Capitol Hill: 'Politico' Overdraft Fees Piece & NCUA Liquidity Bill

Capitol Hill buildings

Credit union leaders should stay on the alert after a Politico opinion piece on the topic of overdraft fees was published Thursday by a guest writer from the Brookings Institution.

The opinion article highlights how larger financial institutions are not the only provider reaping the benefit of overdraft fees. The author suggests regulating overdraft fees, as well as mandating reporting requirements specifically for credit unions (see bold area on pages 3 – 4 of the article copy above).

While the Brookings Institution is one of many thinktanks, the California and Nevada Credit Union Leagues' advocacy team is on high alert for any potential effort to regulate this product.

Within the past few weeks, the House Financial Services Committee and the Senate Banking Committee held hearings focused on the nation’s largest banks and their overdraft practices. Combined with a consumer-oriented Consumer Financial Protection Bureau (CFPB) and the announcement that Ally Financial will terminate its overdraft fees, the Leagues are making credit unions aware of the state-of-mind in our nation’s capitol.

There are plenty of efforts underway to aid credit unions by improving their charter and mission. However, there are also efforts that can harm the ability to offer market-based solutions and desired products for credit unions' members.

"It’s one more reminder why we must never take a moment for granted in our advocacy efforts," said Diana Dykstra, president and CEO of the Leagues.

House Committee Passes NCUA Liquidity Bill
On Wednesday, the House Financial Services Committee marked up H.R. 3958 (a hearing where it amends bills). This legislation would make permanent the borrowing authority of the National Credit Union Administration's (NCUA) Central Liquidity Facility, which expires at the end of this year.

The bill is authored by Committee Chairwoman Maxine Waters (D-Los Angeles).

"The issue was not debated much, minus the fact that the existing extension of the authority was not used during the peak of the pandemic," said Jeremy Empol, vice president of federal government affairs for the Leagues. "The debate moved to a question of more of responsive policy versus proactive — not necessarily about credit unions or the lending facility itself. Lawmakers on both sides of the aisle acknowledged their support for credit unions; however, there was some partisan rift, which comes naturally in Congress."

In response to the question of need for the CLF, the testimony of previous NCUA Board Chairman Rodney Hood and current Chairman Todd Harper was cited. Committee Democrats acknowledged this is a sound measure to prepare the credit union system for any potential liquidity crunch. GOP committee members, while opposed, opted for further study.

During the hearing, Waters noted the work of California’s credit unions and the Leagues’ support for this bill. The two other California members of the committee, Rep. Brad Sherman (D-Sherman Oaks and a bill co-sponsor) and Rep. Juan Vargas (D-Chula Vista), spoke favorably of the legislation. Vargas also had very sound arguments for this bill and the prudential operations of credit unions.

Nevada does not have a member on this committee.

The bill passed 28-to-22 and now moves to the full House for consideration. While it's a mid-level priority for the credit union agenda, the committee hearing shows the complicated nature of advancing any bill or policy.

"The Leagues and the Credit Union National Association (CUNA) work diligently to ensure our issues are bipartisan and not involved in party politics," Empol added.

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