House Draft Defense Bill Considered a Victory by Key CU Trade Group

Long-running debate between credit unions and banks over rent benefits on military bases looms in backdrop.

In an initial victory for credit unions, the draft defense authorization bill being marked up by the House Armed Services Committee subcommittees this week does not include a provision providing banks with the same free rent benefit that credit unions receive on military installations.

Anthony Hernandez, president/CEO of the Defense Credit Union Council (DCUC), cautioned that the subcommittee markups are just the first step in the legislative process.

“DCUC is very encouraged with these initial indications,” he said, adding, however, “The bill has a long way to go before it is enacted and signed into law.”

Senate subcommittees begin their markups of the annual defense bill—considered must-pass legislation—next week. While the credit union-bank fight is a high-profile issue in the financial services world, it is a tiny issue for the House Armed Services committees.

Under current law, credit unions, but not banks, may have rent-free branches on military bases, a benefit banks have long argued they too should have. Credit union trade groups have fired back that they are non-profit, member-owned institutions and as such they alone should be given that status.

The Defense Department is conducting a study on the issue but has not released details of the report. “We continue to look for an opportunity to review or comment on the proposed study,” Hernandez said. He further noted that individual banks can apply for the same benefit that credit unions automatically receive but have not done so.

Banking trade groups have said banks have left military bases because of high rents.

Support From Other Credit Union Groups

Hernandez also thanked other credit union trade groups for their support on the issue.

The DCUC, the Credit Union National Association and the National Association of Federally-Insured Credit Unions last month sent a joint letter to House Armed Services Committee leaders arguing that banks should not be provided with the rent benefit.

In the letter, the groups said defense credit unions manage the Pentagon’s substantial cash requirements without charge and that they assume responsibilities for deposits into the Treasury General Account for services such as base commissaries.

“Unlike other financial institutions, defense credit unions do this on a not-for-profit basis—with their bottom line being service, not their shareholders,” they stated.

The Consumer Financial Protection Bureau recently warned about non-traditional financial services providers that may attempt to take advantage of servicemembers. The bureau said many of those providers are located just outside military bases.