[Congressional Record Volume 160, Number 67 (Tuesday, May 6, 2014)]
[House]
[Pages H3426-H3428]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              CREDIT UNION SHARE INSURANCE FUND PARITY ACT

  Mr. ROYCE. Madam Speaker, I move to suspend the rules and pass the 
bill (H.R. 3468) to amend the Federal Credit Union Act to extend 
insurance coverage to amounts held in a member account on behalf of 
another person, and for other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 3468

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Credit Union Share Insurance 
     Fund Parity Act''.

     SEC. 2. INSURANCE OF AMOUNTS HELD ON BEHALF OF OTHERS.

       Section 207(k) of the Federal Credit Union Act (12 U.S.C. 
     1787(k)) is amended--
       (1) in paragraph (1)(A)--
       (A) by inserting after ``payable to any member'' the 
     following: ``, or to any person with funds lawfully held in a 
     member account,''; and
       (B) by striking ``and paragraphs (5) and (6)'';
       (2) in paragraph (2)(A), by striking ``(as determined under 
     paragraph (5))'';
       (3) by redesignating paragraph (5) as paragraph (6); and
       (4) by inserting after paragraph (4) the following:
       ``(5) Coverage for interest on lawyers trust accounts 
     (iolta) and other similar escrow accounts.--
       ``(A) Pass-through insurance.--The Administration shall 
     provide pass-through share insurance for the deposits or 
     shares of any interest on lawyers trust account (IOLTA) or 
     other similar escrow accounts.
       ``(B) Treatment of ioltas.--
       ``(i) Treatment as escrow accounts.--For share insurance 
     purposes, IOLTAs are treated as escrow accounts.
       ``(ii) Treatment as member accounts.--IOLTAs and other 
     similar escrow accounts are considered member accounts for 
     purposes of paragraph (1), if the attorney administering the 
     IOLTA or the escrow agent administering the escrow account is 
     a member of the insured credit union in which the funds are 
     held.
       ``(C) Definitions.--For purposes of this paragraph:
       ``(i) Interest on lawyers trust account.--The terms 
     `interest on lawyers trust account' and `IOLTA' mean a system 
     in which lawyers place certain client funds in interest-
     bearing or dividend-bearing accounts, with the interest or 
     dividends then used to fund programs such as legal service 
     organizations who provide services to clients in need.
       ``(ii) Pass-through share insurance.--The term `pass-
     through share insurance' means, with respect to IOLTAs and 
     other similar escrow accounts, insurance coverage based on 
     the interest of each person on whose behalf funds are held in 
     such accounts by the attorney administering the IOLTA or the 
     escrow agent administering a similar escrow account, in 
     accordance with regulations issued by the Administration.
       ``(D) Rule of construction.--No provision of this paragraph 
     shall be construed as authorizing an insured credit union to 
     accept the deposits of an IOLTA or similar escrow account in 
     an amount greater than such credit union is authorized to 
     accept under any other provision of Federal or State law.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
California (Mr. Royce) and the gentleman from Colorado (Mr. Perlmutter) 
each will control 20 minutes.
  The Chair recognizes the gentleman from California.


                             General Leave

  Mr. ROYCE. Madam Speaker, I ask unanimous consent that all Members 
have 5 legislative days in which to revise and extend their remarks and 
to include extraneous materials on the bill, H.R. 3468.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  There was no objection.
  Mr. ROYCE. Madam Speaker, I yield myself such time as I may consume.
  I rise in strong support of the Credit Union Share Insurance Fund 
Parity Act. This is a bill which passed out of the Financial Services 
Committee on a voice vote. This is bipartisan, commonsense legislation. 
The bill is supported by the Credit Union National Association, the 
National Association of Federal Credit Unions, the California and 
Nevada Credit Union Leagues, as well as the American Bar Association.
  What this bill does is to ensure that there is parity in the 
treatment of trust accounts covered by the National Credit Union Share 
Insurance Fund and the Federal Deposit Insurance Corporation, the FDIC.
  The Financial Services Committee has heard the testimony of credit 
unions from West Virginia to Texas that:

       There is no public policy reason for deposit insurance 
     purposes to distinguish credit union interest on lawyer trust 
     accounts (IOLTAs) from those insured by FDIC. It is essential 
     for the NCUA's share insurance fund to be treated identically 
     in order to maintain parity between the two Federal insurance 
     programs.

  Specifically, the bill amends the Federal Credit Union Act to require 
that pass-through share insurance coverage be provided when a credit 
union member holds funds on behalf of a nonmember in an IOLTA or other 
similar account.
  Unlike FDIC coverage, currently the National Credit Union 
Administration treats funds held by credit union members on behalf of 
those who are not federally insured credit union members as not covered 
by the National Credit Union Share Insurance Fund. This has created, of 
course, a disparity in coverage, specifically when looking at IOLTAs 
and prepaid debit master accounts.
  Part of the mission of credit unions from their very beginning has 
been to reach out to the community around them, especially to reach out 
to the underserved. Maintaining a strong commitment to the IOLTA 
community and removing a barrier to greater participation sustains that 
very mission.
  I urge my colleagues to support this bill, a bill which corrects a 
technical disparity between the way trust accounts are federally 
insured at credit unions and at banks.
  I look forward to the statement of the other Ed, the gentleman from 
Colorado, my friend, who has been a champion of this important bill.
  I reserve the balance of my time.
  Mr. PERLMUTTER. Madam Speaker, I thank my friend, Mr. Royce of 
California, for his remarks, and I yield myself such time as I may 
consume. As I say: ``Two Eds are better than one.'' So we will start 
with that.
  This bill is designed to create parity between certain accounts held 
at credit unions and those held at FDIC insured banks.
  As a preliminary matter, I introduce into the Record six letters.
  The first is a letter dated September 17, 1996, signed by Richard 
Schulman, the associate general counsel of the National Credit Union 
Administration.
  Second is a letter dated October 8, 2008. That is from Sheila A. 
Albin, associate general counsel.
  A letter dated May 6, 2014, from the American Bar Association, signed 
by the president, James R. Silkenat.
  A letter dated May 5, 2014, signed by Brad Thaler of the National 
Association of Federal Credit Unions.
  A letter dated May 5, 2014, signed by Bill Cheney, president of the 
Credit Union National Association.
  And finally, a letter signed by Scott Earl from Mountain West Credit 
Union Association.

                                               September 17, 1996.
     Re Interest on Lawyers Trust Accounts (``IOLTA''), (Your 
         August 22, 1996, Letter)

     Elyse E. Rogers, Esq.,
     Mette, Evans & Woodside,
     Harrisburg, PA.
       Dear Ms. Rogers: In your letter, you requested our opinion 
     as to whether Pennsylvania attorneys can maintain client 
     trust funds, in association with Pennsylvania's IOLTA 
     Program, in share draft accounts at credit unions regulated 
     by the National Credit Union Administration. As discussed 
     below, the answer depends upon the credit union membership 
     status of the clients whose funds are contained in the IOLTA 
     account.


                                ANALYSIS

       Generally, an IOLTA account is set-up by an attorney or a 
     law firm as an escrow account containing pooled client funds. 
     In a credit union, an IOLTA account would be set-up as an 
     ``agent'' account. Section 745.3(a)(2) of NCUA's Regulations 
     defines an agent account as ``[f]unds owned by a principal 
     [member] and deposited in one or more accounts in the names 
     of agents or nominees. . . .'' The client continues to own 
     the funds while the attorney or law firm serves only as a 
     custodial agent.
       A federal credit union (FCU) can only accept funds 
     belonging to its member or those

[[Page H3427]]

     that qualify for membership. There are limited exceptions 
     which permit an FCU to accept nonmember funds if it serves 
     predominately low-income members and thereby has a ``low-
     income'' designation. 12 U.S.C. Sec. 1757(6). NCUA 
     Regulations define a member as ``those persons enumerated in 
     the credit union's field of membership.'' 12 C.F.R. 
     Sec. 745.1(b). Membership in an FCU is limited ``to groups 
     having a common bond of occupation or association, or to 
     groups within a well-defined neighborhood, community, or 
     rural district.'' 12 U.S.C. Sec. 1759. An FCU's charter 
     outlines its membership. 12 U.S.C. Sec. Sec. 1753, 1754.
       With an agent account, the membership status of the client 
     (owner of the funds) and not that of the agent (attorney, law 
     firm or IOLTA Board) is determinative as to whether an IOLTA 
     account can be properly maintained. Consequently, in order 
     for an attorney or law firm to maintain an IOLTA account at 
     an FCU, either all of the clients whose funds would be 
     deposited must be members of that FCU or the FCU must be 
     designated as a low income which would allow it to accept 
     nonmember funds.
           Sincerely,
                                              Richard S. Schulman,
     Associate General Counsel.
                                  ____

                                                  October 8, 2008.
     Re Insurance Coverage for Interest on Lawyers Trust Accounts 
         (IOLTA) Accounts

     Mary Hoeft Smith,
     Trust Account Program Administrator, Supreme Court of 
         Wisconsin, Office of Lawyer Regulation, Madison, WI.
       Dear Ms. Hoeft Smith: You have asked us about the insurance 
     coverage by the National Credit Union Share Insurance Fund 
     (NCUSIF) for IOLTA accounts in federal and state-chartered 
     credit unions and those designated as ``low-income.'' As 
     discussed below, client funds in an IOLTA account are insured 
     for those clients who are members of the credit union or, if 
     a credit union is designated as low-income, all funds are 
     insured regardless of the client's membership status.
       Under IOLTA programs, lawyers and law firms establish 
     accounts to hold their clients' funds in trust to pay costs 
     related to legal services. Participation in IOLTA programs by 
     lawyers and law firms is required in some states and is 
     optional in other states. A lawyer or law firm opens an IOLTA 
     account and, as an agent, deposits its clients' funds in the 
     account and holds them there in trust until they are needed. 
     The interest earned from the money in the IOLTA accounts is 
     aggregated and paid generally to another state agency or 
     private nonprofit organization, such as a state bar 
     association, to subsidize legal aid services or for other 
     charitable purposes.
       The clients, not their lawyers or law firms, own the funds 
     in an IOLTA account. The lawyers or law firms are merely the 
     agents holding the funds in trust for their clients. While 
     NCUSIF insurance coverage might cover clients as the 
     beneficial owners of the funds, 12 C.F.R. Sec. 745.3(a)(2); 
     see, e.g., OGC Op. 96-0841 (Sept. 17, 1996), OGC Op. 94-0119 
     (Feb. 9, 1994) (available on NCUA's website at www.ncua.gov), 
     the NCUSIF insures only member accounts. Therefore, client 
     funds in an IOLTA account are insured by the NCUSIF only for 
     those clients who are members of the credit union. 12 C.F.R. 
     Sec. Sec. 745.0, 745.1(b). In the event of a credit union's 
     liquidation, the amount of each client's insured funds in 
     IOLTA accounts is added together with any other individual 
     account of the client. 12 C.F.R. Sec. 745.3. Insurance 
     coverage is the same whether the credit union is a federal or 
     state-chartered credit union. 12 C.F.R. Part Sec. 745.
       You have also asked about NCUSIF insurance coverage for 
     IOLTA accounts at federal and state-chartered credit unions 
     designated as low-income. Both federal credit unions and 
     state-chartered credit unions designated as low-income can 
     accept nonmember funds. 12 U.S.C. Sec. 1757(6); 12 C.F.R. 
     Sec. 701.34; see, e.g., OGC Op. 96-0841. A state-chartered 
     credit union can also be designated as low-income. 12 C.F.R. 
     Sec. 741.204(b). Nonmembers at low-income credit unions are 
     considered members for purposes of NCUSIF coverage. 12 C.F.R. 
     Sec. 745.1(b). Therefore, a nonmember client's funds in an 
     IOLTA account at a low-income credit union are entitled to 
     NCUSIF coverage. 12 C.F.R. Sec. 745.1(b).
           Sincerely,
                                                  Sheila A. Albin,
     Associate General Counsel.
                                  ____



                                     American Bar Association,

                                         Chicago, IL, May 6, 2014.
     Hon. Ed Perlmutter,
     House of Representatives,
     Washington, DC.
       Dear Representative Perlmutter: On behalf of the American 
     Bar Association and its nearly 400,000 members, I am writing 
     in support of H.R. 3468, the ``Credit Union Share Insurance 
     Fund Parity Act.''
       This legislation would benefit state charitable programs 
     receiving revenue from Interest on Lawyers' Trust Accounts 
     (IOLTA) by providing attorneys the ability to hold client 
     funds in credit unions, which have historically provided 
     higher interest rates than other financial institutions. More 
     than 90 percent of IOLTA grants fund the delivery of legal 
     services to Americans living in poverty. Legal aid and pro 
     bono programs receiving IOLTA funds provide legal assistance 
     to veterans, domestic violence victims, those coping with the 
     after-effects of natural disasters, and those undergoing 
     foreclosures and other housing issues.
       Thank you for your leadership on this important issue. The 
     ABA stands ready to assist you in helping this legislation 
     become law.
           Sincerely,
                                                James R. Silkenat,
     President.
                                  ____

                                           National Association of


                                        Federal Credit Unions,

                                       Arlington, VA, May 3, 2014.
     Re Support and Pass H.R. 3468, the Credit Union Share 
         Insurance Fund Parity Act

     Hon. John Boehner,
     Speaker, House of Representatives,
     Washington, DC.
     Hon. Nancy Pelosi,
     Minority Leader, House of Representatives, Washington, DC.
       Dear Speaker Boehner and Minority Leader Pelosi: On behalf 
     of the National Association of Federal Credit Unions (NAFCU), 
     the only trade association exclusively representing the 
     interests of our nation's federal credit unions, I write in 
     strong support of the Credit Union Share Insurance Fund 
     Parity Act (H.R. 3468), and to urge swift passage of this 
     important bipartisan legislation.
       Maintaining parity between the coverage provided by the 
     National Credit Union Share Insurance Fund (NCUSIF) and the 
     Federal Deposit Insurance Corporation (FDIC) on all types of 
     deposits and accounts is imperative and a longstanding goal 
     of NAFCU member credit unions. Consumers often do not 
     distinguish between the government backing on accounts at 
     financial institutions. It is important that the law dictate 
     that there is no difference in coverage, so as not to favor 
     one type of institution over another in the marketplace. 
     NAFCU is pleased that the legislation, as favorably reported 
     out of committee, will provide NCUSIF parity with the FDIC 
     for certain accounts, including Interest on Lawyers Trust 
     Accounts (IOLTAs).
       We applaud and thank the bill's sponsors, as well as House 
     leadership, for addressing this important issue as it will 
     provide much needed relief to our nation's credit unions. We 
     appreciate your consideration of this measure and would 
     welcome the opportunity to discuss this issue further should 
     you need additional information. If my colleagues or I can be 
     of assistance to you, please feel free to contact myself or 
     NAFCU's Director of Legislative Affairs, Jillian Pevo.
           Sincerely,
                                                      Brad Thaler,
     Vice President of Legislative Affairs.
                                  ____



                            Credit Union National Association,

                                      Washington, DC, May 5, 2014.
       Dear Representative. On behalf of the Credit Union National 
     Association (CUNA), I am writing in support of certain 
     regulatory relief measures scheduled on the suspension 
     calendar this week. CUNA is the largest credit union advocacy 
     organization in the United States, representing America's 
     state and federally chartered credit unions and their 99 
     million members.
       Credit unions face a crisis of creeping complexity with 
     respect to regulatory burden. It is not any one regulatory 
     change or requirement that is causing this crisis, but the 
     ever-increasing, never decreasing accumulation of regulations 
     over time that cripples credit unions' ability to efficiently 
     serve their members. The bills that the House will consider 
     this week will take small steps toward alleviating some of 
     that burden, and better enable credit unions to more fully 
     serve their members.
       Credit unions support H.R. 3584, the Capital Access for 
     Small Community Financial Institutions Act; H.R. 3468, the 
     Credit Union Share Insurance Fund Parity Act; and H.R. 2672, 
     the CFPB Rural Designation Petition and Correction Act. We 
     urge the House to pass these measures.


 H.R. 3584--Capital Access for Small Community Financial Institutions 
                                  Act

       H.R. 3584, introduced by Representatives Steve Stivers (R-
     OH) and Joyce Beatty (D-OH), seeks to correct a drafting 
     error in the Federal Home Loan Bank (FHLB) Act that prohibits 
     state chartered, privately insured credit unions from joining 
     the FHLB system. This legislation was reported out of the 
     Financial Services Committee on March 14, 2014 by a vote of 
     55-0; similar legislation has also been approved by the House 
     of Representatives as part of comprehensive regulatory relief 
     legislation in 2006 and 2008. By correcting the oversight in 
     the original legislation, 132 privately insured credit unions 
     across the country will be eligible for membership in the 
     FHLB system and have additional opportunities to provide 
     mortgage credit to their members.


        H.R. 3468--Credit Union Share Insurance Fund Parity Act

       H.R. 3468, introduced by Representatives Ed Royce (R-CA) 
     and Ed Perlmutter (D-CO), provide National Credit Union Share 
     Insurance Fund (NCUSIF) coverage for trust accounts, such as 
     Interest on Lawyer Trust Accounts (IOLTAS) and other similar 
     accounts. This legislation is necessary because the National 
     Credit Union Administration (NCUA) has interpreted that the 
     Federal Credit Union Act does not permit it to extend such 
     coverage. The legislation would direct the NCUA to extend 
     share insurance to the fund held in trust accounts opened and 
     managed by credit union members, even if the funds in such 
     accounts are owned by one or more nonmembers. This would 
     provide parity in the

[[Page H3428]]

     insurance treatment of trust accounts offered by credit 
     unions with the treatment of similar accounts offered by 
     banks.
       H.R. 3468 was reported out of the Financial Services 
     Committee on November 14, 2013 by voice vote.


     H.R. 2672--CFPB Rural Designation Petition and Correction Act

       H.R. 2672, introduced by Representative Andy Barr (R-KY) 
     would direct the CFPB to establish an application process 
     determining whether a county should be designated as a rural 
     area if the CFPB has not designated it as one. Designation of 
     ``rural'' by the CFPB has many implications for credit 
     unions, particularly with respect to the type of products 
     credit unions may offer their members in these areas. For 
     instance, the Escrow Requirements under the Truth in Lending 
     Act Rule require certain lenders to create an escrow account 
     for at least five years for higher-priced mortgage loans. If 
     those loans are made by small lenders that operate 
     predominately in rural or underserved counties, they are 
     exempt from this requirement. Another example includes the 
     Ability to Repay and Qualified Mortgage (QM) Standards Under 
     the Truth in Lending Act rule by which mortgage loans with 
     balloon payments do not meet the QM standard. Like the Escrow 
     Rule, small lenders that operate predominately in rural areas 
     are eligible to originate balloon-payment QMs. The CFPB has 
     defined ``rural'' by using the U.S. Department of Agriculture 
     Economic Research Services'' urban influence codes.
       H.R. 2672 was reported out of the Financial Services 
     Committee on March 14, 2014 by a vote of 54-1.


                               Conclusion

       Each of these bills would reduce credit unions regulatory 
     burden and help them better serve their members. They were 
     all subject to thorough consideration by the Financial 
     Services Committee, and as the votes indicate, they are 
     noncontroversial. We urge you to support the bills when they 
     come to the floor.
       On behalf of America's credit unions and their 99 million 
     members, thank you very much for your consideration of our 
     views.
           Best regards,
                                                      Bill Cheney,
     President & CEO.
                                  ____



                                                 Mountain West

                                     Credit Union Association,

                                                       Denver, CO.
     Hon. Ed Perlmutter,
     Longworth House Office Building,
     Washington, DC.
       Dear Representative Perlmutter. On behalf of the Mountain 
     West Credit Union Association, the trade association that 
     represents Colorado credit unions, I am writing to express 
     our support for H.R. 3468--Credit Union Share Insurance Fund 
     Parity Act, which provides the National Credit Union Share 
     Insurance Fund (NCUSIF) coverage for trust accounts, such as 
     interest on Lawyer Trust Accounts (IOLTAS) and other similar 
     accounts.
       As you know, attorneys routinely receive client funds that 
     are to be placed in IOTLA accounts. These accounts generate 
     interest for charitable causes, primarily civil legal 
     services for economically disadvantaged citizens. Currently, 
     credit unions are unable to offer IOTLA accounts to members 
     because the Federal Credit Union Act does not permit NCUA to 
     extend insurance coverage to these accounts. As a result, 
     credit union members that would like to open IOLTAS are then 
     forced to go to thrift or a bank.
       If passed, this legislation would provide parity in the 
     insurance treatment of these accounts for credit unions.
       On behalf of Mountain West Credit Union Association and our 
     member credit unions, I want to thank you and Congressman 
     Royce for your leadership in sponsoring this important piece 
     of legislation.
           Sincerely,
                                                       Scott Earl,
     President/CEO.
                                  ____


  Mr. PERLMUTTER. Specifically, the bill extends insurance coverage to 
Interest on Lawyer Trust Accounts, as Mr. Royce said, and I will call 
those ``trust accounts or similar escrow accounts,'' those that are 
held at credit unions that are otherwise fully insured at FDIC-insured 
banks up to $250,000.
  As a practicing lawyer for 25 years, I know Lawyer Trust Accounts in 
Colorado as COLTAs, or Colorado Lawyer Trust Accounts, which we 
established for our clients so that interest can be earned for various 
charities that might exist. For instance, legal aid which provides 
assistance to veterans or people involved in domestic violence 
situations.
  Under our bill, if a credit union were ever to fail and needed to be 
resolved, then the client funds held in an escrow account would be 
insured and thus protected, regardless if the beneficiary is a member 
of the credit union or not. In my instance, if I had a trust account 
which had a number of different clients, some clients might be members 
of the credit union, others are not. Only those under current law that 
are members of the credit union are covered by share insurance. Those 
that are not members of the credit union are not covered. So we are 
trying to stop this differentiation between banks and credit unions.
  Currently, the NCUA's regulations and legal opinions as established 
in 1996, which is one the letters we are introducing today, do not 
allow Federal deposit insurance equal to the coverage provided by the 
FDIC for accounts held by credit union members that contain funds owned 
by one or more nonmembers.
  IOLTA accounts often contain funds from many clients, some of whom 
may not be members of the particular credit union where the attorney or 
the escrow agent has opened the account.
  With an IOLTA account or other escrow accounts held in trust, under 
current law, the membership status of the client/beneficiary, and not 
of the agent or the attorney, is determinative as to whether an IOLTA 
account can be properly maintained. In order for a law firm or a real 
estate escrow company to maintain an IOLTA account at a credit union, 
either all of the clients whose funds would be deposited must be 
members of that credit union or the credit union must be designated as 
a low-income, which would allow it to accept nonmember funds.
  Many States or bar associations require the funds in an IOLTA to be 
fully insured, meaning a lawyer may not be able to use a credit union 
for these accounts if they can't be fully covered.
  It is important to note that this legislation should not be seen as 
an authorization to take nonmember deposits beyond the current 
regulatory limits, nor should it be seen as an authorization for the 
NCUA to increase those thresholds.
  What we have before us today is a negotiated compromise. The language 
as introduced in the manager's amendment narrowly defines which 
accounts will be extended Credit Union Share Insurance Fund coverage. 
This includes IOLTA/COLTAFs and other escrow accounts held in trust.
  I thank my friend from California for bringing this legislation. It 
is time that there be parity and that all of the clients be covered by 
the Share Insurance Fund.
  I urge quick passage of H.R. 3468, the Credit Union Share Insurance 
Fund Parity Act.
  I yield back the balance of my time.
  Mr. ROYCE. Madam Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from California (Mr. Royce) that the House suspend the rules 
and pass the bill, H.R. 3468, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.

                          ____________________