Legislative & Advocacy Update

​A move to tackle the debt limit divide; credit union advocacy highlights; key events in DC this week,
​and more. 

360-Degree advocacy highlights.

• Credit unions told Treasury its proposed Emergency Capital Investment Program data collection would cause more harm than potential benefits.
• The CUNA-League system called on congressional leaders to ensure credit unions have parity with banks in any potential deposit insurance reform legislation.  
• CUNA and the Leagues wrote the House Small Business Committee in strong opposition to proposed changes to the Small Business Administration’s 7(a) loan program.
• The CUNA-League systems supported the Secure and Fair Enforcement (SAFE) Banking Act in a letter to the Senate Banking, Housing, and Urban Affairs Committee. NOTE: Senator Keven Cramer (ND) has signed on as a co-sponsor.

President and Congress make a move to tackle debt limit divide.
President Joe Biden met with Speaker of the House Kevin McCarthy (R-CA), House Minority Leader Hakeem Jeffries (D-NY), along with Senate Majority Leader Chuck Schumer, (D-NY), and Senate Minority Leader Mitch McConnell (R-KY), last week to discuss breaking the current deadlock over raising the U.S. debt limit. Treasury Secretary Janet Yellen announced the government could hit its debt limit on June 1, much sooner than previously anticipated. Biden and the three congressional leaders are expected to meet again today (Tuesday), and reports are that staff have been in discussions this week, but no breakthroughs have been made.

On April 26, the House narrowly passed House Speaker McCarthy’s debt ceiling proposal, H.R. 2811, the Limit, Save, Grow Act of 2023, by a vote of 217-215. Speaker McCarthy hopes to negotiate with President Biden on spending cuts and policy reforms, while President Biden has said he is willing to discuss the federal budget separately but continues to support only a clean debt limit raise. President Biden announced he is considering invoking the 14th Amendment to unilaterally pay the nation’s debts, but the legality of this potential solution remains unclear and would almost certainly result in numerous court challenges.  

This is the last week both Chambers of Congress will be in session before the June 1 deadline. Treasury Secretary Janet Yellen will likely release an update on the default deadline this week, but the Congressional Budget Office (CBO) last week said there is significant risk of default sometime during the first two weeks June. Regardless of the exact “X-date” of default, lawmakers will continue efforts to address the debt limit and the issue will continue to dominate the discourse in Washington until resolved. 

What impact will FDIC revisions have on credit unions?
The FDIC announced a proposal to charge larger banks an additional fee to replenish the FDIC’s deposit insurance fund. The insurance fund took a large hit following the failures of Silicon Valley Bank and Signature Bank and the government’s decision to back uninsured deposits.

Excluding the first $5 billion in deposits not backed by the FDIC, the proposal requires that each bank pay an annualized fee of 12.5 basis points — an eighth of a percent of the rest of their uninsured deposits. The special assessment would be charged based on a bank’s total number of uninsured deposits as of the end of last year.

FHFA rescinds GSEs’ upfront DTI fees.
The Federal Housing Finance Agency (FHFA) announced it has rescinded higher upfront fees for mortgages with a high debt-to-income (DTI) ratio on loans acquired by Fannie Mae and Freddie Mac – the government-sponsored enterprises (GSEs) – due to responses from stakeholders.

The GSEs were due to start charging these fees in August. The FHFA had previously announced in March it would delay implementation of the fees to engage with the industry and better understand concerns.

CFPB declares that reopening a closed account is a possible UDAAP violation. 
The CFPB Wednesday issued a circular stating that a financial institution may violate federal law if it reopens a deposit account to process transactions after a consumer has already closed it. This guidance comes as part of the bureau’s attempt to tackle “junk fees” and is in response to consumer complaints that a bank “reopened” closed accounts and assessed overdraft and nonsufficient funds fees.

Key events in DC this week.
Tuesday 

• Senate Finance Committee hearing to examine House Republican supplemental IRS funding cuts, focusing on the impact on federal law enforcement and the federal deficit. 
• Senate Judiciary Subcommittee on Privacy, Technology, and the Law oversight hearing to examine A.I., focusing on rules for artificial intelligence. 
• Senate Homeland Security Committee hearing to examine artificial intelligence in government.
• Senate Banking, Housing, and Urban Affairs Committee hearing to examine the failures of Silicon Valley Bank and Signature Bank. 
• House Financial Services Committee hearing to examine oversight of prudential regulators.
• House Ways and Means Committee hearing to examine health care price transparency. 

Wednesday 

• Senate Health, Education, Labor, and Pensions Committee hearing to examine a crisis in mental health and substance use disorder care. 
• Senate Agriculture, Nutrition, and Forestry Subcommittee on Rural Development and Energy hearing to examine rural broadband, focusing on connecting our communities to the digital economy. 
• House Financial Services Committee hearing to examine continued oversight over regional bank failures. 
• House Ways and Means Health Subcommittee hearing to examine why health care is unaffordable.

Thursday 

• Senate Finance Committee hearing to examine tax incentives in the Inflation Reduction Act, focusing on jobs and investment in energy communities. 
• Senate Banking, Housing, and Urban Affairs Committee oversight hearing to examine financial regulators, focusing on financial stability, supervision, and consumer protection in the wake of recent bank failures.
• House Financial Services Committee hearing to examine putting the “stable” in stablecoin.
• House Foreign Affairs Subcommittee on the Indo-Pacific hearing to examine standing united against the People’s Republic of China’s economic aggression and predatory practices.