Banks CUs Actually Agree On Bill

June 11, 2004
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GRAND RAPIDS — While banks and credit unions are often at odds with each other, both now have one thing in common — they like HR 1375, the Financial Services Regulatory Relief Act (FSRRA).

The Michigan Bankers Association (MBA), a group of made up of 192 banks in the state and based in Lansing, supported the federal act recently passed by the House, as did similar groups in Indiana and Arkansas.

At the same time, banking organizations were also pleased that the chamber defeated an amendment offered by U.S. Representative Anthony Weiner, D-New York.

Weiner wanted to ban banks from charging their customers a fee when they deposited a bad check written to them by someone else.

“If you write a check and it bounces, you should expect to be charged a high fee: You’ve wasted the time and money of both the bank and the person you’re supposed to pay,” wrote Weiner on his Web page.

“But receive a bad check, and that should be punishment enough, especially since you’ve done nothing wrong,” he wrote.

“But banks make a bundle charging the recipients of bad checks high fees, especially in New York,” he added, noting that the fees New York banks charge reach $30 and that the entire industry was making billions on bad-check fees.

The House, however, checkmated the Weiner amendment by a 255 to 167 vote.

The MBA noted that had the amendment passed, banks would have been forced to recoup losses associated with bad checks from their entire customer base and, in effect, would have created a tax on every customer and not just the check-bouncers.

The association also said passage of the amendment would have slowed the check-clearing process and would have facilitated check fraud by not providing a disincentive for passing bad checks. The Arkansas and Indiana associations agreed.

Bankers generally liked FSRRA because it reduced their regulatory burden. A trio of provisions within the act were highly favored. The act:

  • Grants federal savings associations unlimited small-business lending authority and increases the lending limit on other business loans to 20 percent of assets.

  • Permits de novo interstate branching by national and state banks, extending the benefits of flexible branching authority now available to savings associations.

  • Provides for trust activities of savings associations under certain provisions of the Investment Advisers Act and the Securities Exchange Act of 1934.

FSRRA also equalizes SEC registration standards for banks and thrifts and gives banks an option to pay interest on commercial demand accounts. The latter was prohibited through a Depression-era law.

But banking associations weren’t the only groups that liked the revisions.

The National Association of State Credit Union Supervisors (NASCUS) welcomed four features of the act. The act:

  • Permits non-federally insured credit unions to be eligible to join the Federal Home Loan Banks.

  • Provides exceptions for savings associations and credit unions from SEC broker and dealer registration and investment advisor registration requirements similar to those already granted to commercial banks.

  • Excludes loans or loan participations by federally insured credit unions to nonprofit religious organizations from statutory member business limits.

  • Provides parity of treatment with banks and savings institutions and exempt federally insured credit unions from the pre-merger notification requirements of the Clayton Act.

Both the National Association of Federal Credit Unions and the Credit Union National Association found even more favor with FSRRA.

In addition to the highlights offered by the credit union supervisors, NAFCU and CUNA supported nine more provisions of the act. A few of those provisions are:

  • Expands the lending authority of credit unions from 12-year maturity to 15 years.

  • Raises the limit of federal credit unions to invest in credit union service organizations from 1 percent to 3 percent of shares and undivided earnings.

  • Permits NCUA more flexibility to adjust the usury ceiling, which makes it easier for credit unions to serve the underserved.

“NASCUS believes that H.R. 1375 is a major step toward modernizing regulation of depository institutions,” said Mary Martha Fortney, group president and CEO.

The U.S. Senate now must take up the bill.

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