Special Report: America's CU Conference

Cheney: State of CUs is ‘Extremely Good’

CUNA CEO outlines CUs' standing in the financial, political, and regulatory arenas.

June 21, 2011

Credit unions are coming out of the financial crisis in “extremely good” condition, CUNA President/CEO Bill Cheney told America’s Credit Union Conference attendees Monday.

Cheney outlined the state of the credit union movement in the financial, political, and regulatory arenas. Politically, things are looking up, he says.

“We lost an important fight on [debit fee] interchange,” he notes, referring to the 60 votes needed to delay the Federal Reserve’s implementation of its debit interchange rule. Credit unions came up with 54 votes. “The last time I checked 54% of 100 is a majority. That majority is resonating throughout Congress.”

Cheney says credit unions “did a tremendous job” and “the atmosphere has changed.”

The Fed will review the rule to enforce credit union exemption. The Fed’s rule issuing the July 21 implementation should be passed in the next few days but Cheney indicated the Fed may not put compliance in effect for 60 to 90 days.

Credit unions have “made the issue of interchange fees toxic with an election next year,” he adds, and the issue is off the table for a while.

“Credit unions moved straight from interchange to member business lending [MBL],” Cheney says, noting that in his testimony last week before the Senate Banking Committee about Senate Bill 509 (which would raise the MBL cap from 12.25% of assets to 27.5%), he told legislators “it’s hard for small businesses and credit union employees and volunteers to believe the government is telling them they can’t help create jobs.

“And when credit unions ask me why Congress will not let credit unions do more business lending, there’s just one answer: The banks oppose it,” Cheney says. “The answer is not good enough for taxpayers who have given the banks $30 billion of their money to lend to small businesses but have only seen the banks use $9.2 billion.”

Cheney also re-rang the alarm bell he sounded at CUNA’s Governmental Affairs Conference on threats to credit unions’ tax-exempt status. Credit unions need “to be more vigilant in defending their tax exemption. There are huge deficits,” he says noting the search for a broader tax base to lower rates for everyone. “I’m concerned when I hear there’s a real threat and we need to make sure we tell our story.”

CUNA continues to receive assurances from key lawmakers that credit unions’ tax exemption isn’t on the table. Lawmakers “have said to continue to deliver great service and value to your members. ‘We know what credit unions’ grassroots are like in a tax fight. Please don’t turn out your credit unions; everything is fine,’ ”.

Last year, Cheney cited supplemental capital as credit unions’ No. 1 priority. “It is one of the top priorities this year. It is essential to the long-term health and viability of credit unions. Credit unions are the only cooperatives in this country without supplemental capital. We will continue to press the issue to move forward.”

He also addressed the need for a consistent message to Congress. “There are 435 members of the House and 100 Senators, and we need a strategic plan for every one.”

Cheney noted past grassroots strength in 1998 for the Credit Union Membership Access Act, but “credit unions’ response now is inconsistent and uneven. We need a strategy for every member of Congress and we need to be willing to engage the movement at the state and credit union level.”

He noted the CUNA Board is working on a vision for the credit union movement. “We’ve gone too long letting others define what credit unions should be.”

On the regulatory front, Cheney mentioned several areas CUNA will address, including the increase in NCUA’s budget; an examination Bill of Rights; concerns about front loading assessments, and new rules that don’t overstep as a result of lessons learned from the financial crisis.

He also noted that credit unions’ return on assets is at 74 basis points nationally. Cheney noted that when he prepared for a recent congressional hearing, “everywhere I went, I heard comments on the strength of credit unions and how well they serve their members.”

NCUA, which had anticipated a premium as high as 10%, has now said it is anticipating a 0% premium because of the improvement in credit unions. CUNA economists expect savings growth to be strong and loan growth to improve as consumer confidence and the economy improve, Cheney notes.