Realtors vs. Banks – Legislative Initiative

Taking a page from the play book credit union associations used in their field of membership battle with banks, the National Association of Realtors (NAR) is seeking a legislative remedy to its fight with the banking associations over whether banks should be allowed to engage in real estate brokerage and management services. The NAR currently has over 120 co-sponsors in the House of Representatives of H.R. 3424, the Community Choice in Real Estate Act of 2001.

The Bill would amend the Bank Holding Company Act of 1956 and the Revised Statutes of the United States to stipulate that federal regulators do not have the authority to allow financial institutions to engage in real estate brokerage and management activities. Specifically, H.R. 3424 would prohibit the Federal Reserve Board and the Secretary of the Treasury from finding that real estate brokerage or real estate management activities are financial in nature, incidental to any financial activity, or complementary to a financial activity. The effect would be to keep regulators from utilizing the provisions of the Gramm-Leach-Bliley Act to allow banks to engage in these activities.

Like credit unions before them, the Realtors have employed a grass-roots army of real estate brokers to lobby Congress and the Executive Branch. Like the field of membership battle, real estate brokers are seeking to use the legislative branch to overturn what seemed to be a fait acompli – in the credit union case to overturn a Supreme Court decision, in the Realtor case, to counter interpretations by regulators that would allow banks to engage in these activities. Thus far the Realtors have been more effective than bankers in encouraging their armies to engage in the battle. H.R. 3234 has gone from thirty co-sponsors at the time of its introduction on December 6, 2001 to 121 co-sponsors on December 21, 2001. Identical legislation S. 1839 was introduced in the Senate on December 19^th , Co-Sponsored by Senators Hillary Clinton (D-NY), Russ Feingold (D-Wis), Richard Shelby (R-AL), and Wayne Allard (R-CO).

The banking trade groups are fighting back. Americas Community Bankers (ACB) penned a December 17^th letter to its members asking them to urge their representatives to oppose the legislation before Congress adjourns. They also sent letters to all Senators and House members asking them to oppose the legislation and to resist calls to co-sponsor the bill.

The American Bankers Association (ABA) issued a press release calling the NAR’s campaign a "…transparent attempt to scare its membership, alarm consumers, and turn the clock back on the Gramm-Leach-Bliley Act (GLB)." The ABA argues that the debate is about more than real estate brokerage – that the challenge is to the authority granted to the agencies by GLB to determine what activities are financial in nature. They contend that if the NAR wishes to challenge that, they should go to the courts, not to Congress. They also note that many NAR members are currently offering brokerage, lending, title insurance and property insurance, and that if they truly believe that these activities constitute a conflict of interest and are anti-competitive, they should stop offering these services immediately. They argue that the logic offered by the NAR in support of its positions are identical to those made by insurance agents during the GLB debate and that "…with GLB working in the marketplace, insurance agents are welcoming partnerships and combinations with financial holding companies because of the expanding marketing opportunities." The ABA’s view of insurance agents’ welcoming banks into the fold may be wishful thinking, but they do point out potential inconsistencies in the Realtors’ position as well as the irony that the "Community Choice in Real Estate Act" may, in effect, reduce the choices available to consumers.

The issue is whether the banking industry’s defense is too little and too late to stop the Realtors’ fast moving train.

CRA Lite For Credit Unions Dropped – Bankers Cry Foul

The National Credit Union Administration Board, the regulatory body for federally insured credit unions and the insurer for almost all credit unions, ended the obligations of community-chartered credit unions to develop and implement written plans for serving the needs of its entire community, effectively putting an end to what has been termed by some as "CRA Lite" for credit unions. The rule enacted last year would have required that community charted credit unions address how it would market to its community and what products and services the credit union would offer to assist underserved members in its community. The Community Action Plan (CAP) requirement was scheduled to go into effect December 31, 2001.

The Board effectively repealed the CAP requirement by adopting an Interim Final Rule that it contended removed a burdensome regulation – finding that the notice and public comment requirements were "impractical, unnecessary and contrary to the public interest." This had the effect of making the rule effective immediately without 30 days advance notice.

Credit union trade groups uniformly praised the dropping of the CAP requirement with National Association of Federal Credit Union (NAFCU) President Fred Becker calling the CAP requirement "…superfluous given all the documentation already required of prospective new credit unions." Credit Union National Association (CUNA) President Dan Mica also commended the NCUA’s decision, contending that credit unions do not need a regulation to force them to serve their members.

Not everyone is a fan of the NCUA Board’s decision, however. ABA executive vice president Donald Ogilvie stated that "NCUA has once again confused its role as chief regulatory for that of a chief cheerleader." He noted that NCUA "… decided today it could not accept even the barest minimum of responsibility for ensuring that credit unions lend in their communities. The agency’s action – done without opportunity for comment – is both appalling and irresponsible."

The Consumer Bankers Association (CBA) wrote to NCUA Chairman Dennis Dollar on December 7^th, objecting to its proposal to kill the CAP – noting that this requirement only subjected credit unions to minimal requirements for community. The letter noted that the "rather modest" CAP requirement would create an obligation for credit unions to reach out to underserved markets, which the CBA contends was the reason credit unions were originally created. Responding to credit union contentions that they already serve they already serve all of their members, CBA President Joe Belew wrote, "The fact that banks feel they already serve their communities needs does not excuse them from CRA; credit unions which take the same view should be treated no differently."