The story of H.R. 1151 from those who lived it
Truliant FCU, formerly AT&T Family CU, was at the center of the fight.
When President Bill Clinton signed into law H.R. 1151—the Credit Union Membership Access Act—on Aug. 7, 1998 it was the culmination of a hard-fought battle.
The battle started in the lower courts, went to the U.S. Supreme Court, rallied a national grassroots campaign, and ended in landmark legislation.
The former AT&T Family Credit Union, now $2.3 billion asset Truliant Federal Credit Union in Salem, N.C., and its President/CEO Marc Schaefer were at the heart of the fight 20 years ago. Schaefer is now Truliant Federal's CEO.
The American Bankers Association and local banks were unhappy that AT&T Family Credit Union opened a branch in Asheboro, N.C., to serve employees of its sponsor company.
Thirteen finance companies, including some owned by big banks, were located in the town of 30,000 people. Bankers took the issue to court.
“These banks were charging much higher interest rates for loans and they were charging fees for services that were free at AT&T. We felt responsible to this community and the companies that were asking us to serve their employees. There was no question. We had to fight this fight,” Schaefer says.
And while the banking industry had money on its side, credit unions had a potent and powerful messenger: credit union member-owners.
The stakes for credit unions and their members were significant.
A Depression-era law, the 1934 Federal Credit Union Act, specified that credit union members must have a “common bond.” Relevant bonds could relate to occupation, association, or residence in a geographic area—but only one bond could unite members at each credit union.
Most credit unions were formed through single employers, such as AT&T Family Credit Union. But when an employer closed or moved production elsewhere, regulators were forced to close the credit union and pay off the depositors. During the economic turmoil in the 1970s and ‘80s, these closures and moves became common and strained the credit union insurance fund.
To resolve this issue, regulators adjusted their interpretation of the 1934 Federal Credit Union Act and started allowing credit unions to form around more than one “bond,” enabling the merger of many credit unions. It was this consolidation process that worried the American Bankers Association and led to court fights.
Supreme Court rules
One of the lawsuits was initiated in 1990 by the First National Bank & Trust in Asheboro, three other North Carolina banks, and the American Bankers Association.
They sued NCUA after the agency approved a membership expansion for AT&T Family Credit Union, allowing it to serve employer groups not related to AT&T. The bankers said the membership expansion was a violation of the 1934 law.
The case eventually wound its way to the Supreme Court. In February 1997, the Supreme Court agreed to hear the case, and on Feb. 25, 1998, it issued a 5-4 decision in "NCUA vs. First National Bank & Trust."
The Supreme Court ruled credit unions could not consist of more than one occupational group as their common bond.
“I was very disappointed,” Schaefer says. “Our attorney was John Roberts, now Chief Justice of the Supreme Court, so we had really good representation.”
NEXT: National grassroots campaign
National grassroots campaign
The ruling could have forced millions of members to leave their credit unions. But one month after the Supreme Court agreed to hear the case, H.R. 1151 was introduced into the House on March 20, 1997.
It was at this point that the credit union representatives shifted their grassroots strategy into overdrive and employed the power of credit union members.
“We realized we needed to make lawmakers understand that this legislation would benefit consumers, but if it wasn’t passed it would hurt consumers,” says John McKechnie, who was then CUNA's vice president of legislative affairs. “That’s what provided us with the impetus to win.”
Buddy Gill was hired to be the principal strategist and architect behind the national campaign.
"The credit union campaign recast the message to Congress from “banks vs. credit unions to ‘what’s best for your district’s constituents’ by giving credit union members a stake in the outcome,” Gill writes in an essay, “How a Massive National Grassroots Campaign Beat the Well-Heeled Bank Lobby.”
Schaefer agreed with the strategy.
“We couldn’t win 'credit unions vs. banks,'” Schaefer says. “We changed the focus. Banks serve stockholders and credit unions serve members. It wasn’t a difficult decision to put our strongest asset—member-owners—at the heart of the campaign.”
The effort was called “The Credit Union Campaign for Consumer Choice.”
But another group—members of Congress—needed to be convinced they could support consumers and not be harmed politically by voting against the powerful bank lobby.
“Our objectives had a single purpose: How to best give our friends in Congress the political cover they needed to be with us and say ‘no’ to the banks when the hard votes came,” Gill writes.
Gill organized credit union voices throughout the country with TV and newspaper ads, media events, phone banks, and letter-writing campaigns that brought pressure from credit union members and credit-union friendly organizations to the steps of Congress.
Locally, AT&T Family solicited support from its member-owners. Lisa Warlick, a former marketing representative, worked on the campaign.
“We just put our heads down and worked,” says Warlick, who is now a campaign/digital analytics specialist at Truliant Federal. “We realized we had to get the laws changed. Since we had lost in the Supreme Court, there was no other way. If we hadn’t won, I can’t imagine what it would look like today—and I can’t imagine what would have happened to all those working-class people who depended on credit unions to help them with their financial dreams and goals. The banks, with their high rates and fees, simply weren’t a good answer for these workers."
People writing to their representatives in Congress was a big part of the Credit Union Campaign for Consumer Choice, Warlick notes.
“We did it the old fashioned way,” she says. “We parked ourselves in our branches and asked everyone who walked through the doors if they would sign a letter for their [representative].”
Registering people to vote also was critical to the campaign.
“We wanted to be able to say that everyone who wrote a letter was a registered voter. We didn’t want people writing a congressman and then not voting. It was said that Howard Coble, a Republican who represented North Carolina’s sixth congressional district, got so many letters through his mail slot, he couldn’t open his front door,” Warlick says.
The result: Congressional representatives received thousands of calls and letters from credit union members from all over the country—and 6,000 credit-union members rallied in Washington on July 14, 1998.
“If you get behind a good cause, it’s not hard to get support,” Warlick said. “Our members loved us and we loved our members. It was inspiring to be a part of this. AT&T Family chartered buses for staff and members. We left at 3 a.m. We marched in mid-morning. We were exuberant. It was a blast. Then we loaded back on the buses and came home.”
Gill says the reaction from congressional offices was overwhelming.
NEXT: A lopsided vote
A lopsided vote
In addition to grassroots efforts, credit unions made key congressional alliances.
“Credit unions won this legislation because of the groundwork we did politically,” McKechnie says.
Georgia Credit Union Affiliates leaders gained support early from Rep. Newt Gingrich (R-Ga.), ensuring he knew the benefits of credit unions.
“Gingrich was Speaker of the House at that time,” McKechnie says. “It’s rare for Speakers to sponsor legislation. But he went to a credit union conference before the legislation was introduced and announced he was going to co-sponsor the bill. It sent a message to the rest of the House that it was OK to support the bill.”
The message got through.
On April 1, 1998, the House voted to pass H.R. 1151 by a vote of 411-8, and the Senate passed the bill 92-6 on July 28, 1998. Five months after the Supreme Court decision, President Bill Clinton signed H.R. 1151 into law.
The law allows credit unions to have multiple bonds among their member-owners.
Twenty years later, Schaefer and other credit union executives say the fight continues.
“The banking industry and their trade associations will continue to try to disadvantage credit unions and our members. We have to be vigilant and aggressive in defending what we have, and then we have to continually demand the right to modernize credit unions so we can more effectively serve members,” says Schaefer. “H.R. 1151 was about the banking industry wanting us to go back to 1934.”
The key to fighting off future bank attacks is remaining committed to mission, according to Schaefer.
“We have to continually prove how we serve our members so they can’t lock us in,” says Schaefer. “If we never forget that, the future is bright for us and for our member-owners.”