The first session of the 105th Congress came to a close the evening of November 13, as lawmakers headed home until January. Despite the bipartisanship which resulted in the enactment of the balanced budget deal earlier this year, floor action in both the House and Senate ground to a halt several times later in the session, as proponents or opponents of various measures used parliamentary maneuvers to gum up the works. Frustrated by recurring partisan spats over campaign finance, disputed elections, transportation subsidies, school vouchers and abortion, lawmakers adjourned until January 27, 1998 after completing work on the final three FY 1998 spending bills. While a few controversies were settled in the last week of the session, Congress put off most of the contentious issues until next year.

The action most of interest to NCUA, of course, was the inclusion of an additional $1 million for the Revolving Loan Fund in the VA, HUD and Independent Agencies Appropriation, PL 105-175. This measure was signed into law by President Clinton on October 27, 1997. However, various other measures of interest to NCUA remain pending. Below is an issue-by-issue status report on legislative action of interest to NCUA and credit unions. Because the 105th Congress continues through 1998, all measures currently pending can be taken up when Congress reconvenes in January.

Revolving Loan Fund

The VA, HUD and Independent Agencies Appropriations Law for fiscal year 1998, PL 105-75, includes an additional $1 million for the CDCU Revolving Loan Fund. Although the additional funds for the CDRLF were not included in either the original House or Senate versions of the bill, VA-HUD Appropriations Chairman Jerry Lewis (R-CA) and Rep. Marcy Kaptur (D-OH) persuaded other conferees to add the funding during the House-Senate conference. The Revolving Loan Fund Appropriation now totals $8 million.

Board Members Confirmed

On October 9, the Senate voted to confirm Dennis Dollar and Yolanda Wheat as NCUA Board members. Mr. Dollar, whose term expires in April, 2003, was nominated July 31, 1997; the Senate Banking Committee held a hearing on his nomination September 30 and unanimously voted to confirm him October 9. Mrs. Wheat, whose term expires in August, 2001, has been serving as a recess appointee since April, 1996.

Field of Membership Legislation

H.R. 1151, the "Credit Union Membership Access Act," introduced by House Banking Committee members Paul Kanjorski (D-PA) and Steve LaTourette (R-OH), now has 130 sponsors. Among the cosponsors are 32 Republicans, 97 Democrats and 1 Independent. Twelve cosponsors (3 Democrats and 9 Republicans) are also House Banking Committee members. However, with the death of Rep. Walter Capps (D-CA), the resignations of Reps. Henry Gonzalez (D-TX) and Tom Foglietta (D-PA), and the expected resignation of Rep. Ron Dellums (D-CA), the number of sponsors will fall to 126 before the next session of Congress convenes.

On November 9, Rep. John LaFalce (D-NY), floated his suggestion for a proposed solution to the FOM debate. Rep. LaFalce will become the ranking Democrat on the House Banking Committee in January, after Rep. Gonzalez retires. Rep. LaFalce inserted his draft bill, the "Credit union Growth and Improvement Act," into the Congressional Record but has not formally introduced the measure. In his statement, Rep. LaFalce noted that he was putting forth his proposal as a "beginning point for future discussion." Rep. LaFalce's proposal would:

--amend the FCU Act to allow membership in FCUs to be comprised of "1 or more groups," but would require that each group be located in the same "well-defined and limited community";

--grandfather FOM expansions which occurred before October 25, 1996;

--restrict new FOM expansions to employee groups of 1,000 or less, occupational groups of 2,000 or less and association groups of 5,000 or less;

--require the NCUA Board, to determine that, among other things, the expansion will not result in "serious competitive injury" to another credit union or "unreasonable competition for other depository institutions" before approving any FOM expansion;

--lift the FOM restrictions for new credit unions, or merged or liquidated credit unions;

--require the NCUA Board to establish and enforce standards for compliance with the Community Reinvestment Act (CRA) for credit unions which have assets of $25 million or more and more than one group in their field of membership;

--require the President to consider experience with financial institutions other than credit unions and state regulatory experience in nominating NCUA Board members.

Bankruptcy

On September 17, Banking (and Judiciary) Committee member Bill McCollum (R-FL) introduced H.R. 2500, the "Responsible Borrower Bankruptcy Protection Act of 1997." Rep. Rick Boucher (D-VA) cosponsored the bill. Basically, the bill would restrict the ability of consumers who have income equal to 75% of the national median or more to choose Chapter 7 Bankruptcy. Instead, the bill would require certain of these consumers to use Channel 13. (Creditors prefer Chapter 13 to Chapter 7 because Chapter 7 allows the consumer to walk away from debts, but Chapter 13 requires a repayment plan.) A consumer with monthly net income (after subtracting secured debt payments and living expenses) sufficient to pay off at least 20% of his or her total unsecured debt over the next five years would be required to file under Chapter 13.

H.R. 2500 would also:

--require courts to inform debtors of alternatives to bankruptcy;

--streamline and speed up the repayment process under Chapter 13;

--require bankruptcy courts to compile and report to Congress information about bankruptcy trends; and

--discourage consumers from filing multiple bankruptcies.

Bankruptcy legislation has also been introduced in the Senate. Senate Judiciary Committee members Charles Grassley (R-IA) and Richard Durbin (D-IL) introduced S. 1301, the "Consumer Bankruptcy Reform Act of 1997," October 21. The Senate bill is similar to the House bill, but instead of an automatic requirement that certain consumers file under Chapter 13 instead of Chapter 7, the bill gives bankruptcy judges discretion to put certain debtors in Chapter 13.

The National Bankruptcy Review Commission, created by the 1994 Bankruptcy bill, submitted its report to Congress October 21. Many of the Commission's recommendations were unfavorable to creditors, but the Commission is badly divided over its recommendations. The only certainty about bankruptcy legislation at this point is that Congress will give the issue further consideration next year.

Audit Requirement

Although his bankruptcy bill was welcomed by credit unions, Rep. McCollum's efforts this year were not entirely favorable to credit unions. Rep. McCollum also introduced H.R. 2552, the "Credit Union Audit Improvement Act." H.R. 2552 would require all credit unions with $10 million or more in assets to have an annual audit by a CPA. Rep. Spencer Bachus (R-AL) is the other original cosponsor of H.R. 2552.

In response to Congressman's request for comments, Chairman D'Amours wrote to Rep. McCollum August 8 to explain that this measure is unnecessary and poses an unfair burden on credit unions. Based on conversations PACA has had with both Republican and Democratic staff, there is little support for H.R. 2552. The comparable audit requirement for banks applies to institutions with $500 million or more in assets. The draft of the Treasury Department's credit union study recommends that credit unions with $500 million or more in assets have an annual CPA audit.

Financial Services Modernization

As has been the case in numerous previous sessions, this Congress has been unsuccessful in efforts to repeal Depression-era laws which require strict separation between banking and other lines of business. This year's "Financial Services Competitiveness Act," H.R. 10, like previous efforts, fell victim to the ongoing feud between the banking, thrift and insurance industries. Because of the subject matter, House leaders gave both the Banking and Commerce Committees jurisdiction over H.R.10.

The House Banking Committee reported out its version of H.R.10 June 20. Banks were not completely satisfied with this version of the bill and feared amendments made by the Commerce Committee would be even less in their favor. After announcing in September that consideration of H.R.10 would be delayed indefinitely, the House Commerce Committee abruptly shifted course and reported out H.R. 10 October 30. As predicted, the insurance industry preferred this version, but the bankers liked it even less that the Banking Committee version . Ultimately, the lack of a solution to the dispute forced House leadership to give up plans to bring the bill to the House floor before the end of the session.

It remains to be seen whether H.R.10 will be resuscitated for the second session of the 105th Congress. PACA will continue to monitor the progress of this legislation next session, as the financial modernization bill, if it is revived, could be a vehicle to which credit union field of membership provisions are attached.

Year 2000

Both the House and Senate Banking Committees expressed growing interest in the ramifications for financial institutions of computer problems due to the Year 2000 (Y2K). The Financial Services and Technology Subcommittee of the Senate Banking Committee held a hearing on Y2K issues July 30, at which NCUA Chairman Norm D'Amours and the other financial institution regulators testified. After the hearing, Subcommittee Chairman Robert Bennett (R-UT) asked the General Accounting Office to evaluate each regulator's degree of preparedness for the Y2K conversion. NCUA was the first agency to be evaluated by GAO. GAO made numerous suggestions for improving the agency's Y2K efforts.

The House Banking Committee held a hearing on the Y2K issue November 4. The only regulators testifying at that hearing were the FDIC and the OCC, but Senator Bennett, who was also a witness, mentioned the GAO report and noted a general concern with the regulators' readiness and the lack of disclosure standards.

Senator Bennett introduced a Y2K measure November 10, while Rep. Leach will not introduce the House bill until early in the next session of Congress. Senator Bennett's bill, S. 1518, applies only to publicly traded companies and does not affect credit unions. Rep. Leach's staff is in the process of drafting a Y2K bill; this bill will have a number of provisions of interest to NCUA. The House proposal would give NCUA authority over vendors for Y2K purposes and require all regulators to conduct seminars and develop model solutions for Y2K compliance. The House bill would also allow financial institutions to copy software for the limited purpose of Y2K compliance and clarify that financial institutions may not be held liable for technical violations of law due to a Y2K problem.

Federal Employee Issues

Civil Service Retirement: The budget reconciliation bill, PL 105-33, signed into law August 5, requires increased contributions from agencies as well as employees. PL 105-33 requires each federal agency, including NCUA, to increase its contribution to the Civil Service Retirement System to 8.51% of basic pay (from the current 7% level.) The increase is effective for the period from October 1, 1997 to September 30, 2002.

The reconciliation law also requires an increase in employee contributions from the current 7% level. Employee contributions will increase to 7.25% for calendar year 1999, 7.4% for calendar year 2000 and 7.5% for calendar years 2001 and 2002. After December 31, 2002, employee contributions are scheduled to revert to 7%.

Travel: On April 16, the House approved H.R. 930, the "Travel and Transportation Reform Act of 1997." This bill would require government workers to use a government credit card for official travel expenses, so that the government would accrue benefits such as frequent flier miles. The Senate took no action on this measure in 1997.

Veterans: On April 9, the House approved the "Veteran Employment Opportunities Act of 1997", H.R. 240. This measure would strengthen veterans' eligibility preference and apply veterans preference requirements to additional agencies. The bill would require agencies to notify OPM of each vacant position for which competition is restricted to persons having competitive service. The bill also provides administrative and judicial remedies for any veteran alleging that an agency has violated his or her veterans' preference and grants additional protections to veterans during reductions in force. The Senate took no action on this measure in 1997.

Government Performance and Results Act

The Government Performance and Results Act (GPRA), PL 103-62, requires all agencies, including NCUA, to submit strategic plans to Congress by September 30, 1997. Throughout the year, agency officials consulted with Congressional staff in developing the plan, and the General Accounting Office found that a draft of NCUA's plan largely satisfied GPRA's requirements. Vice Chairman Shirlee Bowné, along with other financial institution regulators, testified at a July 29 House Banking Committee hearing on GPRA and the GAO evaluations of agency draft plans. Based on the feedback from Congress and the GAO, NCUA revised its draft and submitted its final plan on September 30.

Private Mortgage Insurance

Both the House and Senate approved measures to require the cancellation of private mortgage insurance (PMI) when a homeowner's equity reaches a certain level. The original House version of the bill required cancellation of PMI when a homeowner's equity reached 25%, assuming the homeowner was current on payments. The version of the bill most likely to pass now, H.R. 607 as amended and passed by the Senate on November 13, would require automatic cancellation of PMI when a homeowner's equity reaches 22% if the account is current. H.R. 607, as introduced and in its most current version, also would require notice to consumers about the right to request cancellation of PMI.

PMI reform legislation stalled in the Senate Banking Committee earlier this year because Sen. Lauch Faircloth (R-NC), whose state includes the largest number of private mortgage insurance companies, balked at approving a PMI bill. However, Sen. Faircloth signed off on the measure shortly before the Senate approved it; with little remaining opposition, the PMI bill seems likely to be enacted next session.

Debit Card Losses

Several House and Senate bills introduced this year would limit consumer liability for unprotected debit cards. Such cards are increasingly issued to consumers who do not realize that unlike traditional ATM cards, the debit card can access their bank accounts without a PIN.

The Senate version of the bill, S.1203, was introduced September 23 by Banking Committee Chairman Alfonse D'Amato (R-NY). S. 1203 would require debit cards which can access a consumer's account with only a signature to be accompanied by a warning that the card does not require a unique identifier for use and that loss or theft of the card could result in unauthorized access to the consumer's account. S. 1203 would also reduce the time period for correcting errors from 10 business days to five business days, and limit liability for unauthorized fund transfers to $50.

Several House members also have introduced debit card protection legislation. H.R. 2234, introduced July 23 by Rep. Chuck Schumer (D-NY), would allow nonprotected debit cards to be distributed only if issuers comply with validation requirements applicable to unsolicited credit cards and would limit liability for unauthorized fund transfers to the liability imposed for unauthorized use of credit cards. H.R. 2319, introduced July 31 by Rep. Tom Barrett (D-WI), would require a warning that the card does not require a code or other identifier to access the consumer's account to accompany the card or appear on the card. H.R. 2319 would also require financial institutions to reissue an unprotected card as a card which does require a code or other identifier at the consumer's request, and prohibits the imposition of fees for insufficient funds due to unauthorized funds transfer using an unprotected card.

The timing of future action on these measures will be determined by election-year politics; the current expectation is that the Senate will act first. Senator D'Amato is running for re-election next year. Rep. Schumer, a longtime consumer issues advocate, is running in the Democratic primary to challenge Senator D'Amato, so it seems likely that the House leadership will hold up action on its bills in order to allow Senator D'Amato, rather than Rep. Schumer, to take the credit for winning increased consumer protections.

Flood Insurance

Legislation authorizing the National Flood Insurance Program, which implements mandatory flood insurance purchase requirements for homeowners in certain high-risk areas, expired on September 30, 1997. The flood insurance reauthorization was attached to a bill that seemed certain to be enacted before the end of the session, but last-minute amendments by the Senate, after the House adjourned, made final passage impossible. Thus, the earliest the reauthorization will be enacted is February.

Legislative Update October 6, 1997 Congress will begin its Columbus Day recess this Friday, with Members still hoping to adjourn the First Session of 105th Congress by early November, although much work remains. In the House, Democrats are slowing action by calling for many procedural votes. The Senate, meanwhile, has taken up campaign finance reform, a topic that is sure to consume many hours of floor time. In this environment, any non-essential legislative action, such as financial services modernization or regulatory relief, will be deferred until next year.

One major item on Congress' agenda -- reauthorization of the main transportation funding law -- was addressed temporarily by passing a six-month extension of the current law. Congress managed to complete work on only 10 of the 13 Appropriations bills before the October 1 beginning of fiscal year 1998. After the politically disastrous 1995 government shutdowns, both parties agreed that a repetition of that episode was not in their best interests, so a short-term, continuing appropriations bill passed with little controversy.

Congressional actions for the rest of this session of most interest to NCUA and credit unions will be the vote on the VA, HUD and Independent Agencies Appropriations bill, which includes an additional $1 million for the revolving loan fund, and the Senate's action on the nominations of Dennis Dollar and Yolanda Wheat to the NCUA Board.

Revolving Loan Fund: The Conference Report on the VA, HUD and Independent Agencies Appropriations Bill, H.R. 2158, includes an additional $1 million for the CDCU Revolving Loan Fund. Although the additional funds for the CDRLF were not included in either the House or Senate versions of the bill, Rep. Marcy Kaptur (D-OH) persuaded other conferees to add the funding during the House-Senate conference. Neither the Senate nor the House has set a date to vote on the conference report.

Board Member Confirmation Hearing: The Senate Banking Committee held a September 30 hearing to consider nominations, including that of Dennis Dollar to be a member of the NCUA Board. The Committee is expected to vote on the nominations October 8. The date for the full Senate vote is not yet known.

OPM Report: The Oversight Subcommittee of the House Banking Committee held a hearing on the OPM report September 30. Chairman D'Amours, Vice Chairman Bowne', and Board Member Wheat each testified, as did Acting OPM Director Janice Lachance. Subcommittee members attending the hearing were Chairman Spencer Bachus (R-AL), Ranking Member Maxine Waters (D-CA), Rep. Carolyn Cheeks Kilpatrick (D-MI) and Rep. Steve LaTourette (R-OH). Rep. Paul Kanjorski (D-PA), who sits on the full Banking Committee but not the Subcommittee, also attended the hearing.

Field of Membership: H.R. 1151 cosponsors now total 117. The five latest additional cosponsors are Reps. Sander Levin (D-MI), James McGovern (D-MA), Charles Rangel (D-NY), Thomas Manton (D-NY), and Bobby Rush (D-IL).

Bankruptcy: On September 25, Banking (and Judiciary) Committee member Bill McCollum (R-FL) introduced H.R. 2500, the "Responsible Borrower Bankruptcy Protection Act of 1997." Rep. Rick Boucher (D-VA) cosponsored the bill. Basically, the bill would restrict the ability of consumers who have income equal to 75% of the national median or more to choose Chapter 7 Bankruptcy. Instead, the bill would require certain of these consumers to use Channel 13. (Creditors prefer Chapter 13 to Chapter 7 because Chapter 7 allows the consumer to walk away from debts, but Chapter 13 requires a repayment plan.) A consumer with sufficient monthly net income (after subtracting secured debt payments and living expenses) to pay off at least 20% of his or her total unsecured debt over the next five years would be required to file under Chapter 13.

H.R. 2500 would also:

--require courts to inform debtors of alternatives to bankruptcy;

--streamline and speed up the repayment process under Chapter 13;

--require bankruptcy courts to compile and report to Congress information about bankruptcy trends; and

--discourage consumers from filing multiple bankruptcies.

The National Bankruptcy Review Commission is due to make its recommendations to Congress this month; Rep. McCollum has stated that no action on H.R. 2500 will take place until the Commission report is completed.

Audit Requirement: Although his bankruptcy bill was welcomed by credit unions, Rep. McCollum's efforts this month were not entirely favorable to credit unions. Rep. McCollum also introduced H.R. 2552, the "Credit Union Audit Improvement Act." H.R. 2552 would require all credit unions with $10 million or more in assets to have an annual audit by a CPA. Rep. Spencer Bachus (R-AL) is the other original cosponsor of H.R. 2552.

Chairman D'Amours wrote to Rep. McCollum last month to explain that this measure is unnecessary and poses an unfair burden on credit unions. The measure appears to have little support.

Debit Card Losses: Banking Committee Chairman Alfonse D'Amato introduced a bill to limit consumer liability for lost debit cards. Last week, the House Banking Committee held hearings on this same topic. Further action on this issue in either the House or Senate is unlikely this year.

Electronic Payments System: The House Banking Committee held a September 25 hearing on the Treasury Department's proposed rules regarding the management of federal agency payments through electronic funds transfer. At this hearing, Rep. Paul Kanjorski (D-PA) stated that he hoped to see credit unions getting a share of the electronic funds transfer business, and repeated his strong belief in the value of credit union services, and the need for all Americans to have access to credit unions.

Financial Services Modernization: Although the House Commerce Committee was slated to take up the measure, H.R. 10, in September, the Commerce Committee announced September 19 that its consideration of the measure would be delayed indefinitely. The measure has been consumed in controversy since the Banking Committee reported it out during the summer. Commerce, like Banking, was apparently unable to find a way to satisfy both the banking and insurance industries. While the reform bill seemed to have run out of steam, the latest news is that leadership is trying to broker a compromise which would get the bill to the House floor this year.

PACA staff will continue to monitor the situation. As any time financial services reform plans are considered, there is always the potential for amendments on financial institution regulatory agencies.