State Session Begins Next Week
(Issue 1 of 5)
Congress convened its new session (the 114th Congress to be precise) on January 6th, and Georgia begins the first half of a two-year state legislative session next week on January 12th. Both have a clean slate for legislation, as any bill that did not receive final action by the end of 2014 is "dead." But at both the state and federal level, watch for many of the unresolved issues of 2014 to carry forward into new bills in 2015, and a range of new issues to arise. While the media widely touts the slow pace of Congress, the Georgia Legislature is anything but slow, with political insiders and the media alike wondering how rapid a pace to anticipate! But what are these state legislators likely to spend the majority of their time debating?
- The state budget is first and foremost, with spending levels among agencies/state initiatives a source of debate as the state moves slowly out of the recession.
- There is a renewed effort to seek transportation funding solutions, with the topic of what to tax (or how much more to tax) always a contentious topic.
- A possible attempt to address Medicaid funding (and the impact on rural hospitals) is expected.
These issues in Georgia, along with hot media topics left unresolved in 2014 (such as medical marijuana and autism insurance coverage) are anticipated to take early attention within the state Legislature. There will be thousands of bills and resolutions to be introduced over the next few months that will need to be reviewed for potential impact to credit unions in the course of the 40-day state legislative session. Interested in learning more? Join us at the Grassroots Academy on January 27th. Issues (and the status of them) change quickly on the state level, so during the state session, Creating Influence will run weekly in lieu of the supplemental "Legislative Update" email. Stay tuned!
Credit Unions Meet with
|From left: Ed Templeton, SRP FCU; Kathy Igou, Georgia’s Own CU; Sherry Saxon, Augusta Metro FCU; Congressman Rick Allen; Phyllis Cochran, Augusta VAH FCU; Stacy Tallent, Health Center CU; Ed Presnell, SRP FCU
Congressman Rick Allen (Issue 2 of 5)
On December 22nd credit union leaders in the Augusta area sat down with one of Georgia’s newest Congressmen, Rep. Rick Allen (R). Allen defeated incumbent Rep. John Barrow (D) to serve the 12th District as its U.S. Representative. Credit unions seized the opportunity early to help build a strong relationship with Allen before he traveled to Washington, D.C., to serve on the Hill. The group illustrated the value of credit unions and discussed the regulatory burden placed on financial institutions - topics that are important to the entire industry. Our thanks to Augusta Metro FCU, Augusta VAH FCU, Georgia’s Own CU, Health Center CU, and SRP FCU for sharing some pre-Christmas time with their new Congressman!
|10 Credit Union Legislative and Regulatory Priorities (Issue 3 of 5)
Each year the GCUA Advocacy Plan that is shared with credit unions outlines priorities and strategies to ensure that credit union interests are protected at the state, federal, and regulatory level. This plan, crafted with the guidance of the Advocacy Policy Committee and the Georgia Credit Union League Board, helps chart the course for credit unions to be successful today and in the years to come. For the full document for 2015 please click here, and below are the 10 credit union legislative and regulatory priorities highlighted:
- Defend the Income Tax Exemption as Being Essential to the Not For Profit Cooperative Structure of Credit Unions.
- Replace Exclusivity with Inclusivity and Convenience with Respect to Member Eligibility.
- Seek Reduction of Compliance Burdens on Credit Unions and Removal of Unnecessary Regulatory Limitations.
- Promote the Need for a Progressive Operating Environment for Credit Unions To Serve Their Members’ Lending and Savings Needs.
- Obtain Support for Credit Unions to Better Serve the Commercial Activities of their Members.
- Seek Authority for Credit Unions to Obtain Forms of Paid-In Capital that Do Not Alter the Democratic Structure of Credit Unions.
- Advocate for a Fair Foreclosure Process in Georgia Law that Maintains the Ability to Work with Members.
- Establish and Maintain Credit Union Relationships With Regulatory Officials, Elected Leaders and Executive Branch.
- Seek Protection for Credit Union Members Against Personal Data Theft.
- Promote Fair and Consistent Examination Processes.
|State Issues of Interest Anticipated Early (Issue 4 of 5)
Whether the state session holds the same frantic pace set in 2014 is yet to be seen, but regardless of the pace, there are multiple issues of credit union interest that will need to be addressed. Each year in the course of the state legislative session there are thousands of bills, many of which can have a direct impact on credit unions in a myriad of ways. While there will be hundreds of bills introduced in 2015 that will require constant monitoring for credit unions, here are eight issues already anticipated:
- Foreclosure Process Changes
Since the housing crisis, there are large volume of bills introduced that seek to alter the foreclosure practices and procedures of this state. There have been attempts to:
- increase the foreclosure period and/or change lending procedures,
- completely overhaul the entire foreclosure process, and
- change Georgia to a judicial foreclosure state.
This trend will continue, as some legislators believe that it is too easy for financial institutions to foreclose and that the process is unfair to the borrower. Bills that will either attempt to modify rules to be more consumer-friendly, or even mandate a judicial foreclosure process, will likely be introduced again in 2015. Negative foreclosure changes would increase costs on Georgia credit unions as they would directly affect the time and expense of the foreclosure process. As such this issue is one that requires consistent lobbying efforts.
- Superseding Lien Priority
In addition to the attempts to alter the foreclosure process, there will likely be attempts to increase the exposure to the financial institution involved in the foreclosure. In the past, these have included association assessments and/or the creation of priority lien status for certain obligations (homeowners/condo associations, materialmen’s liens) that attempt to supersede the priority lien status of credit unions and other financial institutions. From our pre- session intel this is anticipated again in 2015. Superseding the financial institution’s lien priority would directly add to the expense for credit unions of unpaid association dues/materialmen’s fees (a personal obligation of the consumer) or subjugate the lien of the credit union. As such this issue is worked actively on behalf of the industry.
- TNC Insurance Coverage
Transportation Network Companies, such as Uber, Lyft or other ride-share companies, are growing in popularity around the world. There is often heated debate in states and municipalities on the regulation of these industries. However, one point of note is there is a gap in insurance coverage if individuals are operating their vehicles as ride-share cars (as this is a commercial activity). This insurance issue has been researched on behalf of credit unions in Georgia during the off session, and the Government Influence Team has engaged the Insurance Commissioner’s office, the chairman of the House Insurance Committee, insurance lobbyists, and TNC industry lobbyists to proactively address this issue. GCUA is presently working with these individuals to craft legislation. This is of interest to credit unions from a consumer perspective, as well as from a lender’s perspective in protecting the collateral. Legislation to prevent gaps in the insurance coverage would be of benefit to Georgia. In addition, greater transparency from the TNC companies to their drivers is sought to reduce the level of risk held by both consumers and lenders.
- Tax Reform
Each year the legislature typically makes tweaks to state tax law, none of which changes the tax status of credit unions. However, the Legislature will continue to look for ways to increase revenue. As such, legislators are regularly educated on the credit union difference through written communications shared, as well as direct communication at all state-level Hikes at Home/tour meetings to refute the bankers’ refrain of "they don't pay taxes" and provide a greater understanding of what credit unions do.
Over the off session in 2014, the legislature conducted several post-session study committee meetings to consider changing the state tax to a modified version of a FairTax plan. The Government Influence Team was present at each of these hearings, and it appears that there is interest among certain legislators in pursuing proposals on a state level to broaden the tax base. Whether this is a full FairTax system, or a combination of lowered income tax and higher tax on goods and services, remains to be seen. It is unclear what, if anything, will pass on this topic. However, this is an issue that will continue to be monitored as legislators continue to look at state tax reform options. Any tax proposal is monitored to protect against any inadvertent change to the credit union tax exemption. Regarding FairTax proposals - any proposals that seek to broaden the tax base could include financial transactions. While some financial services (such as safe-deposit fees) are typical in FairTax attempts, those that would widely broaden it to financial services (tangible and intangible) could create a negative impact on consumer behavior and create undue regulatory burdens. As such, these are monitored closely to ensure that credit unions are not disadvantaged.
- Defining Financial Institutions and Services
The most negative potential consequences of legislation can be by mere accident - often when bills are drafted that reference a financial institution or financial transaction, the words “bank”and/or “FDIC” are used. If left unaltered, these bills could have detrimental effects on the manner in which credit unions lend, serve members or operate, period. Identifying these issues, often buried in innocuous bills, takes constant review – it takes being aware, and communicating the issue to the bill sponsor. There are continual educational efforts to increase legislators’ awareness of credit unions, and their unique needs (and terminology). In addition, any bill that opens a section of law that touches credit unions or financial services is monitored closely for changes, inadvertent or otherwise, that could impact credit unions (either positively or negatively). Every bill introduced is reviewed as each year there are bills that, if left unchanged, would drastically alter the way credit unions operate.
- Deficiency Judgments
Any bill that would make Georgia loans on the secondary market undesirable for purchase would have a negative impact on credit unions and their ability to obtain liquidity. In addition, these bills often complicate rather than resolve the issue - attempting to go after bad apples in the debt-purchasing marketplace, and creating unintended consequences on lending procedures – and are monitored closely to protect credit unions.
There have been bills in the past three years that sought to regulate deficiency judgments (where a guarantor of a loan that is not performing is sued by the lender or purchaser of the debt obligation prior to a foreclosure). This is often a sensitive issue, and one that is not directed at credit unions. However, we are unintentionally wrapped into the debate on this issue. From a credit union perspective, the stance is to:
- ensure that credit unions’ access to the secondary market is not impacted, and
- ensure that the options currently available to credit unions regarding deficiency judgments are not impacted (regardless of the lack of deficiency judgments themselves).
- Payment Cards
In 2013 and 2014 there were multiple bills that sought to place limits on what can be purchased with state-issued EBT (electronic benefits) cards, or how cash value could be accessed. These bills were directed at preventing individuals on public assistance from using the funds to buy items ranging from tattoos to alcohol, gift cards to tobacco. The restrictions sought would have placed additional burdens on the entities where the cards would be presented for use, and would have prevented ATM access. These bills stalled at the end of the session, but will likely return. EBT legislation has the potential to increase costs and compliance burdens on credit unions, and creates operational issues. In addition, the EBT debate has the likelihood of opening a Pandora’s box of misguided legislation on operational fees, ATM or otherwise.
- Debt Settlement
In the fall of 2014, the House Judiciary Committee met for a hearing on a bill to allow debt- settlement companies to operate in Georgia. This issue has been sought by some legislators over the past two sessions, and this latest attempt is to try to prevent “bad actor” debt-settlement companies from operating across state lines by providing another option. It is clear from this early hearing, as well as discussions with legislators and interest groups, that this issue will be one that the legislature will try to pass in 2015. This legislation could have the potential of drawing credit unions into additional regulations and compliance burdens, as well as impacting the consumer’s ability to utilize credit union accounts to pay back debts, and will need to be worked closely throughout the session.
|Chick-fil-A Data Breach Investigation (Issue 5 of 5)
The Atlanta Business Chronicle reported on January 2nd that Chick-Fil-A has confirmed that it is investigating reports of potential unusual activity involving payment cards used at its restaurants. The Atlanta-based chicken chain said it received the initial report from its payment industry contacts late on December 19th.
According to cyber crime and other Internet securities websites, one bank said it had nearly 9,000 customer cards listed in an alert that was sent to several financial institutions about a breach at an unnamed retailer that lasted from December 2, 2013 to September 30, 2014, and that the only common points-of-purchase were Chick-fil-A locations.