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Banker involvement is key to the success of our government relations program. That is why the
ABA
has developed a system that makes it very easy for our members to communicate with our Congressional Delegation.
Below you will see sample letters, memos and talking points regarding various issues that impact banking. Please feel free to modify and/or reproduce these documents for your signature and send them to your Senator or Representative.
To begin and continue your involvement with the
ABA
Grassroots
Action
Center
, view the current issues below and Get Involved.
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February 4, 2011
Oppose Efforts to Expand Credit Unions’ Business Lending Authority
Congress enacted limits on credit union business lending in 1998 in order to ensure the safety and soundness of the credit union industry and to maintain their focus on lending to people of modest means. A new breed of large, growth-oriented credit unions are attempting to have Congress either increase or eliminate their business lending cap of 12.25 percent of a credit union’s total assets.
Members of Congress should oppose any legislative efforts by the credit union industry to move legislation individually or as an amendment to any other legislation for the following reasons.
* Raising the Business Lending Cap Would Not Benefit 99.5 Percent of All Credit Unions. It Would Directly Affect 33 Large, Non-Traditional Credit Unions That Have Abandoned Their Mission • While the credit union industry argues that expansion of business lending would immediately impact all credit unions, the fact is that the primary beneficiaries of such expanded authority are large, non-traditional, growth-oriented credit unions that have abandoned their mission of serving people of modest means.• When asked by Sen. Jack Reed (D-RI) at a recent Congressional hearing about the number of credit unions that have reached their limit, NCUA Chairman Deborah Matz stated: “It’s a small number that are at their cap.” Source: Testimony on December 9, 2010, before the Senate Banking Committee. • In fact, only 33 very large credit unions of the nearly 7,400 credit unions are at or near their Congressionally mandated 12.25 percent lending cap. *Source: National Credit Union Administration (NCUA). • Despite the credit unions’ claims, the increase would benefit less than one percent of all credit unions. 99 percent of credit unions have more than enough authority and lending capacity to make additional loans to small businesses today, yet have chosen not to do so. • The number of credit unions offering small business loan products has actually decreased from 1,942 in 2008 to 1,758 as of September 2010 – further evidence that raising the cap would have very little impact on lending to business.
* Credit Unions Already Have Sufficient Authority to Make Small Business Loans• Under current law, the aggregate business loan limit is 12.25 percent of a credit union’s assets. The limitation helps to prevent the tax subsidy from being used to support large business loans.
Winter 2011
• Business loans that are less than $50,000 or have a governmental guarantee, such as Small Business Administration (SBA) loans, are excluded from this calculation of the aggregated business loan limit. These exemptions, combined with the authority to make such loans up to the 12.25% limit, gives credit unions sufficient authority to meet the credit needs of small businesses without causing them to further stray from their Congressionally mandated mission of serving people of modest means.
* Expanded Business Lending Poses a Safety and Soundness Concern • The Government Accountability Office (GAO) warned in 2003: “[S]ince member business loans constitute only a small percentage of credit union lending, most NCUA examiners will not have significant experience looking at this type of lending activity” … and NCUA may not be up to the “the challenge to ensuring that it is adequately prepared to monitor” the expansion of credit union business lending.
* Increased Business Lending Will Move More Credit Unions Away from Their Mission • Credit unions were chartered to fulfill “their specified mission of meeting the credit and savings needs of consumers, especially persons of modest means, through the emphasis on consumer rather than business loans.” *Source: Senate Banking Committee Report (105-193). • To help credit unions fulfill their mission, Congress granted credit unions an exemption from federal taxation. • The credit union industry’s efforts would allow tax-exempt credit unions to allocate resources to multi-million-dollar business loans, funding hotels, malls, and condo developments, rather than focusing on either the small business borrowers they talk about or the people of modest means emphasized in their charter.
Stop the Federal Reserve’s Interchange Rule from Being Implemented
Background: When Congress approved the Dodd-Frank Act last year, it contained an amendment by Senator Richard Durbin (D-IL) that directed the Federal Reserve to set price controls on debit card interchange transactions. The Fed is directed to determine a “reasonable and proportional” fee to the merchant for use of the debit card payment network, considering only certain “incremental costs” of clearing a specific transaction. There is no consideration of the overall costs to maintain/improve the U.S. payments system, the costs of fraud, and the need for return on capital, among other things. The Durbin Amendment aimed to shift the cost away from retail merchants, such as Wal-Mart, and the Fed has recently proposed a very narrow rule that has exactly that effect.
The End Result: Consumers will pay more for banking services, millions who cannot afford to do so will be driven out of the banking system to payday lenders and loan sharks, banks of all sizes will have less revenue to fight fraud and make job-producing loans, and big-box merchants will receive $14 billion in new-found “profit” (with 1.5% of merchants getting 80% of the benefit). And all of this the result of an 11th hour addition of the Durbin Amendment on the Senate Floor to the Dodd-Frank Act – an unrelated amendment to the broader debate on financial reform legislation – without the benefit of any Senate hearings, study or informed debate. In passing the Amendment, Congress imposed a law that will have a major negative impact on consumers, the economy and banks. Congress needs to act immediately to stop these negative consequences from coming about.
We strongly urge Congress to Stop the Fed Interchange Rule
Consequences of the Durbin Amendment and Federal Reserve Action:
• Severe impact of price controls on the debit-card system and consumers. Debit card interchange provides the revenue source that supports free checking accounts, basic banking accounts to low-income individuals, fraud protection, and the efficient operation of our nation’s payment system. It likewise supports constant innovation in the marketplace. The Durbin Amendment’s (and the resulting Fed rule) failure to take into account the full costs of operating our nation’s vast debit card system will lead to the elimination of many of these consumer benefits, and drive millions of people who cannot afford the new costs of services to payday lenders and loan sharks.
• Job reductions, less capital, less loans. As proposed by the Fed, debit card revenue will be slashed by 70-85%, with a reduction of industry revenue of over $14 billion. This will adversely impact the capital position of banks of all sizes, their ability to make loans and hire people, and their ability to otherwise support a growing economy. All of this is critically important for creating new jobs and putting our economy back on track.
• No protection for small banks. The “exemption” for banks under $10 billion is unworkable for one simple reason. Merchants will drive business to lower-cost cards issued by larger institutions, forcing small institutions to either lower their prices to the same level as those subject to the proposed rule or stop issuing debit cards to their customers. This so-called exemption will not protect community banks. And as revenue shrinks at community banks, so does that bank’s ability to recover the millions of dollars of fraud losses from data breaches, a vast number of which occur at retailers who accept little responsibility for such losses but reap much of the benefit from the current system.
Action Needed: The Federal Reserve is expected to issue its final rule on the Durbin interchange amendment in April 2011. If it is implemented as it stands now, it will result in a substantial loss of revenues that will have major adverse consequences on banks of all sizes, but particularly on small banks – which already are struggling under the immense requirements of the Dodd-Frank Act. Many banks will be faced with difficult choices, including not issuing debit cards, raising other fees, closing branches, firing employees, and/or limiting other services that their customers have come to expect.
We strongly urge Congress to take immediate action to Stop Implementation of the Fed Interchange Rule.
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