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    Legislative Hot Topics

    Last Updated: December 16, 2013

    Below, you’ll find the latest information on“hot” legislative topics impacting Tech CU and the credit union industry as a whole.

    Credit Union Tax Exemption Under Threat

    The push by big banks (ABA) to tax credit unions is gaining strength. Though Congress’ recent focus has been on larger budget concerns, make no mistake that the fight between bankers and credit unions over taxation remains as strong as ever.

    What’s the current status?

    • Credit unions (used by 96 million Americans) could lose their tax-exempt status if Congress approves a proposal from big banks to tax not-for-profit financial institutions.
    • The taxation issue has received more attention recently as a direct result of the ongoing Congressional review of government spending and taxation.
    • CUNA doesn’t expect to see an end to the tax reform issue until 2014. Be aware that this is going to be a drawn-out fight.

    Why should I care?

    • Taxing credit unions (without relieving the current regulations credit unions operate under — such as the 12.25% business lending cap) would directly impact Tech CU’s ability to continue to provide members with excellent service and new technologies.
    • A tax could force credit unions to impose fees similar to those of big banks.
    • It can potentially hurt consumers by raising interest rates on loans and lowering yields on savings accounts.

    Taxation Facts

    • Credit unions don’t pay income tax. Credit unions do, however, pay other taxes, including payroll, sales and property taxes.
    • Credit union members pay taxes on their dividends.
    • Credit unions have a 12.25% cap (of all assets) on business lending.
    • Some banks are classified under S-Corp status — removing them from corporate taxation. This responsibility is then passed on to shareholders, who are taxed at the individual level. S-Corp bank customers, like credit union members, pay taxes on their interest earnings.

    What can I do?

    • CUNA and the NAFCU have launched “Don’t Tax My Credit Union,” aimed at protecting credit unions’ tax-exempt status. You can go to the site to learn more about this issue and to explore how to help.
    • Reach out to your member of Congress. Watch a video by Congresswomen Elisabeth Etsy (Connecticut, 5th District) on the best way to contact your members of Congress. Her number one tip: Call the local office in your state.

    Member Business Lending

    The Credit Union Small Business Jobs Creation Act (H.R. 688) proposes to raise the cap on credit union member business loans from 12.25% to 27.5%.

    • The bill is still sitting with the House Financial Services Committee, and it has dropped from a 51% chance of getting past committee to a 45% chance, with a 19% chance of being enacted.
    • It has 116 co-sponsors (85D, 31R). All Bay Area representatives have signed on as co-sponsors, with the exception of Nancy Pelosi (D-CA12), San Francisco, and Barbara Lee (D-CA13), Oakland/Berkley/Alameda/San Leandro.


    Examination Fairness

    In a recent survey conducted by CUNA, nearly 30% of credit unions reported dissatisfaction with their most recent exam. Congress is considering legislation to bring fairness to the examination process: The Financial Institutions Examination Fairness and Reform Act (H.R. 1553).

    • The bill was introduced in April 2013 and is sitting in the House Financial Services Committee with an 18% chance of getting past committee.
    • It has 135 co-sponsors (108R, 27D), none of whom are from the Bay Area.


    Privacy Notification

    The Eliminate Privacy Notice Confusion Act (S. 635 / H.R. 749) would provide benefits to both credit unions and their members by streamlining the compliance burden of credit union privacy policies.

    • The bill passed in the House on March 12, 2013. It goes next to the Senate for consideration.
    • It has a 24% chance of being enacted, with 73 co-sponsors (37R, 36D), none of whom are from the Bay Area.


    Housing Finance Reform

    The federal government has a very important role in ensuring that the secondary market operates efficiently, effectively and fairly for all borrowers and lenders alike. Credit unions maintain a level of concern about the possibility of the secondary mortgage market being controlled by a handful of very large banks. Credit unions create much needed competition in the secondary marketplace — helping to keep rates low and allowing for more options.

    As Congress considers comprehensive housing finance reform, credit unions must continue to have access to the secondary mortgage market.

    • No bills have been introduced as of yet, but credit union representatives testified before the Senate Banking Committee Hearing on Housing Finance Reform in June of 2011. This was the last action on this issue to date.


    Supplemental Capital

    Currently, credit unions have restrictions on sources of capital — the only thing that counts as capital for a credit union is retained earnings. Allowing credit unions to access supplemental forms of capital would be a safety and soundness tool — acting as a buffer to absorb operating losses and asset write-downs during economic downturns.

    The Capital Access for Small Businesses and Jobs Act (H.R. 719) would modify the definition of credit union net worth — including supplemental forms of capital for credit unions and allowing regulators to develop risk-based capital standards for prompt corrective action (PCA)

    • The bill was introduced to the House Financial Service Committee in February 2013.
    • It has a 27% chance of getting past committee, with 46 co-sponsors (33D, 13R), none of whom are from the Bay Area.


    Interchange Fees

    The Merchant Payment Coalition continues its effort through litigation to try and reduce the fees merchants pay in order to accept payment cards. Financial service trade associations (including CUNA) continue to fight against the coalition, arguing that the rate is too low.

    Merchants are not passing savings from lower fees onto consumers. In addition, lower fees do not take into account the significant costs financial institutions incur to protect merchants against theft and fraudulent transactions.

    • Credit: A settlement regarding credit card interchange was agreed to by merchants, large card issuing banks, MasterCard and Visa. On Capital Hill, most feel the credit card settlement terms eliminate the need for congressional action and that the “case is closed,” but leaders from the credit union industry do not agree.
    • Debit: It is not expected that Congress will revisit the debit interchange (in a substantive manner) in the foreseeable future.

    The Merchant Payment Coalition continues its effort through litigation to try and reduce the fees merchants pay in order to accept payment cards. Financial service trade associations (including CUNA) continue to fight against the coalition, arguing that the rate is too low.


    Limiting Consumers to Six Transfers Per Month

    Federal Reserve Regulation D limits consumers to six transfers per month from their savings account to any other account. This regulation requires credit unions to devote valuable time and resources to monitoring members’ accounts.

    The Regulation D Study Act (H.R. 3240) instructs the U.S. Government Accountability Office to study the impact of the Federal Reserve Board’s monetary reserve requirements (implemented through Regulation D), on depository institutions, consumers and monetary policy.

    • The bill was assigned to the House Financial Services Committee in October 2013, where it is still sitting. It has a 27% chance of getting past committee and a 6% chance of being enacted.
    • It has 15 co-sponsors (8R, 7D). All Bay Area representatives have signed on as co-sponsors, none of whom are from the Bay Area.

    For detailed information on any of these legislative issues, visit the Credit Union National Association (CUNA) Legislative Hot Topics page.