Below is a list of current federal legislative issues.
Federal Credit Union Act Update
Michigan’s member-owned credit unions compete in a rapidly changing industry. As consolidation continues to increase the average size of banks and credit unions and technology advances, playing a greater role in our work, updating the Federal Credit Union Act (FCUA) is necessary to ensure federally-chartered credit unions have the powers and flexibility necessary to be competitive and continue serving their members. In 2016, the Michigan Legislature enacted a comprehensive six-bill legislative package to update the Michigan Credit Union Act, providing much-needed regulatory relief and expanded powers.
Legislation (H.R. 1661) backed by MCUL and CUNA was introduced early in the 116th Congress to eliminate the restriction on federal credit union loan maturity. A bill (H.R. 2305) has also been introduced that would exempt credit union business loans made to veterans from the member business lending cap. Working with CUNA, MCUL continues to identify key areas of the Act that need to be revised and will work with Congress to pass legislation that modernizes it. Rather than approach an update via a comprehensive bill, we expect to see additional bills introduced this Congress that will be limited in scope, addressing one or two issues.
MCUL believes an update should, among other things, do the following:
- Grant credit unions greater authority to invest in CUSOs.
- Expand the NCUA board from three to five members.
- Provide credit unions additional authority regarding administrative actions, such as determining their fiscal year, scheduling board meetings and removing abusive members.
The federal Controlled Substance Act (CSA) classifies cannabis as a Schedule 1 drug — the same category as heroin and methamphetamine. While illegal at the federal level, 47 states and the District of Columbia have passed laws and adopted policies allowing for some cultivation, sale, distribution and possession of cannabis — all of which are contrary to the federal CSA. Michigan is among those states who have legalized both medicinal and recreational cannabis use, which has created a tremendous need for financial institutions willing and able to service cannabis-related businesses.
MCUL takes no position on the broader issue of cannabis legalization, it supports legislation such as the SAFE Banking Act of 2019, H.R. 1595 and S.1200 and the STATES Act, H.R. 2093 and S.1028, in the 116th Congress that enables the banking of cannabis business in states where usage has become legal. On September 25th, the U.S. House passed H.R. 1595 by a vote of 321-103 and sent it to the U.S. Senate for consideration. Michigan Reps. who voted for passage include: Reps. Amash, Dingell, Kildee, Lawrence, Levin, Mitchell, Slotkin, Stevens, Tlaib and Upton.
In 2019, a number of Michigan leaders publicly called on Congress to pass legislation that would enable financial institutions to bank legitimate cannabis businesses. These leaders include: Governor Gretchen Whitmer, Attorney General Dana Nessel, and Department of Insurance and Financial Services (DIFS) Director Anita Fox. In addition, the Michigan House of Representatives passed House Resolution 101 urging Congress to take action on cannabis banking and the Michigan Senate is expected to debate and vote on Senate Concurrent Resolution 9 in the Fall which would similarly call on Congress to pass cannabis banking legislation.
Data Security Reform
The personal financial information of millions of American consumers has been compromised by one or more breaches in recent history. Many Americans have had their information compromised multiple times in the last year. Retailers accepting electronic payments do not face the same strict data security standards that financial institutions are subject to under the Gramm Leach Bliley Act (GLBA). While legislation at the federal level has yet to be introduced, MCUL continues to push for comprehensive data security reform to help protect consumers payment and other personal information. Retailers who choose to store sensitive personal information pertaining to their customers should be required to protect this information at the same level as financial institutions.
Protect the Credit Union Not-for-Profit Tax Status
In 1937, Congress Granted credit unions a not-for-profit tax status based on our cooperative structure. To this day, credit unions continue to operate as democratically controlled institutions where one member has one vote. Credit union boards are made up of volunteers who are not paid for their knowledge or service to the institution. While credit unions are not-for-profit entities, they pay payroll taxes, real estate taxes and property taxes. Currently, the credit union not-for-profit tax status is not in jeopardy but MCUL continues to educate lawmakers on the importance of this status and stands prepared to defend against any and all attacks.
Current Expected Credit Loss (CECL)
In June of 2016 the Financial Accounting Standards Board (FASB) issued final guidance for their Current Expected Credit Loss (CECL) accounting standard. Implementation of the CECL standard would change how credit unions account for credit losses. Instead of using the current “incurred-loss” standard, credit unions would be required to recognize lifetime expected credit losses. CUNA and MCUL believe the consequences of the new standard will be significant and detrimental for credit unions.
Set to go into effect in January 2022, credit unions and other financial institutions have called for a delay and further investigation into how CECL will impact the economy, the availability of credit, investor decisions, its impact on financial institutions of varying sizes, etc. FASB recently agreed to delay implementation of the standard for 1 year, until January 2023, to provide additional time for institutions to come into compliance but did not propose to study the impacts of the rule as we believe needs to be done.
MCUL, along with CUNA, are calling for Congress to pass legislation (H.R. 3182 and S.1564) that would delay implementation of the CECL standard for a year and require federal financial regulatory agencies to study and report to Congress on the potential consequences the new standard would have if implemented.
Americans have grown tired of being bombarded with unwanted robocalls. According to the Federal Communications Commission (FCC), U.S. consumers received approximately 4 billion robocalls per month in 2018, a number that is projected to increase in 2019. MCUL and CUNA support efforts by the FCC and Congress that will put an end to illegal robocalls while protecting a credit union’s ability to contact its members for a legitimate business purpose. We are supporting legislation (H.R. 3375, the Stopping Bad Robocalls Act) recently passed by the U.S. House of Representatives. The bill now heads to the U.S. Senate for consideration.
Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Relief
The Bank Secrecy Act requires financial institutions to keep records and file reports with the government that involve certain financial transactions initiated by a member/customer. Typically, financial institutions use Currency Transaction Reports (CTR’s) and Suspicious Activity Reports (SAR’s) to comply with the requirements of the BSA. CTR’s must be filed when a transaction exceeds $10,000 while a SAR must be filed when:
- There is suspected insider abuse
- Transactions total $5,000 or more when a suspect can be identified
- Transactions total $25,000 or more regardless of potential suspect
- Transactions total $5,000 or more that involve potential money laundering or BSA violations
Passed into law in 1970, the thresholds outlined above have never been adjusted to account for inflation. According to the U.S. Bureau of Labor Statistics CPI Inflation Calculator, $5,000 in 1970 has the same buying power as $33,881 in June of 2018. MCUL believes Congress should pass legislation that indexes the CTR and SAR thresholds for inflation and addresses redundancies, unnecessary burdens and improves efficiencies under the BSA.
MCUL supports legislative efforts to reform BSA/AML laws, including H.R. 2514, the Coordinating Oversight, Upgrading and Innovating Technology, and Examiner Reform Act of 2019 (COUNTER Act of 2019) which would index the CTR threshold for inflation and require a study on a modified SARS form. In addition, the bill requires a review of financial institution reporting requirements under the BSA and its implementing regulations by the Treasury Department, federal law enforcement agencies and others which will result in proposed reforms that will reduce the regulator burden and ensure that information being provided to law enforcement is of a ”high degree” of usefulness.
The U.S. House recently incorporated the language from H.R. 2514 into H.R. 2513, the Corporate Transparency Act of 2019, and passed that bill by a vote of 249-173. H.R. 2513 now heads to the Senate for consideration.
Government Sponsored Enterprise (GSE) Reform
Following the 2008 financial crisis both Fannie Mae and Freddie Mac remain in conservatorship; however, the President and congressional leaders on both sides of the aisle have expressed a desire to overhaul our nation’s housing finance system, including initial recommendations from the Administration and Senate Republicans that GRE’s should be transitioned into private entities.
A proposal from the White House is expected soon with the Department of Housing and Urban Development (HUD) drafting reforms to federal housing finance agencies and the Treasury Department drafting GSE reforms. Meanwhile, in the U.S. Senate, Banking Committee Chairman, Mike Crapo (R-ID), released his outline for housing finance reform and held a hearing on the subject.
MCUL, working with CUNA, will monitor reform proposals and actions taken by the Administration and Congress to ensure credit union interests are considered and protected.
Below is a list of current federal regulatory issues.
Community Reinvestment Act (CRA)
After advocacy efforts by CUNA and state associations Senator Elizabeth Warren (D-Mass.) released an updated version of her housing legislation March 13, 2019. The bill reflects significant engagement from CUNA and the credit union industry. Unlike the previous version outlined below, The American Housing and Economic Mobility Act of 2019 would not require credit unions to comply with the Community Reinvestment Act (CRA). The previous bill included the following:
- Aim to reduce the cost of housing by creating incentives for local governments to eliminate unnecessary land-use restrictions;
- Create two new programs: One meant to offer down payment assistance to those communities often denied mortgages, and another to support those families whose housing wealth was destroyed by the financial crisis;
- Plan to hold financial institutions accountable for providing access to credit by extending CRA; and
- Seek to strengthen anti-discrimination laws and improve the housing voucher program.
- Section 203 of the bill would subject credit unions to the Community Reinvestment Act (CRA). Since the enactment of the CRA, credit unions have been excluded.