Congress on Tuesday passed a bill that would allow more people to join credit unions, undoing a Supreme Court ruling that had restricted membership.
President Clinton said after the voice vote in the House of Representatives that he would sign the measure, even though it lacks a key provision requiring credit unions to abide by fair-lending rules that banks must follow. The Senate overwhelmingly approved the bill last week.
Those community-lending rules, long championed by Democrats and attacked by conservative Republicans, require banks to serve low-income people and minorities in their communities. But overall, the bill will make it easier for credit unions “to expand where appropriate” and “ensures that consumers continue to have a broad array of choices in financial services,” Clinton said.
Under the legislation, all current credit union members will be allowed to remain with their institutions. That gives credit unions a boost in their competition with smaller community banks to attract customers.
The legislation overrides a 5-month-old Supreme Court ruling by allowing federally chartered credit unions to continue to include more than one occupational group in their memberships, as long as each new group doesn’t exceed 3,000 people.
Credit unions contend they are the best source of help for people of modest means. But the banking industry has bitterly protested credit unions’ exemption from federal taxes, an exemption retained by the legislation.
“I would say it was a victory of David over Goliath,” said Rep. Paul Kanjorski (D-Pa.), one of the bill’s original sponsors.
Dan Mica, president and chief executive of the Credit Union National Assn., called the vote a “tremendous victory for consumers across the country . . . who want the door open to low-cost credit union service.” He said about 62 million employees of small businesses, who were rendered ineligible by the high court ruling, now will be able to join an existing credit union.
A feverish lobbying campaign has pitted the banking industry--which brought the lawsuit that reached the high court--against the 70-million-member credit union industry. Credit unions, with their tax exemption, compete with banks by often providing lower-cost loans and other services at more favorable rates.
“We see it primarily as a taxpayer issue,” said Virginia McGuire, a spokeswoman for the American Bankers Assn., the industry’s biggest lobbying group. The group has cited an estimate by the congressional Joint Committee on Taxation that the exemption would cost taxpayers some $4.4 billion between 1998 and 2002.
The administration has supported the legislation, but had pushed for fair-lending rules to be extended to credit unions.