House Financial Services Chairman Barney Frank today took the blame for House leaders having to pull legislation that would benefit the credit union industry after it came under fire from banking groups. Frank said he overestimated support for the bill that would allow credit unions to expand their membership into underserved areas regardless of their original field of membership. "I take the blame for this," Frank told members of the Independent Community Bankers of America, who were in town to lobby against the bill. "I overestimated my ability to kind of work things out."
The measure, sponsored by Rep. Paul Kanjorski, D-Pa., had been scheduled to be considered on the floor today under the suspension calendar, which requires two-thirds support for passage. Majority Leader Hoyer called Frank Monday night and told him he was pulling it after banking lobbyists mounted a vigorous effort to defeat the measure. Frank said he would go back and try to clarify provisions in the bill. Banks argued that the membership language was written so broadly that it could include entire cities such as Washington, D.C., Philadelphia and Houston. The expansion was supposed to be based by census tract, but Frank noted "there is some debate about exactly what it means." He also said that staff will have to address language that would allow federal credit unions to offer payday loans to nonmembers. Banks argued that the language was too vague and could permit credit unions to offer a credit-card loan as a substitute for payday lending, circumventing the intention of the provision to cut down on predatory lending. Dan Mica, president of the Credit Union National Association, said his group's whip count showed the bill had the support of at least 80 percent of House members.
Frank decided to enter into the feud between banks and credit unions by first offering each some incentives, such as regulatory relief from some federal rules. For example, he intends to move legislation sponsored by Rep. Dennis Moore, D-Kan., that would remove some credit limits for thrifts and eliminate annual privacy notices for banks that do not share customer information. "There will be some conversations about those two bills. I believe when it comes to various parties we'll probably have a compromise which will make no one either wildly happy or [upset], which in my opinion is probably good," Frank said. But in exchange, Frank wants more emphasis placed upon serving low-income individuals, many of whom do not rely on the banking system and patronize payday lenders and pawnshops that charge higher interest rates. He called for applying the requirements of the Community Reinvestment Act to credit unions, which brought applause from the room full of bankers. The 31-year-old law requires banks to invest a certain percentage of their assets into low-income areas. Credit unions oppose extending CRA to them. "I told my friends at the credit unions that is part of the rationale for what I hope we ultimately we will work on this package. My view is that they should be given greater authority to act in areas that are underserved," Frank said. "But I think that argument goes to the CRA issue as well."
This article appears in the May 3, 2008 edition of National Journal Daily PM Update.