MCUL – Key State Issues

1. MCUL – Key State Issues Blight Penalties: Senate Bills 35-39 would create additional criminal and civil penalties for accumulated blight tickets issued by qualified municipalities. At MCUL’s urging, the Senate Judiciary Committee has exempted financial institutions and GSEs from the new penalties. With the carve out, credit unions and their officials will be protected from unnecessary civil sanctions and criminal liability related to blight they did not cause and are trying to correct. The bills have been signed into law by the Governor. Inspection of Foreclosed Homes: Following passage of the timed repeal of the state 90-day workout law and implementation of a new right to inspect homes that are purchased at foreclosure sales during the redemption period, HB 5527 was introduced to: place common-sense parameters on inspections to protect borrowers and institutions and better define “damage”; fix provisions on the right to cure damage; narrow the universe of parties allowed to redeem; and provide legal presumptions to reinforce accountability for borrowers that abandon property in redemption. The bill has been signed into law by the Governor. Card Skimming:House Bills 5050-5054 harmonize existing criminal sanctions for card skimming into one felony provision, tweak jurisdictional statutes to ease prosecution for skimming offenses, and to criminalize the sale or possession of skimming devices. Credit unions lose tens of thousands annually to skimming, impacting members and the share insurance fund. The bills have been signed into law by the Governor. Uniform Commercial Code (UCC) Article 9 Penalties: Senate Bill 551 reforms the penalties for non-compliance with Article 9’s provisions, which deal with secured transactions – for certain consumer goods transactions, existing penalties can be extremely high, with no rational tie to the underlying problem, and have given rise to potential class actions in other states. Senate Bill 551 would place more common sense parameters on statutory penalties, allow deficiencies to offset the penalties, and clarify errant case law on allowing pursuit of deficiency when an error has been made. The bill has been signed into law by the Governor.

2. MCUL – Key State Issues Recording Process / Certified Copies in Lieu of Lost Documents:House Bills 4638-4640 have been introduced to rectify a U.S. Bankruptcy Court decision that disallowed the practice of using a copy of a lost document certified by an affidavit to satisfy recording requirements and preserve chain of title on properties. Passage of the legislation will also shore up any lingering questions on the veracity of electronic signatures for electronically recorded documents. The bills have been signed into law by the Governor. Homestead Exemption (PRE) on Foreclosed Properties: House Bills 4135 and Senate Bills 532 have been introduced to allow financial institutions to realize the benefits of the PRE on foreclosed properties for up to three years. Current law allows institutions to file and claim the exemption, but they still must pay the higher-rate, non-PRE tax through a different route. Passage of the legislation would provide relief from the additional 18 mills of non-PRE tax, on properties where credit unions already have to pay back taxes, repair costs, and carrying costs until the home is re-sold. SB 532 has been reported by the Senate Finance Committee, and HB 4135 has passed the House and also been reported by the Senate Finance Committee. Campaign Finance Reporting Relief Threshold: For over a decade, MCUL state PAC fundraising has been hampered by MCFA requirements for specific donor information reporting for any donation, no matter how small. Senate Bill 661 has been amended to provide absolute clarity that MCULAF may solicit from credit union members, and to provide relief from reporting formats for required information on small donations, which may enable more aggressive grassroots fundraising. The bill has been signed into law by the Governor.

3. MCUL – Key State Issues Electronic Vehicle Titling and Lien Release: The Secretary of State has initiated Senate Bills 915-918 to centralize and make electronic Michigan’s system for title-holding for vehicles (cars, boats, manufactured, etc.) and for lien checking and release. The measure should help significantly with regard to fraud prevention and detection rooted in the current paper-based system where owners hold the actual title document on lien-encumbered collateral. The bills have been signed into law by the Governor. Installment Loans by Payday Lenders:House Bill 5594 would amend the Regulatory Loan Act to allow for a new monthly service fee on covered loans of 9.75%, calculated from the original balance. When added together with maximum interest and a 5% courtesy fee, the overall “rate” exceeds 200%. It is designed to give payday lenders an alternative product that is lucrative enough to maintain. MCUL strongly opposes this legislation. The bill is referred to House Financial Services Committee. Scrap Metal Reforms: House Bills 4593 and 4595 would create tougher standards for the scrap metal industry with regard to purchase and payment on scrap material, to help curtail a serious and growing issue with metal theft. The bills have been signed into law by the Governor. In addition to the specific items mentioned above, MCUL has or will be working on several miscellaneous defensive measures, including restrictions on ATM benefits dispensed through bridge cards by machines located at liquor stores or adult entertainment establishments (enacted); various reforms to Michigan’s Uniform Commercial Code Articles 3, 4, and 4a (enacted); anti-squatting measures (enacted); anti-”patent trolling” legislation; and accountability for retailers in a data breach situation.

4. MCUL – Key Federal Issues Tax Reform: In 2013, the House Ways and Means Committee and Senate Finance Committee began the process of considering comprehensive tax reform, using a “blank sheet of paper” approach. MCUL and CUNA have actively engaged with the “Don’t Tax My Credit Union” campaign and through intensive efforts with individual lawmakers. The discussion draft released in February holds credit unions harmless, but efforts continue to ensure that remains the case throughout the process. Through social media and electronic communication, 31,000 Michigan contacts 1.2 million national contacts have been made to Congress, and Michigan’s entire delegation has indicated support for the exemption. GSE Reform: The House Financial Services Committee has reported the PATH Act, H.R. 2767, to the full House, and the Senate Banking Committee has under consideration the Housing Finance Reform and Taxpayer Protection Act of 2013, S. 1217 (“Corker-Warner”), to reform the secondary market and wind up Fannie and Freddie. As introduced, the PATH Act does not ensure access to a secondary market and does not provide any government-backed guarantee for a 30-year fixed loan product or other critical products. Corker-Warner does, making it the preferred vehicle. Recently, Senate Committee leadership released the “Johnson-Crapo” plan to work within the framework of Corker-Warner. While it does require some adjustment, it does contain the two critical elements credit unions have pushed for. Regulatory Relief: Several targeted measures have been introduced on various points of relief, including: the CLEAR Relief Act, H.R. 1750 and S. 1349; the Consumer Mortgage Choice Act, H.R. 1077/ S. 949 / H.R. 3211; and the Regulatory Relief for Credit Unions Act of 2013, H.R. 2572. CUNA is expected to spearhead a comprehensive bill based on their 35-point plan for regulatory relief later this year; MCUL provided direct input to CUNA on items of direct importance to be included in any comprehensive measure. Measures to eliminate duplicative annual privacy notices, H.R. 749 and S. 635, and examination fairness, H.R.1553 and S. 727, have also been re-introduced this session. H.R. 749 on privacy notices has passed the full House, and its provisions are included in several of the other targeted regulatory relief measures. Finally, the House Financial Services Committee has taken testimony on a large package of bills that would reform the CFPB’s structure and procedures, and action on several within that package.

5. MCUL – Key Federal Issues Charter Enhancements: MCUL and CUNA continue to work on measures to raise the member business lending cap from 12.25% of total assets to 27.5%, H.R. 688 and S. 968, as well as on allowing the NCUA to approve one or more forms of supplemental capital, H.R. 719. The MCUL also continues to push CUNA to develop recommendations to improve the federal Credit Union Act as well as related regulations and bylaws, to modernize them and help to keep the federal charter competitive with the Michigan state charter. Recently, H.R. 4226 was introduced to create parity in treatment between loans made by credit unions and banks to fund apartment buildings (bank loans are classified as residential, while credit unions’ are considered business and subject to the federal cap). Prize Linked Savings: S. 1567 and companion House legislation have been introduced to provide parity among financial institutions to offer prize-linked savings programs. The legislation has been introduced and referred to the U.S. Senate Committee on Banking and House Committee on Financial Services. MCUL will continue to work with CUNA and our congressional delegation on comprehensive regulatory relief, identifying needed and desirable updates to the FCUA and related regulations, and issues related to the SAFE Act and over-burdensome NMLS registration requirements. In particular, MCUL will focus on indexing and increasing applicability thresholds under Dodd-Frank, and extending them to all regulations under the Act, as opposed to just direct examination.