BOSTON, Mass.–This state’s credit unions and banks squared off against each other during a hearing related to several bills before the Joint Committee on Financial Services.
The disagreement centered on pending legislation that would change how credit unions operate, such as a new prohibition on deposits from non-authorized patrons or permission to offer real estate loans outside their geographic area, according to the Worcester Telegram.
Representatives of the Cooperative Credit Union Association and the Massachusetts Bankers Association testified during the hearing. “They highlighted different details they view as concerns, but reached similar conclusions: that the language in question would boost one side at the other’s expense,” according to the Telegram.
‘Consistent’ Complaint
In a report to its membership on the hearings, the CCUA said, “All of the Association’s credit union legislative proposals were opposed by local bank trade groups at the public hearing. Issues raised in opposition consistently were centered around the complaint that any expansion of credit union powers should not be supported by lawmakers as credit unions are not subject to the same statutory, regulatory and financial burdens as banks. One local mutual bank, Middlesex Savings Bank, also personally appeared to oppose credit union legislation. Another mutual bank, UniBank, submitted written testimony in opposition.”
According to the CCUA, other opposition comments that were made included:
* “The real issue pending is that the local community bank is working in and for the communities in lawmakers’ districts while competing with multi-million or multi-billion dollar tax exempt credit unions with no real common bond.”
* “A review of the past credit union legislative victories, including but not limited to, the sale of insurance, the re-write of the mortgage statute, and the grant of parity authorities, were selective statutory and regulatory sought to make credit unions more bank-like while retaining other advantages.”
* It is simply a fairness argument, especially with regard to the small group of aggressive credit unions that operate more like commercial banks than traditional common bond organizations.”
Among the bills drawing sharply divergent views was H. 1065, submitted by Rep Frank Moran, which would bar credit unions from taking deposits from most nonmembers and from making some large business loans. It would also require credit unions that seek to change the bylaws governing their membership to secure votes only at annual meetings rather than special meetings, which can be scheduled more promptly.
Bankers Back Bill
The legislation has the backing of the Massachusetts Bankers Association, which has been working on the bill for several sessions of the legislature, according to the Telegram, with MBA EVP John Skarin telling the publication the latest version is a viable compromise.
“This bill, we think, strikes a balance between some of the overreaching provisions we had in the original bill and some things this committee might find favorable this session,” Skarin said, the Telegram reported.
CUs Say Bill Stifles Competition
But credit unions responded by saying the bill is little more than an effort to stymie competition.
“This bill is a simple attempt to publicly discredit local credit unions, increase the regulatory burden, and claim an even larger share of the marketplace for banks,” said Ron McLean, president and CEO of the Cooperative Credit Union Association, the Telegram reported.
There were also tensions over bills backed by the state’s credit unions, according to the Telegram, including S. 575 and H. 1034, which seek to close regulatory gaps amid a changing landscape and allow mutual banks and credit unions to merge — with the charter remaining in the name of the CU — “as a way to manage pressure from larger national and international banks,” the Telegram said.
The bill would further expand credit unions’ ability to purchase or participate in loans, something that industry leaders say is currently difficult to do.
“The industry is changing very rapidly,” said Robert Cashman, president of Metro Credit Union, during the hearing. “In essence, what this would do is strengthen the credit union charter.”
Protests From Bankers
But that statement “drew protests from bankers,” according to the Telegram, which reported Ian Hecker, a Middlesex Savings Bank executive vice president and MBA member, expressed opposition to the bill, arguing it would “make an already difficult situation even worse by expanding credit union powers.”
“It seems very clear that the credit union industry is asking to be treated like a bank, but remain tax-exempt and under-regulated,” Hecker was quoted as saying. “It’s difficult to see how promotion of tax-exempt but obviously commercial business activity would make for sound public policy.”
Legislators Want Compromise
House Committee Chair Rep. James Murphy of Weymouth said members want to avoid choosing one side over the other, and called on representatives from the two industries should communicate over compromises, the Telegram reported.
“We’re not looking to jam anything down anybody’s throat,” Murphy was quoted as saying. “We would like to help both industries, both banking and credit unions, modernize things that allows you to work more efficiently.”