WASHINGTON—Credit unions across the nation should be concerned about a proposed amendment to the House FY2025 National Defense Authorization Act (NDAA) recently introduced that would amend the Federal Credit Union Act, says Defense Credit Union Council (DCUC) President and CEO Anthony Hernandez.
As CUToday.info reported, an amendment to the House FY2025 National Defense Authorization Act (NDAA) has been proposed by Reps. Pete Sessions (R-TX), Young Kim (R-CA) and Gerry Connolly (D-VA).
The amendment would clarify military members under the Department of Defense’s Overseas Military Banking Program (OMBP)—but only OMBP members—are insured by the National Credit Union Share Insurance Fund (NCUSIF).
The issue has come to the forefront in Congress after Navy FCU won the contract to operate the Department of Defense’s banking operations on military bases overseas. Navy Federal had sought NCUSIF insurance on those deposits, but NCUA rejected that option. The world’s largest credit union turned to Excess Share Insurance to provide the coverage.
Hernandez told CUToday.info the “entire situation” could have been easily avoided.
Bank Contract
“This is a bank contract with bank language in the contract,” Hernandez said about the Navy FCU’s contract with the DoD. “Everything going on is simply trying to force a square peg into a round hole for a situation that was entirely self-inflicted.”
Hernandez emphasized what is at stake, the credit union tax exemption, makes this a matter for all CUs to be concerned about.
“This is not an overseas issue or even a defense credit union issue,” said Hernandez. “We believe this language could put the industry’s credit union tax-exemption at risk.”
Hernandez explained why.
“This amendment only benefits one credit union with share deposit insurance for non-members (natural persons),” said Hernandez. “Unlike low-income credit unions, once you allow any credit union to accept and insure non-member deposits, we become more like banks with a tax-exemption rather than member-owned financial cooperatives.”
Expand Language
Hernandez noted that DCUC recognizes there is an “attempt to expand the language” for future situations where a credit union may act as a fiscal agent in other capacities for DoD or the broader federal government.
“However, very few credit unions have ever raised this issue, which makes it even more puzzling as to why it has been elevated into a major credit union matter for Congress,” Hernandez said.
As CUToday.info reported, an alternative approach to the amendment is being advocated by America’s Credit Unions.
“In fact, even a cursory look at the credit union experience as fiscal agents would have shown there are already several defense credit unions operating as fiscal agents in managing the government’s Treasury General Account at their respective bases,” continued Hernandez. “None of those credit unions have ever asked for special powers to accept non-member deposits (natural persons) because they perform this service.”
Hernandez said DCUC has offered, and will continue to offer, several workable alternatives for DoD to consider, including letting credit unions already operating overseas with federal insurance to perform these services.
“There are also alternatives to rewriting the (DoD) contractual terms for the 21st Century…which may have resulted in Bank of America continuing to operate the contract,” Hernandez said. “We encourage all credit unions to write their federal lawmakers to oppose this ill-considered amendment. An amendment like this should have had a full hearing before changing the Federal Credit Union Act via must-pass legislation.”
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