Part 1 of many. Stay tuned.

Only a handful of ‘working’ days remain in the 2022 session of the U.S. Congress, and with midterms coming, who knows what can be accomplished.

That said, consistently sharing credit unions’ collective story of what we do for members – many of whom vote – every day and how legislation would impact those successes. On that point, NAFCU holds its Congressional Caucus each year around this time (It seems there’s an unwritten rule that CUNA GAC kicks off each congress and NAFCU bats cleanup), to help usher – or make sure bills that would harm credit unions go away – what we can past the finish line.

Interestingly enough, The Credit Union Connection was the only credit union publication on site in Washington, D.C., that I noticed. What’s up with that? Didn’t used to be that way. Just a ponderance.

Let’s dive in with the biggies and I promise a soft landing – better than what the economy is likely to offer us.

Cybersecurity

The issue of cybersecurity was raised by many during the event, but let’s straight jump to the expert: Former Director of the National Counterintelligence and Security Center Bill R. Evanina.

“Iran’s No. 1 target is the financial services sector.”

Ok. But what really caught my attention is that all the Chinese and other foreign threats are not after the data or money – that’s just the $500B-$600B the icing on the cake. What they want, according to Evanina is “to identify both the algorithms and business models” to quash competition. Of course, he noted, once a company realizes it’s been breached, it’s too late.

Prevention is key. His 3 recommendations to prepare and prevent were:

• developing a comprehensive, strategic and proactive crisis plan in place

• benchmarking and collaborating with others to keep current on how they identify and fight potential breaches

• leading your organization on cyber issues to help ensure effective alignment

He concluded, “Data is the new global commodity. You are part of the solution geopolitically, socially and legislatively.”

Interchange

Mastercard SVP/Head of U.S. Federal Affairs Amanda Slater pointed to the increase in fraud on top of the Durbin Amendment that capped interchange income on debit cards, which decreases the covered expenses due to fraud, from refunding the actual fraud to re-issuing cards, associated with data breaches and unauthorized use of consumers’ cards. Now Sen. Dick Durbin, for whom the legislation was memorialized in law, plans to try to extend that to credit cards. Never mind the fact that fraud typically starts with the retailers, who benefit from fast, simple payment options. And despite the fact, retailers never decreased pricing, the alleged point of the legislation – they just pocketed the added revenue. In addition to a decline in free checking for American consumers due to the added expenses from the original law from Dick.

Electronic Payments Coalition Chairman Jeff Tassey asserted that financial institutions, including credit unions and NAFCU, are united on this front.

Meredith Ritchie, SVP/General Counsel/Chief Ethics & Government Affairs Officer at Alliant Credit Union (how do you fit that title on a business card?!), said her credit union was “fearful” of Dick’s extension of the interchange cap, because of the revenue impact and potential decline in products and services members want and need. Per NAFCU, 30% of cardholders lost their debit rewards within two years of the first implementation.

The panel asked credit union leaders to share their stories of how it would impact members. In its issue brief, NAFCU wrote, “This loss is particularly harmful for community financial institutions with lower transaction volumes—the kind of credit unions and banks that operate in rural and underserved communities—because they face drastically higher per-transaction costs for settling electronic payments.”

Rep. French Hill (R-AK), Ranking Member of the Housing, Community Development and Insurance Subcommittee, advocated during his address to Caucus, not be passive and “definitely talk about it aggressively and be direct,” when lobbying on the harm it would cause for small financial institutions, consumers and small businesses.  

Cannabusiness banking

In a quick hotbox, the SAFE Banking Act allow credit unions and other financial institutions to offer banking services to cannabis and related businesses. It’s passed the House, count it, 7 times.

While Rep. Ed Perlmutter (D-Colo.) touted credit unions’ grassroots efforts, he noted it has yet to pass the Senate. “I need the help to get this passed,” he pleaded with credit union leaders attending Caucus.

Legit cannabusiness owners are in danger every day, because they often have to carry around cash in ordinary backpacks and cardboard boxes, potentially threatening their livelihoods, their families and themselves.

NCUA Board Member Rodney Hood extended his support in the fight to be able to safely and soundly serve cannabusinesses without fear to bring these businesses into the “legitimate financial system.”

Credit unions serving cannabis business have explained that Bank Secrecy Act compliance for any institution is a great burden to bear, but it’s amped up to 11 for those that decide to cannabank. Keep that in mind if you’re exploring this option, but even if you aren’t, lobbying for it for the safety of your communities and the possibility in the future, is important.

Rep. McHenry deserves his own section

The ‘fireside chat’ between Congressman Patrick McHenry (R-N.C.), ranking member of the House Financial Services Committee, and NAFCU CEO Dan Berger took a minute, because they coverage A LOT. A staunch conservative, McHenry wasn’t always a friend of credit unions – or at least their regulator. This raised its head during the conversation that unfolded on stage: “The regulators need some oversight in the form of Congress.”

He certainly didn’t pull any punches with that one. Let’s bullet point this out:

• “Data providers should have the same standards you do,” McHenry said on working to update the Gramm Leach Bailey Act

• It’s possible to pass stable coin legislation by yearend. Stable coins are cryptocurrencies tied to another currency, unlike Bitcoin.

• McHenry acknowledged the importance of the partnership model between fintechs and banks to spur innovation and the need to protect it, especially for smaller institutions, like credit unions, and for broader consumer options.

  • A clear dig at the CFPB Director’s request for information, which typically foreshadows regulation. (He bravely joined NAFCU Caucus, too. More coming in Part 2 on his remarks.)

  • “Without consumer choice, we’re worse off. We do not want to look like Europe, with fewer options and larger institutions, which leads to a less dynamic economy.”

• The GOP congressman expects to become chairman when the House turns red after the midterm elections.

• McHenry accused the CFPB of regulating by enforcement. He suggested credit union employees should understand exactly what the CFPB is regulating and how to be compliant. He added that he looks forward to “many, many, many” – maybe more manys than that – oversight hearings for Director Chopra in the next Congress.

In conclusion, “We desperately need smaller financial institutions, so there is greater consumer choice….but you need to be able to offer your members innovation. The [fintech] partnership model needs to be preserved. Any other approach is wrong headed.”

 Stay turned for part 2 of a few later this week.