EDWARD F. SAUNDERS JR. – Movement needs protection
More than 100 members of the Massachusetts Credit Union League descended on Beacon Hill last Thursday to make sure legislators knew where credit unions stand on several bills pending before the house and senate.
The MCUL Governmental Affairs Day was kicked off at the Omni Parker Hotel and, throughout the course of the morning, members drifted out to meet with their district representative armed with talking points and packets of information on individual bills.
“It is necessary to protect the credit union movement from political and legal attack,” said Edward F. Saunders Jr., senior vice president and legislative counsel to the MCUL.
This year, the MCUL has seven filings before the Legislature in addition to several other bills that it supports. Although all are important, Saunders said he has heard the most discussion on a bill dealing with credit union real estate loans sponsored by Sen. Robert S. Creedon Jr., D-Brockton.
Currently, in order for a state-chartered credit union to approve a real estate loan, its board of directors must meet and approve the loan. Instead, the bill proposes loan officers be trusted to approve loans pending the ratification of the board. The current law has been in effect and unchanged since 1926, according to the MCUL. With many mortgage lenders advertising quick closings, the credit unions are at a disadvantage, said Saunders.
Tying the hands of institutions also has another effect.
“It hinders the public. It’s the members that are being hurt. In today’s real estate market, they’re bidding over [each other]. Unless they have financing click, click, click, they’re losing out on their dream home,” said Saunders.
A bill sponsored by Rep. Eugene L. O’Flaherty, D-Malden, would allow credit unions to branch anywhere within the state based upon the location of their membership. That is important, said Saunders, because branch location is currently limited to within the county in which the credit union is located or within 25 miles. Recently many credit unions have decided to merge operations, and the bill would release them from the challenge of “geographic barriers,” he said. According to the Credit Union Hill Message given to members, “Enacted in 1965 and last amended in 1979, these statutory provisions are outdated and serve no compelling purpose within today’s rapidly changing financial services industry.”
In fact, if a theme for this year’s legislative priorities could be culled from the many pending matters, Saunders said it is similar to Senate Banking Committee Chairman Andrea Nuciforo’s Senate bill which would eliminate outdated laws and put in place new ones to reflect a more modern industry.
“That’s really the theme,” said Saunders. “Update, modernize and equip credit unions to remain competitive.”
Another law currently on the books is also reflective of an earlier time. In order for credit unions to add investments to the permissible legal list under the commissioner of banks, 10 credit unions must petition the Massachusetts Credit Union Share Insurance Corp., which then petitions the commissioner.
“The present procedure is outdated and archaic … This hinders the consideration of potential investments in a timely manner,” said Saunders. Additionally, those institutions with less than $10 million in assets are not allowed to petition for investments. The new law would allow credit unions to petition the commissioner of banks directly. It is sponsored by Rep. Peter J. Koutoujian, D-Waltham.
Greater Flexibility
An Act Relative to Deceased Depositors, sponsored by Rep. Michael J. Rodrigues, D-Westport, seeks parity with what federally chartered credit unions and banks already have. Under current law, the maximum dispersible funds to a spouse or family member when a depositor dies is $3,000. Additionally, the person must wait 60 days before receiving the money. Under the new law, credit unions may disperse up to $10,000 in 30 days.
Another bill sponsored by Rodrigues that is before the House would remove the “outdated” 6-percent-per-year interest rate cap on deposits.
The current cap, based upon asset size, ranges from $75,000 for a single account in a credit union with under $4 million in assets to $250,000 for a single account for a credit union with more than $30 million in assets. While the limits seem large, credit unions often find themselves having to turn down deposits from members who have just sold a home or received funds from a retirement account, said Saunders.
Like banks, credit unions also find themselves in a world where non-traditional financial institutions are competing for dollars. A bill sponsored by Creedon and Sen. Robert E. Travaglini, D-Boston, would permit credit unions to become licensed insurance agents or brokers of insurance companies either directly or by third-party agreement. “The demand by consumers today for insurance products continues to rise. Financial services seem to be centered in one area, and credit unions should be allowed to participate,” said Saunders, pointing out that banks received approval for such products years ago.
A bill sponsored by Rodrigues relating to the operations and governance of credit unions would remove antiquated procedures and allow credit unions to function more like their financial institution counterparts. The goal of the bill is “really to modernize and clean up credit union law,” said Saunders. For instance, the law would allow a board of directors to meet and count present any member participating through a teleconference call. In the same vein, it would allow members to vote at an annual meeting in person, by mail ballot or by proxy.
It also seeks to “reduce the regulation burden imposed on state-chartered credit unions by eliminating advance regulatory approvals to offer credit cards, to accept utility bill payments and to offer safe deposit boxes” and eliminate the “dollar thresholds for advance regulatory approval for the purchase of property, renovation of property owned or leased and for the purchase of furniture, fixtures and equipment.” Instead of a flat rate, the bill proposes an amount that is dependent on the “financial strength” of the credit union. The rate will be determined by a formula. The bill would also increase the amount of money permissible for repair on foreclosed property for sale from $5,000 to $25,000 without the need for regulatory approval.
While Governmental Affairs Days are not unique to the MCUL, Saunders said such visits to Beacon Hill are worthwhile.
“Credit unions going up and telling their stories is very important, because they’re the ones that will have to work within the laws,” said Saunders.
“You should be sure to tell the legislators what you do, day in and day out, for your members,” said Daniel F. Egan Jr., president of the MCUL to members. Egan went on to speak about two issues that are being carefully watched by the group: predatory lending regulations and privacy issues.
“In today’s society, fees and payments have become lifeline issues to people,” Egan said, and those payments can break the financial backs of many. Credit unions have always been at the forefront of the battle against predatory lending, he noted, and will continue to be through participation in groups such as the Consumer Affairs Work Group at the state level or the Credit Union National Association’s Alternatives to Payday Lending Task Force, which has published a brochure on the subject.
Privacy legislation is also a concern for the MCUL. “Credit unions have always provided privacy for their members,” said Egan, adding it will remain an issue for the MCUL.
While the costs of implementing the privacy portion of the Gramm Leach Bliley financial modernization law are estimated at $1 per member, there are those pending in states around the country which would provide an opt-in requirement, rather than the opt-out as state in GLB. That would make it necessary for financial institutions to wait for the approval of members before sharing any information.
“For small credit unions, it would be very costly and time consuming. For them to get the approval of each and every member to share information with those that they need to, [such as] data processing, to do business … I don’t think the opt-in provides any more safety or soundness or provides any greater privacy,” said Saunders, adding that legislators should wait to see whether GLB will be effective.
