[Congressional Record Volume 144, Number 33 (Monday, March 23, 1998)]
[Extensions of Remarks]
[Pages E437-E440]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                    SUPPORT GROWS FOR CREDIT UNIONS

                                 ______
                                 

                         HON. PAUL E. KANJORSKI

                            of pennsylvania

                        HON. STEVE C. LaTOURETTE

                                of ohio

                    in the house of representatives

                         Monday, March 23, 1998

  Mr. KANJORSKI. Mr. Speaker, my collegue, Mr. LaTourette, and I are 
pleased to announce that support for H.R. 1151, the Credit

[[Page E438]]

Union Membership Access Act, continues to grow. Below are the twenty-
first through thirtieth of the more than 100 editorials and columns 
from newspapers all across our nation which support giving consumers 
the right to chose a non-profit, cooperative, credit union for their 
financial services.
  Surveys have consistently shown that consumers strongly support the 
value and services they receive from their credit unions. That is why 
the Consumer Federation of America endorses H.R. 1151, the Credit Union 
Membership Access Act.
  A bipartisan group of more the 190 Members from all regions of our 
country, and all parts of the political spectrum, are now cosponsoring 
the Credit Union Membership Access Act. We should pass it quickly so 
that credit unions can stop worrying about their future and return to 
serving their members.

      [From the Wilkes-Barre, PA, Citizens' Voice, Apr. 12, 1997]

             Credit Unions Deserve Help From a D.C. Friend

       Credit unions occupy a very small part of the world of 
     finance. But they perform a service which is huge.
       Credit unions don't have a lot of political clout. But they 
     have become part of a controversial national issue.
       Credit unions need a little help from a friend at this 
     time.
       And we're happy to see they're getting some, from a local 
     legislator.
       Congressman Paul Kanjorski recently introduced legislation 
     to provide access to credit unions to a greater number of 
     consumers.
       The legislation aims to reverse a recent court decision 
     which prevents credit unions from merging--and prevents 
     employees of one company from joining the credit union of 
     another company.
       At the heart of the issue is whether consumers will have 
     greater or lesser choice regarding small loans and daily 
     finance. Credit unions, said Kanjorski, often serve the 
     smaller loans that large banks overlook.
       That's a genuine service. And that's a service we hope all 
     our area's members of the U.S. Congress will understand and 
     support by signing on to Kanjorski's bill on behalf of credit 
     unions.
                                                                    ____


                   [From the San Francisco Chronicle]

                Small Credit Unions Face Bank Challenge

       A car loan, an advance for a rent deposit or college 
     tuition bill, or a savings account are the bread-and-butter 
     services long offered by the country's 12,000 credit unions. 
     But these small institutions are now in legal struggle with 
     the country's banks, who believe that credit unions have 
     pushed beyond their authorized limits and are piling up a 
     growing share of the financial marketplace.
       The David versus Goliath struggle is now before the U.S. 
     Supreme Court, which agreed earlier this week to hear the 
     dispute and possibly rule within a year.
       Founded in the Great Depression, credit unions were 
     designed to help workers from the same occupation or company 
     band together because conventional banks ignored working 
     people. Credit unions endured before running into modern 
     reality: Downsizing company moves, mergers and even military 
     base closures cut into membership. Also, fresh deposits were 
     needed to offer ATMs, debit cards and other modern services. 
     The solution was to find new members, often from different 
     trades or companies, in a clear break with founding 
     traditions.
       For example, The Embarcadero Federal Credit Union in San 
     Francisco was losing members as federal workers were shifted 
     to new quarters outside the city. So its leaders brought in a 
     local hospital credit union that was struggling. Both groups 
     benefited from the merger, but the court fight has put the 
     marriage on hold.
       If credit unions fade away, so will some great deals for 
     consumers. In a 1995 survey the Consumer Federation of 
     America rated six basic services from checking accounts to 
     money orders, and it found that credit unions were cheaper in 
     every category.
       Banks estimate the nonprofit status of credit unions is an 
     unfair advantage that totals $1 billion per year. In 
     addition, credit unions have wandered from their origins and 
     must compete fully since they have restyled themselves. 
     Further, 1,000 credit unions have assets of $75 million or 
     more, hardly the one-room money-lending outfit near the plant 
     gate. Finally, the real losers are not big banks, which 
     handle huge sums, but smaller financial institutions which 
     may offer small loans in Main Street towns, say critics of 
     credit unions.
       True enough, credit unions have evolved from populist 
     origins. But banks have changed too and should tolerate a 
     sturdy competitor that offers low-cost service to consumers. 
     The Supreme Court should be wary of punishing workplace 
     institutions that have aided millions of Americans.
                                                                    ____


                    [From the Asbury Park Press, NJ]

  Protecting Credit Unions--Congress Could Keep Banking Options Broad

       Rather than await the outcome of a Supreme Court case, 
     Congress should revise the law authorizing the establishment 
     of not-for-profit credit unions to ensure that all Americans 
     can have the widest choice of banking services.
       The Supreme Court yesterday heard arguments in a case 
     brought by the banking industry against broad membership 
     rules for credit unions. During the Depression, Congress 
     authorized groups with common bonds--workers within one 
     company or residents of one small area--to form credit 
     unions. All credit unions accept deposits and make loans; 
     some permit checking accounts and issue credit cards. Today, 
     45 million people have accounts at credit unions, although 
     many also still use commercial banks, too.
       Because they are not-for-profit, subject to less regulation 
     and are owned and operated by their shareholders, credit 
     unions generally pay higher interest rates and often charge 
     less for loans than commercial banks. Yet credit unions hold 
     just 5.65 percent of all deposits and other banking assets. 
     The other 94.35 percent is held by commercial banks and by 
     savings and loans. The average credit union has $2.7 million 
     in assets; the average commercial bank has $533 million in 
     assets. Two huge banks, Chase Manhattan and Citicorp, alone 
     hold more assets than all credit unions combined.
       Still, the banking industry wants the law that created 
     credit unions narrowly interpreted to limit their growth. 
     Plain and simple, banks don't want too many people to be able 
     to turn to credit unions as an alternative.
       Since 1982, the National Credit Union Administration, a 
     federal agency, has allowed credit unions to solicit 
     customers beyond their traditional base. The 1934 act that 
     authorized credit unions limited membership to ``groups 
     having a common bond of occupation or association, or to 
     groups within a well-defined neighborhood, community or rural 
     district.'' In the wake of a wave of corporate mergers and 
     layoffs, the federal agency allowed many smaller credit 
     unions to merge and to accept customers who did not work for 
     the specific companies or other common groups.
       Judging from their questions during oral arguments 
     yesterday, the Supreme Court justices seemed to be leaning 
     toward the narrower interpretation of the law, advocated by 
     the banking industry. That's why it's crucial that Congress 
     remove any ambiguity in this law and allow credit unions the 
     broadest ability to accept customers. A bill before Congress 
     would do that.
       Since federal restrictions on interstate banking were 
     removed, a few large banks have come to dominate the market 
     in New Jersey. Whatever the merits of banking mergers, the 
     consolidations have served to reduce competition. As small as 
     credit unions are, they act as a brake on the fees the 
     commercial banks charge. They also offer residents of 
     underserved inner city and rural areas access to banking 
     services they might otherwise not have.
       Congress should act to ensure that as many Americans as 
     possible retain the right to join a credit union.
                                                                    ____


                [From the Las Vegas Sun, Feb. 26, 1998]

            Editorial: Congress Needs To Help Credit Unions

       Credit unions and their members took a hit Wednesday from a 
     long-anticipated Supreme Court ruling.
       In a 5-4 decision, the Supreme Court discarded a 16-year-
     old government rule that let company credit unions accept 
     members from other companies. The court agreed with a legal 
     challenge brought by banks that federal law doesn't allow 
     credit unions to expand their memberships that way. The 
     court's ruling will prevent many Americans from joining 
     federally chartered credit unions, and could cost credit 
     unions millions of customers.
       Despite the decision, help may be on the way for credit 
     unions, which for many individuals are the only institutions 
     where they can secure low-cost financing. Legislation is 
     being offered in Congress, which has strong bipartisan 
     support, that would reinstate credit unions' ability to sign 
     members from other companies.
       Banks aren't hurting for business, and it's estimated that 
     only 6 percent of financial business is handled by credit 
     unions. In light of the increasing number of bank mergers, 
     there is definitely a need and a place for credit unions, 
     which offer their customers an alternative to higher-cost 
     financial services.
                                                                    ____


                    [From the New Bern Journal, NC]

            Let's Give Credit Unions the Credit They Deserve

       Credit unions, which have been helping people with their 
     financial needs for more than six decades, are themselves in 
     need now. They need to win a legal fight and, failing that, 
     they need some political help from Congress. If they don't 
     get it, the credit unions themselves may no longer be 
     available for millions when they come knocking, and American 
     consumers, especially those of modest means, will have reason 
     to grieve.
       Congress established credit unions as non-profit 
     cooperatives in 1934 chiefly for poorer people left out of 
     the loop by banks.
       It required that members have a ``common bond,'' such as 
     being employees of the same company. The formula worked fine 
     until the late 1970s, when the disappearance of large 
     manufacturing plants and other economic changes began robbing 
     the credit unions of members. A federal agency then said a 
     credit union could include a multitude of groups in its 
     membership in order to maintain a sufficiently large 
     operational base.
       The commercial banks yelped. What's more, they sued. The 
     maintained that the federal agency, The National Credit Union 
     Administration, had misconstrued the law,

[[Page E439]]

     and a federal judge said the commercial banks were right. The 
     Supreme Court has agreed to hear the case either late this 
     year or early next. If the high court concurs with lower 
     court rulings, some 10 million people will no longer be 
     members of credit unions, and millions more may never get the 
     chance.
       If the credit unions lose in court, Congress could quickly 
     come to the rescue with just a slight change in the 1934 
     law's wording about ``common bonds.''
       After all, 70 million Americans belong to credit unions, 
     and that's a lot of voters. It's possible, of course, that 
     another number speaks more loudly in the legislative ear: 4.4 
     trillion, which is the accumulation of dollars the banks have 
     in assets, and more than 12 times the assets of credit 
     unions.
                                                                    ____


                 [From the District News, Dec. 1, 1997]

                    Don't Put Credit Unions at Risk

       In the looming battle of banks vs. credit unions, credit 
     unions should not be put at risk.
       Strong arguments exist on both sides. The status of credit 
     unions, which are nonprofit and, as such, receive tax 
     exemptions not afforded banks, is a topic of considerable 
     debate locally and nationally, and the whole question 
     currently is before the U.S. Supreme Court.
       But credit unions should not be put in jeopardy. Many 
     people in Utah and the United States (nationally the number 
     is in the millions) would be prohibited from belonging to a 
     credit union if the top court, and subsequent legislation, 
     favored the banks. This is not fair nor is it right.
       Credit unions originally were established to make loans 
     available to people who might be considered risks by banks 
     and to give people with small means access to loans. The 
     Federal Credit Union Act of 1934 brought credit unions under 
     federal regulation with the stipulation that membership 
     should be limited to ``groups having a common bond of 
     occupation'' or association.
       The thrust changed in 1982 when the National Credit Union 
     Administration expanded the interpretation of the law to let 
     credit unions accept nontraditional members. This was a 
     response to a downturn in the economy and was an attempt to 
     keep credit unions viable during a time when many of the 
     companies that had formed them were in financial trouble. For 
     example, small businesses that lacked enough workers to form 
     their own credit unions were allowed to join existing credit 
     unions.
       Banks claim the new interpretation precipitated a situation 
     that has gotten out of hand. Some credit unions no longer 
     fall under the traditional definition.
       Several North Carolina community banks and the National 
     Bankers Association sued the AT&T Family Federal Credit Union 
     based in Winston-Salem, N.C., for overstepping its bounds. It 
     has 165,000 members from 323 companies. A judge ruled in 
     favor of the credit unions but a federal appeals court 
     reversed that decision. That's the case before the high 
     court.
       Locally, the Utah Bankers Association brought suit against 
     credit unions--a suit that initially was dismissed in 3rd 
     District Court and then reinstated on appeal.
       Bank officials argue that large credit unions, such as AT&T 
     Family Federal Credit Union nationally and America First 
     locally, no longer fall under the 1934 guidelines and 
     therefore should not be afforded tax-exempt status. They also 
     point out that large credit unions advertise for customers 
     and offer many of the same types of services as banks. 
     Because of their tax exemptions they have an unfair advantage 
     and are able to offer their customers lower interest rates. 
     All banks ask for is a level playing field.
       Credit union officials counter that banks could be more 
     competitive if they were as concerned about their customers 
     as they are about their stockholders and that their sheer 
     size gives banks advantages that equate to a level playing 
     field and then some.
       The fact is conditions have changed a lot for a lot of 
     organizations since 1934, including banks.
       It's also a fact both banks and credit unions are doing 
     well. Banks have about $4.4 trillion in assets compared to 
     $330 billion for credit unions.
       This is not a time of crisis for either. And it shouldn't 
     have to be a time of crisis for credit unions or their 
     customers. Rulings and legislation should reflect that.
                                                                    ____


                [From the Oakland Tribune, Feb. 7, 1997]

                Banks Should Back Off From Credit Unions

       As banks have merged, closed branches and added additional 
     fees for services that were previously free, an increasing 
     number of customers have looked for alternatives. Sometimes 
     they are motivated by the simple urge to deal with a person 
     with a familiar face in a familiar place.
       Credit unions have been the beneficiaries of banking 
     customers' dissatisfaction. But those who run banks are 
     trying to keep their customers from joining credit unions.
       Banks should keep their hands off the credit unions.
       Credit unions were originally established during the Great 
     Depression to accommodate low-paid workers the banks rejected 
     as customers. Membership was restricted to people who worked 
     together or lived in the same vicinity. In recent years, 
     because so many employees have lost their jobs through 
     corporate downsizing, membership requirements for credit 
     unions were relaxed, allowing people from outside groups to 
     join.
       Even as banks were cutting back services, they began a 
     legal assault on the growing credit union industry. In the 
     past six years, bankers have filed 13 suits in 10 states to 
     stop expanding membership of credit unions.
       In one of those cases, five North Carolina Banks and the 
     American Bankers Association sued AT&T Family Federal Credit 
     Union and the National Credit Union Administration, claiming 
     they had violated the federal law by allowing employees of 
     other companies to join the credit union.
       A lower court rejected the banks' argument and the banks 
     appealed. Last July, the U.S. Court of Appeals for the D.C. 
     Circuit sided with the bankers. In October, a District Court 
     judge issued an injunction against the expanded memberships.
       As a result, credit union nationwide reported that each 
     business day they were forced to turn away 4,400 people who 
     wanted to join. On Christmas Eve, however, the U.S. Court of 
     Appeals temporarily blocked the injunction against accepting 
     new members. Now, both sides are waiting to see if the U.S. 
     Supreme Court will hear the case.
       The banks should back off. The moves they have made have 
     led many customers to believe that banks don't have their 
     best interests in mind. Consumers should have the choice of 
     opting for credit unions. If banks don't want credit unions 
     to take away their customers, perhaps they can do a better 
     job of meeting customers' needs. That is the basic principle 
     of our free market system.
                                                                    ____


              [From the Blade, Toledo, OH, Feb. 28, 1998]

                        Credit Unions for Whom?

       The narrow Supreme Court ruling that credit unions cannot 
     draw members from a variety of occupations, contrary to the 
     way regulators had interpreted a 1934 law, is just the 
     beginning of a good fight.
       It's one that will pit average people against big banking 
     interests. And it's one in which a nonprofit, tax-exempt, do-
     it-yourself approach to financial services wages war with 
     money managers committed to bottom lines, shareholder demands 
     for profit, and, with plenty of grumbling, tax payments.
       The 5-4 decision, because it is so narrow, is not one to be 
     relied on over the long haul, but now it defines the law of 
     the land.
       And both banks and credit unions are back in Congress 
     lobbying for pending legislation that would allow individual 
     credit unions to serve a broader clientele.
       The credit unions offer lower fees and better rates on 
     loans.
       Bankers argue that credit unions are exempt from taxes so 
     they can do this. Well, if banks want to be exempt from 
     taxes, it's pretty easy. Let them go nonprofit.
       The current credit union law says these institutions must 
     be limited to groups with a ``common bond'' of occupation, 
     association, or geographical area. Nearly 20 years ago, as 
     companies downsized, merged, or disappeared, the National 
     Credit Union Administration said smaller groups sharing a 
     common employment bond could meet the condition.
       The American Bankers Association argued successfully that 
     the same bond had to unite every member.
       If bankers fear credit union competition, they have only 
     themselves to blame. Their fees have escalated outrageously, 
     along with their profits. Financial services share values 
     have skyrocketed over the decade.
       While credit unions were begun as a way to provide poor 
     people, in whom banks weren't interested, with banking 
     services, many now serve working people who, as a result of 
     union participation, have middle-class incomes. That ought 
     not matter at all, because working people everywhere are 
     still at the mercy of big business, including big banking.
       It's worth noting that the push to let credit unions expand 
     isn't coming from the political left. Ohio Congressman Steven 
     LaTourette (R., Madison Village) is lead sponsor of a bill to 
     expand them so workers of small companies could join together 
     to form one. And House Speaker Newt Gingrich (R., Georgia) 
     has endorsed the legislation.
       Credit unions are about local folks helping local folks. It 
     seems odd that the banking industry, which gave up this 
     approach for mergermania, wants every American now to go 
     along with their way of doing things, letting the diversity 
     that has been America's strength go by the boards.
                                                                    ____


        [From the Pocono Record, Stroudsburg, PA, Feb. 27, 1998]

                      Reverse Credit Union Ruling

       The banking industry's victory over federal credit unions 
     may be short-lived. Even before the U.S. Supreme Court's 
     ruling curtailed credit union membership, a bill was awaiting 
     action in the House to reverse the ruling's effects.
       At issue is a 1992 government rule allowing credit unions 
     to accept members from other companies than the one that 
     formed them. The Court invalidated that rule, basing its 
     decision on the 1934 law that authorized credit unions. That 
     law said credit union memberships ``shall be limited to 
     groups having a common bond of occupation or association'' or 
     to groups in a geographic area.
       What is a common bond? The government had interpreted it 
     broadly, allowing employees of other, smaller companies to 
     join a credit union because they enjoyed a common bond among 
     themselves. Not precise enough, said the Court. That is the 
     issue addressed by the House measure, filed by Rep. Paul 
     Kanjorski, D-Luzerne-Monroe.

[[Page E440]]

       Kanjorski's bill has 138 co-sponsors. It received a bi-
     partisan boost when House Speaker Newt Gingrich endorsed it, 
     ensuring at least that it will come up for a vote in the 
     House Banking Committee. What happens next will be the 
     subject of a fierce lobbying battle between credit unions and 
     the banking industry.
       What is likely, however, is less legislation to overturn 
     the Court's decision, than a compromise, possibly restoring 
     more latitude to that definition of ``common bond,'' while 
     imposing a membership threshold on some of the larger credit 
     unions.
       That would be a workable and fair resolution of the issue. 
     Allowing the court's ruling to stand as it is fails that 
     test. Particularly since deregulation of the banking industry 
     allowed so many and massive consolidations, more competition 
     is needed in the financial industry, not less.
       Kanjorski's bill is pitched at small businesses, which he 
     points out is the fastest growing sector of the economy. 
     Small companies generally do not have enough employees to 
     sustain a credit union by themselves. Even some large 
     companies face problems during economic slowdowns, as layoffs 
     reduce their credit unions' active memberships. That is what 
     happened in the recession of 1982, and prompted the 
     government to broaden membership rules.
       If the Court decision were allowed to stand, in effect it 
     would discriminate against employees of small companies. 
     Unless their workforce--their ``common bond''--were large 
     enough to form a credit union, they would be denied the 
     opportunity to take advantage of its lower loan and mortgage 
     costs and higher savings account interest rates, among other 
     benefits.
       The reason credit unions can offer such benefits, though, 
     is why a compromise is likely. Credit unions bear fewer 
     regulatory and financial burdens than banks do, not having to 
     pay federal taxes, for example. The banking industry 
     considers that unfair competition. But in truth, it is hardly 
     an insupportable competitive burden for banks: In 
     Pennsylvania, with more credit unions than any other state, 
     they still hold only 4 percent of all bank deposits.
       As their recent moves to raise or impose ATM and check-
     cashing rates show, banks are aggressively pursing profits 
     wherever they can find them. Reining in credit union 
     membership is in step with that drive. But as with the 
     service rates, the credit union restrictions will hurt those 
     with less money, who need low-cost alternatives to what banks 
     offer.
       The money will gush in the intensive lobbying against and 
     for Kanjorski's bill. There is merit in a compromise that 
     levels the field for the larger credit unions. But Congress 
     should allow access to credit unions for small-business 
     employees as one way of restoring competition to the banking 
     industry.
                                                                    ____


               [From the Evansville Press, Mar. 4, 1998]

              Congress Should Allow Credit Union Expansion

       The long-running battle between commercial banks and credit 
     unions didn't end last week when the U.S. Supreme Court ruled 
     that a Depression-era law places strict limits on the 
     membership of credit unions.
       The 1934 Federal Credit Union Act established credit unions 
     because banks were perceived as ignoring the needs of low- 
     and moderate-income Americans.
       The act limited credit union membership to ``groups having 
     a common bond of occupation or association, or groups within 
     a well-defined neighborhood, community or rural district.''
       But in 1982, responding to a wave of corporate 
     reorganizations and downsizing that threatened existing 
     credit unions, the National Credit Union Administration 
     expanded membership beyond the single-company, single-
     community confines.
       It is this expansion that the Supreme Court, in a 5-4 
     decision in a case from North Carolina, said was in violation 
     of the 1934 federal law.
       Anticipating the Supreme Court decision, the Credit Union 
     National Association asked Congress last year to consider 
     legislation to allow federally chartered credit unions to 
     maintain their expanded membership base.
       Credit unions operate on a not-for-profit basis. They pay 
     no taxes and tend to offer lower-cost loans and higher 
     earnings for savings. They also tend to charge fewer and 
     lower fees than commercial banks. But the commercial banks 
     say credit unions' not-for-profit status creates an unfair 
     competitive advantage.
       Bankers have reason for concern.
       Since the 1982 regulation took effect, credit unions have 
     rapidly expanded their membership. Last year, 72 million 
     Americans belonged to credit unions, double the number in 
     1991.
       Although banking industry officials say consumers who 
     currently belong to credit unions will not be asked to give 
     up their memberships, the choice of joining a credit union 
     may prove more difficult in the future unless Congress 
     changes the 1934 law.
       A bill before Congress to allow credit unions to serve 
     multiple groups deserves approval.
       With Congress set to begin hearings this week on a bill 
     aimed at resolving the dispute between banks and credit 
     unions, both sides already have begun their lobbying efforts.
       The commercial banks, particularly the smaller community-
     based banks, have legitimate concerns about rapidly expanding 
     credit unions.
       But in drafting new legislation, Congress must recognize 
     the realities of America's small-business economy. Americans 
     have shown an increasing preference for credit unions, and 
     consumer choice must be preserved.

     

                          ____________________