Flanked by lawmakers, regulators and CU advocates, President Clinton signs HR1151 into law.
The legislation started out as just a few sentences long and was essentially designed to reverse a Supreme Court decision that hadn’t even come down at the time the bill was first penned. But when the high court ruling in the case formally known as National Credit Union Administration v. First National Bank & Trust—informally referred to as the AT&T Family FCU case among credit unions—the CU movement swung into action.
Just one day after the Supreme Court handed down its ruling in favor of banks, Speaker of the House Newt Gingrich made history when he announced he would be signing onto HR 1151 as a co-sponsor—something speakers rarely do. Within months, the bill would pass the House by a vote of 408 to 11, swiftly followed by a similar landslide vote in the Senate.
By the time the bill reached President Clinton’s desk, it had swollen from just a few sentences to hundreds of pages. The banking lobby demanded many compromises if Congress was to overturn what otherwise would have been an epic bank victory.
When the Supreme Court ruled NCUA was misinterpreting the Federal Credit Union Act by allowing for multiple common bonds within one field of membership, the decision slammed the door on FOM expansions and threatened millions of Americans with being expelled from their credit unions, jeopardizing the very future of many CUs in the process. Credit unions themselves hedged their bets, with hundreds making the move to a community charter, even as uncertainty remained over what might happen to them, as well. Such charters are common now, but in the mid- to late-1990s many CUs served niche markets and were wary of opening to everyone.
In the months leading up to this day 20 years ago, credit unions' now-famed grassroots put in a near round-the-clock effort to get Congress to pass HR 1151, championed by U.S. Reps. Paul Kanjorski (D-Pa.) and Steve LaTourette (R-Ohio).
What became known as the Campaign for Consumer Choice, the fight to shepherd this bill to the president’s desk united credit unions and their often-rivaling trade associations like never before.
Perhaps nothing summed up credit unions' ability to respond to banker attacks than what came to be known as the "hot dog ad." When the banking industry ran an ad in the New York Times that showed a hot dog street vendor and the headline, "I'll Pay More Taxes Than The Credit Union Industry," credit unions went to work after discovering the vendor was just a model. Credit unions responded by finding a real hot dog vendor, Wendall Sisler, who had been laid off and couldn't get a loan from his bank, so he went to his credit union where he got a real loan for his real hot dog stand.
"I repaid my start-up loan. But I can never really repay my credit union for believing in me," Sisler said in an ad that appeared in Washington media.
As credit unions celebrate the 20th anniversary of the Credit Union Membership Access Act, CU Journal asked credit union advocates to talk about the legacy of HR 1151.'
Dave Adams, CEO of the Michigan Credit Union League
The Supreme Court decision that limited FOM charter expansion had dire implications for credit unions. The long-term impact was far greater than just the FOM fix and the associated tradeoffs on things like the member business lending cap and the credit union to bank charter conversion provisions.
The real impact was that we beat the bankers and sent a strong signal that credit unions have the ability to rally bi-partisan Congressional support against the bankers’ self-serving attempts to limit access. We won and the bankers lost. It was a battle they felt they had to fight but this victory set a tone for future lobbying efforts.
As for negatives, yes there were tradeoffs in the legislation that placed the first-ever cap on member business lending as well as provisions that would at least temporarily make it easier to convert to mutual savings banks. But on both of these issues, subsequent federal regulations have lessened the impact of those issues.
The positives of HR 1151 significantly overshadowed any of the negatives. Successful advocacy almost always comes with tradeoffs.
How has the credit-unions-versus-banks battle changed in the last 20 years since HR 1151 was signed into law?
If anything, bankers’ attacks have weakened and become less impactful. Bankers associations are increasingly divided between the bigger banks who don’t consider credit unions to be a threat, vs. the community banks who can’t seem to survive competitively against big banks or credit unions.
Community banker associations are compelled to go after the credit union tax exemption and to limit charter improvements at the state and federal levels. But again, victories like HR 1151 set a positive tone for many years to come. Bankers associations are really fighting battles that they know are unpopular with both lawmakers and consumers. That’s an unenviable place to be for a lobbyist. With the bank brand so severely damaged by the bad actors who led to the great recession and by the ongoing anti-consumer practices that are so regularly in the news, larger banks are more reluctant to take on unpopular positions like attacking credit unions.
The American Banker once called this the bankers’ “dirty little secret”, that their lobbying efforts on the credit union tax exemption constitute a “battle that they must fight, but know they can’t win.” And they often try to fight quietly and sneakily in the courts and with regulators outside the oversight of public opinion where they almost always lose.
The credit union industry and their associations know that the bank vs. credit union battles associated with the tax issue and charter improvements, will always be challenging. But in an era where issues like regulatory burden and data breaches have become our member credit unions’ greatest concerns, we’re actually aligned with bankers’ associations on those fronts.
HR 1151 flew through both the House and Senate in record time and with landslide votes in both chambers, largely because credit unions saw this as a “do-or-die” situation and got out their now-famed grassroots to lobby Congress. What do you think it would take for that to happen again today?
The answer is in the question. In order to win large, impactful legislative victories more quickly, the issues need to be almost “do or die.” And member credit unions and consumers need to see the importance of the issue that way. If our tax status is ever seriously threatened for instance, we would be fighting a “do or die” issue and I’m confident that we would prevail in a resounding way. However, on more complex issues like the regulatory relief, raising the MBL cap, updates to the FCUA, avoiding pricing restrictions on overdraft fees and card interchange fees, and other such issues, the process is more protracted and difficult.
How do you think the credit union movement has changed – for better and for worse – since then?
Size, market share gains and overall success bring greater scrutiny. But they also come with greater political clout and respect from lawmakers. Consolidation and concentration of business into fewer, but larger and more diverse credit unions constitute the most fundamental change in the industry.
But as long as credit unions large and small stay true to their purpose, the industry will succeed in its important advocacy efforts. That purpose is to bring affordable financial services to consumers and small businesses in ways that strengthen the economy and create opportunity, especially for all, but especially for those who are financially challenged. And telling the story of how credit unions do this in ways that are unique to their not-for-profit status is of paramount importance as we seek to preserve the tax-exempt status and improve our charters.