Mr. Chairman and distinguished committee members, on behalf of the 155,000 members of the Air Force Sergeants Association (AFSA), thank you for this opportunity to present our views on the importance of credit unions and the need to garner support for H.R. 1151, "The Credit Union Membership Access Act," introduced by Representative Steve LaTourette (R-OH). AFSAs primary mission is to promote and protect the quality of the lives of all active and retired enlisted Air Force members (active duty and reserve component) and their family members and survivors. Federal Credit unions are extremely important to those in military service. Without the provisions of H.R. 1151, the credit unions will not be able to expand their membership to cope with changing demographic and economic situations.
H.R. 1151 is a very simple bill that addresses the field of membership of Federal Credit Unions by stating:
Section 109 of the Federal Credit Union Act (12 U.S.C. 1759) is amended by striking "Federal credit union membership shall be limited to groups having a common bond" and inserting "the membership of any Federal credit union shall be limited to one or more groups each of which have (within such group) a common bond."
This change became necessary when the Supreme Court recently ruled by a vote of 5 to 4 (in favor of the banking industry which brought suit) that credit union memberships, in accordance with the Federal Credit Union Act of 1934, should be limited very restrictively. This action stops the trend in recent years to allow credit union membership to expand to accommodate others who are not, strictly speaking, part of the core clientele group.
We recognize that the banking industry, which controls about 96 percent of todays financial market (the other four percent is split between securities, credit unions and others), wants to protect and expand market share. However, todays economic realities, particularly for enlisted military members, dictate that the Federal Credit Union Act of 1934 be amended (as in H.R. 1151) to allow for modestly expanded credit union membership, particularly in areas of economic downturn or in areas of base closures.
As a consequence of the Supreme Court action, a significant number of defense credit unions will no doubt change the nature of their charters to remain fiscally viable. In our view, many of these changes will take away the ability of these institutions in their new form to serve serving service members overseas and perhaps at military bases in the United States.
In the mid-1960s, a congressional committee visited Europe to review and observe financial services being provided U.S. military personnel stationed there. The Committees report was highly critical of the financial situation confronting U.S. personnel overseas, finding instances of loan sharks charging as much as 40 percent interest, among other financial problems facing our military personnel. This must not be allowed to happen again.
Enlisted (noncommissioned) military members are especially in need of credit unions due to the members relatively low pay. Without defense credit unions, our young military members would be left as prey to alternative financing, such as the loan sharks, pawn shops, or unregulated overseas financial institutions. Also, without credit unions, our service members financial transactions would be left to the banks, which do not want and often turn away our junior people.
Many credit unions offer small consumer loans that most banks would not consider, free or low cost services such as life insurance on savings and consumer loans, free budgetary counseling and education, and checking accounts with no minimum balance, no fees, and free checks.
The quality of life of our servicemembers overseas and at home is dependent on the survival of credit unions. They tailor their services to the men and women serving, often at locations far from other financial institutions.
Mr. Chairman, we appreciate the important and often difficult challenges this committee handles. On behalf of the members of this association, I thank you for the opportunity to express our views. As always, AFSA is ready to support you on matters of mutual concern.