The Credit Union Board Modernization Act has hit its first crucial legislative benchmark after receiving an affirmative vote in the U.S. House of Representatives.
The bipartisan bill, introduced by Reps. Bill Huizenga, R-Mich., and Juan Vargas, D-Calif., was brought before the House last week and officially passed by a voice vote on Monday. It was first introduced in March 2022 and similarly approved in the House later that year, but failed to garner momentum before the conclusion of the 117th Congress in December.
The legislation would reduce the minimum number of board meetings required under Federal Credit Union Act from 12 to six a year if enacted into law, providing credit union directors with greater flexibility in the cadence of the gatherings and lessening the burden placed on the institution’s time, staff and other resources. De novo credit unions and those with low CAMELS — which is an international rating system used by regulatory banking authorities to rate financial institutions — scores must still hold meetings on a monthly basis.
For those well-capitalized institutions with smaller economies of scale, the bill and its potential benefits are a “common sense, straightforward approach, and I think anything that allows credit unions to get back to the business of serving the members is an important step,” said Robert Lewis, executive vice president and chief advocacy officer for the Credit Union National Association.
“The Credit Union Board Modernization Act will go a long way to providing reasonable regulatory relief for credit unions, especially in Michigan’s 4th Congressional District and across the nation,” Huizenga said in a speech. “These common-sense reforms will allow federally chartered credit unions in good standing the same, reasonable governance practices afforded to those at the state level.”
Similar campaigns for adapting credit union procedures also launched throughout last year, including a proposed rule by the National Credit Union Administration on mandating succession planning for executives at federally-chartered institutions as well as the Credit Union Governance Modernization Act that passed in March as part of President Biden’s $1.5 trillion omnibus spending package. The act grants institutions the ability to expel members who commit fraud, verbally or physically abuse branch staff or other members, lead the institution to suffer a material loss or engage in other improper conduct.
The National Association of Federally-Insured Credit Unions said the reduced requirement will strengthen the credit union system by supporting highly rated credit unions and ensuring undercapitalized institutions have ample opportunities to address various issues.
Greg Mesack, senior vice president of government affairs for NAFCU, explained how easing the burden placed on credit union employees, capital and other resources by lowering the minimum number of required board meetings per year will afford directors a better equilibrium between overseeing operations and fielding member concerns.
“Six times a year, [or] at least once a quarter, still allows for good oversight for credit union boards to be more hands on and see what’s happening plus managing the day to day, but it [also] balances with the need for management to be spending time overseeing the credit union,” Mesack said.
New credit unions and those with low CAMELS scores must still have monthly meetings under this bill, “so the act rewards a well-run credit union,” Mesack said.
The legislation is currently under discussion in the U.S. Senate.