Banks, credit union league at odds over impact of proposed changes

A new draft of legislation to rework North Carolina credit union regulations moved quickly through committee Thursday despite disagreement from opposing sides about what the bill does.

Credit unions pushing for the first major reforms in nearly 50 years say House Bill 410 lets them modernize and to serve new low-income customers in rural areas where banks have shuttered branches, creating banking deserts.

Banks leery of competition and others against the bill, including former credit union executives and at least one credit union in Eastern North Carolina, say the measure contains subtle, but massive, changes in state law, opening the door to credit union consolidation and letting them chase investments out of state, leaving less money to loan rank-and-file customers.

The measure moved forward after about a half hour of discussion Thursday in the House Banking Committee. It may be on the House floor for an important vote next week.

“You are being intentionally under-informed and misled,” Jim Blaine, the former long-time head of the State Employees Credit Union, told lawmakers Thursday during a House Banking Committee hearing on the bill.

“As a mother of five and a grandmother of 13, I can spot a dirty diaper,” Blaine’s wife, Jean Blaine, told committee members. “And this bill is one dirty diaper.”

The measure has support from the Carolinas Credit Union League, which represents the industry in North and South Carolina. After Thursday’s meeting, League spokesman Pat Ryan said bill critics sounded like they were describing a different bill than the one moving forward.

That measure started life as 80-plus pages and a complete overhaul of credit union laws. The new version that emerged Thursday morning runs about nine pages and focuses on key reforms, including widening the “field of membership” that credit unions can serve.

Credit unions are non-profit and the law restricts who they can take on as customers. The State Employees Credit Union, for example, serves state employees and their families, with limited exceptions.

The latest version of House Bill 410 widens credit unions’ potential customer bases by letting them serve any person whose income falls below the federal poverty line, plus anyone who lives in an area without a bank branch in an 8-mile radius of the local population center.

The bill would also let credit unions loan money to other credit unions, and to municipalities.

Banks are worried that the bill opens other doors, too. They would become banks, “just without the tax and regulatory responsibilities” that banks have, association president and chief executive Peter Gwaltney told lawmakers. Mike Lord, another former head at SECU, told committee members that the bill would “outsource capital” and create a “national field of membership.”

The Credit Union League says its opponents are mischaracterizing the bill.

About a dozen people spoke on the bill during Thursday’s committee meeting. Lawmakers limited their comments to a minute each.

State Rep. Julia Howard, one of the bill’s primary sponsors, said behind-the-scenes negotiations on the bill have been going on for about two years. When she rolled out the latest version Thursday morning, the Davie County Republican called it “as close as we’re probably going to get” to a consensus bill.