[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.
____________________