When it comes to banks and credit unions, some old wounds never heal.
The rival industries have found common ground in a number of areas in recent years, including a mutual dislike of various aspects of the Dodd-Frank Act and a shared concern about data security.
Still, all it takes sometimes is a divisive issue such as field-of-membership rules, to have both sides ready to spar.
-
The head of the Independent Community Bankers of America fires a legal warning at NCUA and says relations between the two industries has never been more strained.
November 24 -
The agency's board, however, delayed action on a contentious proposal to increase a key population threshold for determining fields of membership in metropolitan markets. Bankers remain on alert, however, because the agency has indicated an interest in revisiting the issue.
November 19 -
The Dodd-Frank Act is a burden on community banks and credit unions but regulators are struggling to quantify the costs, according to a report released Wednesday by the Government Accountability Office.
December 31
The National Credit Union Administration is considering a plan that would allow federal credit unions to expand field of membership beyond what the Office of Management and Budget considers a core based statistical area. The proposal, which would eliminate the "core" requirement and allow federal credit unions to serve beyond a single county, is one of several initiatives designed to make it easier for those institutions to grow.
The American Bankers Association and Independent Community Bankers of America, fearing that the NCUA will make the change, recently sent a joint letter to Congress asking lawmakers to intervene. Camden Fine, the ICBA's chief executive, had already threatened to file a lawsuit against the NCUA if it moved forward with the proposal.
The "sweeping proposal will have significant policy implications, dramatically expanding Federal tax subsidies, diminishing government revenues that support needed services, and causing substantial harm to taxpaying community banks who serve their communities without the benefit of such subsidies," the letter said.
Dan Berger, president and CEO of the National Association of Federal Credit Unions, quickly fired back, saying the proposal would simply modernize requirements that haven't been updated in years. "NAFCU members believe that the federal credit union charter must keep pace with changes in state laws, technology, and the progressiveness of the financial services industry," he said wrote in the letter.
"NAFCU is disappointed that the ABA and ICBA have chosen to attack efforts at regulatory relief for credit unions and their 101 million members," Berger added.
The banking trade groups wrote in their letter that the change represents a policy shift rather than a regulatory adjustment. "This proposal is not 'regulatory relief,' — it is wholesale charter enhancement in contravention of Federal statute and policy intent," the letter said.
"The banks see it as a slap in the face that a tax-exempt industry would be asking for even more authority to lend beyond what they lend already and that is the crux of the disagreement," James Ballentine, an executive vice president at the ABA, said in an interview.
Ballentine said that expanding what is considered a field of membership for a credit union would also circumvent the business lending cap of 12.25%. He said most credit unions are below their small-business lending limits, though expanding their membership territory would allow more of them to push up against that limit.
"It would basically render the cap meaningless," Ballentine said. "If you are able to expand your geographic areas, you are going to have lenders that are going to be making loans well beyond what their capacity is."
"All this new proposal does is follow statistical definitions that other government agencies use to define population centers," said Carrie Hunt, an executive vice president at NAFCU.
"Credit unions want to be able to provide their services to more consumers, and a lot of times credit unions will face a roadblock," Hunt said, adding that "everyone loses" when someone enters a credit union looking for financial services, but the institution is unable to serve them because the person falls outside their field of membership.
"If there is a fresh way to look at the rules so credit unions can reach more consumers and provide more affordable financial services and at the same time keeping up with the federal credit union act and stay within congressional intent, we fully support that," Hunt said.
Paul Merski, executive vice president and chief economist at the ICBA, argued that credit unions should lose their tax-exempt status if they are allowed to expand their membership.
"If you open up your membership to everyone, there is really no justification anymore for your tax exemption," Merski said, suggesting that Congress "could be receptive to taxing credit unions, particularly with a large deficit and looking at tax reform."
Berger, however, pointed to an independent study that found that not-for-profit credit unions provide the greater economy with a cumulative benefit that "totals over $17 billion a year."
The comment period for the NCUA's proposal ends on Feb. 8.
