By Sarah Snell Cooke

“If we don’t advocate, we’re going to have problems.”

NAFCU Senior Vice President of Government Affairs Greg Mesack said this during last month’s Congressional Caucus discussing defeat of the bill to ask credit unions to police tax cheats and more.

And as NAFCU Vice President of Legislative Affairs Brad Thaler pointed out, the best lobbying comes from credit unions themselves. The lobbyists are there to make connections and open doors for credit union leaders; you just have to walk through with stories to share. And you’ve got a million of them, that’s why we started The Credit Union Connection and its sister site, Own Your Banking.

Send your credit union and credit union-adjacent press releases to press@thecreditunionconnection.com to reach either site!

Making connections, whether with your members or your members of Congress, is all about the storytelling you do based on the seemingly every day things your credit unions do that change people lives and save marriages and families. While at NAFCU’s Caucus, I sat down with CEO Dan Berger, and we talked about many of the critical issues credit unions are facing, from the reduction of interchange income to third-party vendor authority for the NCUA. Credit unions definitely have a lot of stories to tell, so do it well and often.

Because agencies like the CFPB and lawmakers like Sen. Dick Durbin (D-Ill.) are coming for you. CFPB Director Rohit Chopra sitting down to a fireside chat with Berger at Caucus: We’re asking what is our role in big tech and big data co-mingling banking and commerce? Pretty brave.

And when Berger asked Chopra about his so-called junk fees oversight, Chopra responded, “We’d like to see more competitive forces working there.” He’s expecting the bureau’s review to be finished next year, so let’s get to the storytelling of how credit unions are cooperatives, and some fees are necessary to remind members that if they don’t pay their bills, it can hurt all the members in the long run. Imagine if credit card late fees were taken away.

And on the CFPB’s proposed data collection rule and general oversight, Rep. Blaine Luetkemeyer (R-Mo.) expressed his frustration regarding the CFPB overstepping its regulatory authority, stating that “they continue to push the envelope. It’s our job as Congress to point out [to the CFPB] that you cannot do what you’re doing.” Apparently, Rep. Patrick McHenry (R-N.C.) agreed, saying he welcomed the opportunity for “many, many, many” hearings with the director.

It’s not all partisan politicking in DC though. Senator Sherrod Brown (D-OH) touted the good bipartisan efforts on employee safety bill, so credit unions can remove members who abuse frontline staff. Led by Rep. Ed Perlmutter (D-Colo.) and Representative Tom Emmer (R-MN), the recent passage of the Credit Union Governance Modernization Act noting that “we can work with people across the aisle when people are working on reasonable common-sense legislation.” The legislation would expedite member expulsion processes for members who abuse staff or commit fraud or other illegal behavior or cause material losses to the credit union.

Perlmutter also pleaded for credit unions to help him get the SAFE Banking Act through before he retires at the end of this Congress. You may have some great stories from college or last weekend, but these would be more focused around cannabis banking, not smoking. I’ve listened to credit union CEOs in the biz who helped to keep members from carrying around 10s of thousands of dollars in cardboard boxes in their cars right next to their children, because no one would bank them. Others cannabusiness owners are walking around with cash stuffed into backpacks. They can make deposits much less get a loan, and that goes for their employees, too. Let’s bank ‘em if we got ‘em.

Why the CLF Is Tied up in the DoD Budget

Given the skyrocketing inflation, impending recession and the subsequent job losses, a little extra liquidity would seem like a good idea for credit unions. But Washington.

So, the Central Liquidity Facility – the less sexy brethren of the Fed Reserve Discount Window – is tangled up in the National Defense Authorization Act. A bill that becomes a perennial Christmas tree, complete with glorious ornaments (aka other legislation that can’t pass on its own), because it’s certain to pass but it’s always a struggle – and might your ornament fall and smash to the ground?

CLF membership is voluntary for all credit unions, although some type of liquidity backstop is required for federally insured credit unions of more than $250 million. Less than $50 million you need a policy and for those in the middle, you need a plan. Specifics are here.

For decades, corporate credit unions have been serving as agents of our boutique credit unions to disperse the operational challenges that come with the sheer volume. It’s the same reason the discount window doesn’t want to deal with them, but as cooperative credit unions, we made it work.

And apparently some are not favorable to the reauthorization of certain extensions of authorities granted to the CLF in the CARES Act during COVID. The NCUA lays it all out here.

The agency also has been laying it all out for members of Congress who’ve opposed the extension in the letter below. This is why we always need to be sharing our stories, because, as the letter states, “The CLF is the only practical source of emergency liquidity for the over 3,600 credit unions under $250 million.”

NCUA to Members of Congress (and anyone who will listen) about the CLF

Dear – 

Thank you for responding so quickly. We understand if your office can’t support the recommended language, but want to ensure your office knows what it is saying ‘no,’ to. Would you mind having someone confirm your office understands the bullet points below? And if you can’t support our request, can someone assure us that it’s not too disruptive to communicate the Member’s view back to the credit union groups that originally reached out to us (who might wind up speaking to their Members on this issue)?

Please know we wouldn’t be bothering you unless it was critical. We should have communicated better the reasons for our sense of urgency on the adjustments to the Agent Membership provisions in the CLF. 

·       We responded to concerns at the June 21, 2021 mark-up meeting and targeted the recommended language to just the CLF’s Agent Membership Provision. The NCUA Board already has the authority through the Federal Credit Union Act, to authorize a corporate credit union to act as an agent on behalf of all its members. Our recommended language changes that to a subset of its member credit unions.

·       The CARE’s Act provided an opportunity to study the effects of the change on the CLF. The result was an increase of over $12 billion in additional reserve liquidity. This is a benefit to the taxpayer as CLF deposits are a buffer between credit unions and taxpayers.

·       The CLF is NOT taxpayer funded. It has been funded entirely by credit unions and corporates since the 1980s. The recommended language would likely increase the buffer. Please note that the CLF keeps 100 percent of its funds in the US Treasury until needed. 

·       The CLF is the only practical source of emergency liquidity for the over 3,600 credit unions under $250 million. These credit unions are so limited in resources that a direct relationship with the CLF is impractical. The current agent program provides their corporates the authority to put up the capital and provide support on their behalf. 

·       If corporates are not allowed to act as agents for a subset of their member credit unions, these credit unions will lose access to the CLF in the third quarter of 2022.  We expect an immediate reduction of $9.7 billion in reserve liquidity for the credit union system due to the corporates withdrawing their funds.

·       A liquidity crisis such as what we had in 2008 would be devastating. Congress/taxpayers would have to step in and provide funding. Severe consequences to the stability of the credit union system could result in the time it would take to authorize and implement funding.

·       The current interest rate risk (IRR) environment makes a liquidity event in the short term a real possibility. Credit unions under $250 million will be especially vulnerable as they don’t have the ability manage their IRR using derivatives – even in their simplest form as allowed by NCUA.