Congress Returns With Major CU Proposals Unresolved

Third-party vendor oversight, marijuana banking and credit card interchange policy are among the issues impacting credit union industry.

Congress returns to Capitol Hill this week with a long list of unresolved issues that could have a direct impact on credit unions—ranging from marijuana banking to credit card interchange policies.

The week will feature a split between the 117th Congress trying to finish business that the House and Senate did not resolve before leaving for the mid-term election and organizational meetings for the 118th Congress.

Also, this week, NCUA Chairman Todd Harper will join fellow prudential regulators in testifying on Capitol Hill. On Tuesday, he will testify before the Senate Banking Committee and on Wednesday, he will appear before the House Financial Services Committee.

On the legislative front, the House and Senate will attempt to enact the annual defense authorization legislation, as well as funding for much of the federal government. The defense bill always is a high priority for lawmakers, so they are likely to try to attach unrelated issues to the measure. The House has passed its version of the bill, with several financial services provisions attached.

Since the Senate has not yet voted on its version of the bill, it is unclear whether senators will accept any of the House proposals.

It also is unclear how Congress will deal with the funding issues. The current Continuing Resolution funding much of the government expires on Dec. 16. Congress could try to enact an omnibus spending bill that would last through the end of the fiscal year on Sept. 30. As an alternative, Congress could enact a Continuing Resolution lasting until early next year and leave it to the 118th Congress to fund the government through the end of the fiscal year.

Most of the NCUA and CFPB are not subject to the annual appropriations process, so they would not be affected by either decision. However, both the CDFI program and the NCUA’s Community Development Revolving Loan Fund program are subject to that process.

With so many moving parts and pending issues, it is unclear when the 117th Congress will finish its business, but here is a rundown on several of the credit union-related issues members will attempt to resolve. Any or all of them could be rolled into the defense or spending bill, or could be considered as stand-alone legislation.

Credit Card Interchange

When the Senate considers its version of the defense authorization, some senators—most notably Sen. Dick Durbin, D-Ill., and Sen. Roger Marshall, R-Kan.—will attempt to attach provisions that would require the Federal Reserve to issue rules that would ensure banks currently using the four-party credit card processing system be required to use at least one affiliated network in addition to Visa and Mastercard. Financial services trade groups, including CUNA and NAFCU, have been furiously lobbying against the issue.

Marijuana Banking

The House version of the defense bill contains language that would provide credit unions and banks with a regulatory safe harbor if they provide financial services to marijuana-related businesses in states where cannabis is legal.

The Senate defense bill does not include those provisions. However, Senate Majority Leader Charles Schumer, D-N.Y., has said he has been working with Democratic and Republican senators to try to hammer out cannabis legislation that would include banking provisions.

The House has passed the marijuana banking legislation several times, but the Senate never has considered it. The issue has been a top priority for Rep. Ed Perlmutter, D-Colo., who will retire at the end of this Congress.

Third-Party Vendor Oversight

The House version of the defense authorization bill would provide the NCUA with oversight powers over third-party vendors. The NCUA does not currently have that power and the agency’s board, Inspector General, the Financial Stability Oversight Council and the Government Accountability Office have all said that it should.

However, credit union trade groups have opposed giving the NCUA that authority, contending that agency officials have not explained how they would develop an examination process. They also have expressed concern that the agency would have to hire additional staff to perform those examinations.

Central Liquidity Facility

Credit union trade groups are pushing for an expansion of pandemic-related legislation that allowed corporate credit unions to become agent-members for groups of credit unions.

NCUA board members and trade groups have been pushing for the legislation, contending that without it there will be a $9.7 billion reduction in reserve liquidity for the credit union system at the end of 2022.

The House version of the defense authorization legislation contained a plan that would extend changes to the Central Liquidity Facility.

Credit Union Board Meetings

The House has passed legislation that would allow well-managed credit unions to meet at least six times a year, rather than the current 12 times. New credit unions and institutions with a poor CAMELS rating still would be required to meet monthly.

The Senate has yet to consider the proposal.

CFPB Court Case

A federal appeals court has said that the method used to fund the CFPB is unconstitutional. Currently, the agency draws money from the Federal Reserve.

A panel of judges from the Fifth Circuit Court of Appeals has ruled that the agency should be subject to the annual appropriations process.

The agency could appeal the ruling to the full Fifth Circuit or go directly to the U.S. Supreme Court.

On the other hand, Congress could choose to step in and pass legislation changing the way that the CFPB is funded. Republicans have long favored making the agency subject to appropriations, while Democrats have argued that the current method provides the CFPB with political insulation.