits during the CUNA Governmental Affairs Conference, in-district visits, and other interactions.
As the tax bill began to round into shape, CUNA closely monitored bills as they were introduced, discussed, marked up, and voted on, all without any major consideration of changing the credit union tax status.
“While we remain confident that the vast majority of Congress recognizes the benefit of the credit union tax status, the real risk is that during the course of negotiations, as members look for ways to offset various cuts or changes, the tax status could be used as a way to scrounge up a quick $1 billion to make the numbers work,” Donovan says.
“The fact we didn’t see any real threat during the process, despite numerous banker attacks, shows how well credit union stakeholders got their message out and sustained it as the bill moved forward,” he adds.
NEXT: Legislative advocacy
While serious threats to the credit union tax status never fully materialized, other policies that would have affected credit union operations were introduced in Congress in 2017—and each was defeated through CUNA’s advocacy efforts.
Early budget drafts from President Donald Trump’s administration featured cuts to a number of programs, including a major fund credit unions use to serve their communities.
The Treasury’s Community Development Financial Institution (CDFI) Fund awards grants and other funds to certified CDFIs around the country.
After being funded at $233.5 million in the previous fiscal year, it was zeroed out in early budget bills.
CUNA quickly launched a nationwide grassroots support effort to ensure funding. Outreach included working with CDFI-designated credit unions through CUNA’s Member Activation Program to show how they leveraged the CDFI funds many times over within their communities.
Examples sent to congressional appropriators included a Tennessee credit union that turned a $2.1 million grant into $10,500 down payment assistance loans for more than 200 families, and a Missouri credit union that used $849,000 in grant money to make $22.7 million in auto loans.
Through these efforts, Congress passed a funding bill that not only restored the CDFI Fund, but increased funding levels to $248 million.
While credit unions earned a win on CDFI funding, an unexpected threat emerged during the appropriations process: a financial services and general government appropriations bill that would have placed NCUA under the appropriations process.
“NCUA is unique among federal regulators in that the institutions it regulates fund the agency, meaning a regulator that operates independent of the annual appropriations process is vital for credit unions,” says Donovan. “As the one sending the resources, credit unions deserve a say in how they are being used.”
Credit union advocates worked closely with Reps. Mark Amodei, R-Nev., and Pete Aguilar, D-Calif., who introduced an amendment to remove the provision from the appropriations bill.
The day after Amodei and Aguilar introduced the bill, credit union advocates across the country assembled on a conference call with the expectation that support for the amendment needed to come together within 12 hours.
Over those 12 hours, CUNA, leagues, credit unions, and members used every resource and communication tool available to send Congress more than 3,000 messages stating that placing NCUA under appropriations was unacceptable.
“While the vote ended up happening nearly a week later, lawmakers heard our voices loud and clear, and the Amodei-Aguilar amendment passed by a voice vote,” Donovan says. “It was a true testament to the full advocacy strength of the credit union movement to see a threat, mobilize, and execute a successful strategy to remove it over the course of a few days.”
CUNA’s legislative advocacy helped secure another regulatory relief win, working with Congress to overturn the Consumer Financial Protection Bureau’s (CFPB) arbitration rule via the Congressional Review Act.
The bureau finalized its rule in July 2017, effectively banning the use of predispute arbitration clauses.
While credit unions generally do not use such clauses, CUNA felt the rule deprived consumers of an effective legal alternative to class-action litigation.
“The arbitration rule was inappropriate for credit unions, as member-owned financial institutions, because without arbitration clauses credit union members in a dispute would be forced to litigate against their credit union,” says Leah Dempsey, CUNA’s senior director of advocacy and counsel. “The CFPB had an opportunity to exempt credit unions from the rule, as it does with all its rules. When it did not, we were forced to use other methods to prevent it from becoming effective.”
To overturn a finalized rule through the Congressional Review Act, both the House and Senate must approve resolutions of disapproval, which the president must then sign.
The House passed its resolution relatively quickly, at the end of July. The Senate vote came down to the wire, with Vice President Mike Pence breaking a 50-50 tie in October to approve the measure, which President Trump signed shortly after.
“In a situation where every vote was essential, CUNA’s outreach to members of the Senate about why this rule would hurt consumers—despite what the CFPB and others claimed—made a huge difference,” says Eli Joseph, CUNA’s deputy chief advocacy officer.
NEXT; Regulatory advocacy
On the regulatory side, several CFPB rule-makings on CUNA’s radar coming into 2017 would have imposed numerous regulatory burdens on credit unions.
Leading up to the release of the agency’s short-term, small-dollar rule, many in the CFPB’s leadership—including former Director Richard Cordray—touted credit union lending efforts such as the Payday Alternative Loan (PAL) program as products consumers needed additional access to, rather than leaving them at the mercy of predatory lenders.
But the proposed rule swept in numerous consumer-friendly options. While PALs were technically exempt, it would have been difficult for most credit unions to fulfill the requirements to qualify for the exemption.
“Credit unions offering PALs or other similar loans faced additional burdens under the proposal that would have made it very difficult to offer those products, many of which result in financial losses for a credit union but are offered as a member service,” Dempsey says. “Those and other provisions had major potential for negative effects on access to credit for many Americans.”
Within three weeks, CUNA reached out to the CFPB, directly identifying these concerns before the official comment deadline. CUNA also approached NCUA with those concerns, outlining how PAL (overseen by NCUA) could be threatened.
CUNA’s 61-page commentary included a 21-page legal support letter addressing the rule’s shortcomings and suggesting potential revisions to ensure the rule didn’t harm consumers. In addition to expressing concerns to the bureau through letters, and face-to-face meetings, CUNA’s advocacy reach garnered support through other avenues.
Rep. Steve Stivers, R-Ohio, specifically cited CUNA’s concerns about the effect on access to credit during a July 2016 discussion on appropriations, as an amendment to a funding bill would have delayed the rule’s implementation.
The Small Business Administration’s Office of Advocacy also echoed CUNA’s position in its comment letter.
The final short-term, small-dollar rule that emerged in October 2017 addressed many of CUNA’s concerns in its 1,700 pages, and Cordray called CUNA President/CEO Jim Nussle to discuss the changes before officially releasing the rule.
“The CFPB listened to the numerous consumer protection concerns we raised in the 15 months between the proposal and final rule, and made changes that not only enable consumers to access safe, short-term credit but allow credit unions to offer those products without additional hurdles,” Dempsey says. “The sustained push from CUNA, leagues, and credit unions, not to mention other agencies that shared our concerns, played a major part in the substantive revisions we saw in the final version.”
While CUNA’s advocacy efforts secured vital changes to the short-term, small-dollar loan rule during the rule-making process, CUNA also maintained efforts to see changes in rules already finalized.
In 2015, the CFPB finalized its Home Mortgage Disclosure Act (HMDA) rule, which was especially burdensome for credit unions.
The Dodd-Frank Act requires mortgage lenders to collect and report certain data points. The CFPB’s final HMDA rule required nearly twice the amount of data points as Dodd-Frank, meaning credit union mortgage lenders would need to update systems, policies, and procedures to collect this information.
Since CFPB finalized the rule, CUNA, leagues, and credit unions participated in dozens of meetings with bureau officials and lawmakers to share concerns while advocating toward legislative solutions.
“The HMDA rule disproportionately penalized credit unions with additional requirements despite no evidence of wrongful conduct, making it more difficult for them to effectively participate in the mortgage lending market,” says Luke Martone, CUNA’s senior director of advocacy and counsel.
“This was a multiyear advocacy effort from the entire CUNA/league system to get relief from onerous HMDA reporting requirements that greatly exceed what Congress intended the bureau to collect when passing the Dodd-Frank Act,” he adds.
CUNA’s efforts continued through the end of Cordray’s term and as President Trump named Mick Mulvaney acting director. CUNA reached out to Mulvaney as soon as he took the agency’s reins.
Those efforts paid off at the end of 2017, as the CFPB under Mulvaney issued a statement that it would not impose noncompliance penalties for nonmaterial errors relating to data collected in 2018 and reported in 2019.
The bureau also announced it intends to use the rule-making process to reconsider changes to the 2015 HMDA rule, including the discretionary data points and tests to determine coverage of both institutions and transactions.
NEXT: Legal advocacy
Legislative and regulatory advocacy have long been a part of CUNA’s efforts.
But in the past few years, CUNA has deployed its legal advocacy efforts both to defend important credit union priorities and to go on the offensive to ensure credit unions receive recompense when they are harmed due to other parties’ negligence.
NCUA finalized its member business lending (MBL) rule in 2016, providing regulatory relief by eliminating most requirements not present in the Federal Credit Union Act. In response, the Independent Community Bankers of America sued the agency.
CUNA, which strongly supports the MBL rule, filed an amicus brief in the case arguing that NCUA was well within its authority to issue the rule.
Within two months, the U.S. District Court of the Eastern District of Virginia granted NCUA’s motion to dismiss the lawsuit.
In its decision, the court said it dismissed the suit on procedural grounds, but also indicated it would have dismissed the suits on its merits.
While defending credit unions’ ability to offer loans to business members, CUNA also went on the offensive in the wake of data breaches that left credit unions scrambling to replace compromised cards at their own cost, despite doing nothing wrong.
A 2014 Home Depot data breach left credit unions facing $60 million in costs to replace 7.2 million payment cards, according to data compiled by CUNA, which joined in a class action lawsuit against Home Depot.
“Credit unions faced significant costs in replacing payment cards that were compromised due to Home Depot’s negligence,” says Susan Parisi, CUNA’s chief counsel. “We felt it was incumbent upon us to stand up with credit unions, pursue every avenue to get merchants to raise their security standards, and give credit unions some financial relief relating to those costs.”
Eventually, the sides reached a settlement that led Home Depot to create a $25 million settlement fund and agree to strengthen its future data security measures. CUNA and state credit union leagues demanded the latter agreement throughout the case.
Payments from Home Depot to credit unions began in January.
When it comes to reimbursing credit unions, CUNA also ensured credit unions started receiving rebates as NCUA considered closing the Temporary Corporate Credit Union Stabilization Fund.
The agency created the fund to guide the credit union system through the worst of the financial crisis.
In the summer of 2017, NCUA indicated it was considering closing the fund and merging it with the National Credit Union Share Insurance Fund.
Such a merger meant credit unions who paid into the fund would start receiving rebates.
CUNA was the only national trade association for credit unions pushing NCUA to close the fund and start issuing rebates as soon as possible. More than 90% of commenting credit unions backed CUNA’s position.
“Simply put, we believed that the money paid into the stabilization fund would be much better served back with credit unions where it could be used to serve members, rather than sitting in an NCUA bank account,” says Elizabeth Eurgubian, CUNA’s deputy chief advocacy officer.
The NCUA Board closed the fund Oct. 1, 2017, using the closing balance as of Sept. 30. Rebates started this year.
“We had a good year last year, and we’re set up for an even better year in 2018,” Donovan says. “Our advocacy agenda was built from the ground up with input from leagues and credit unions around the country, so we know we’re focused on the issues that will make the biggest difference.
“Credit unions and their members expect big things this year,” he adds, “and we’re going to stay on the offensive.”