What began as a court case by banks to stop credit unions fromadding multiple groups to their membership ranks became a definingmoment for the industry, and ignited a grassroots campaign thelikes of which financial institutions had never seen.

Bankers sued the NCUA in the early 90s for allowing the AT&T Family CreditUnion to expand its field of membership. The credit union, nownamed Truliant FCU, received permission from the regulator in theearly 80s for multiple segs. However, after years in the courts,the case ultimately came to rest at the U.S. Supreme Court, whichin February 1998 ruled in the banks’ favor.

Marcus Schaefer arrived at AT&T Family in 1995. As the newlyminted president/CEO, he was already familiar with the court casethanks to his close ties to Washington connections. Schaefer saidthat a July 1996 decision by the Appeals Court giving the banksstanding was the wake-up call for credit unions because it gavebanks the right to sue.

“The banks were unhappy with credit unions having companiesother than their original sponsor,” Schaefer said of the lawsuit.“Like many markets, the NCUA allowed credit unions to serve morethan one company. Some of the companies have since closed and thataffects the entire community.”

He said after receiving a call in which he was told the creditunion could no longer add additional companies, he realized thesituation was serious.

Credit union trade organizations saw the writing on the wall:The courts could decide in favor of banks. They worked with membersof Congress in advance of the Supreme Court decision to introduce asimple two-page bill, the Credit Union Membership Access Act (H.R.1151). However, Congress was not yet acting on the measure.

“We introduced the bill in early 1997,” said John McKechnie, whoat the time was vice president of legislative affairs at CUNA. “We started to gain co-sponsors for the process, but alot of members of Congress said they wouldn't do anything with thebill until the courts finished their work.”

The bill was introduced by Rep. Paul Kanjorski (D-Pa.) in March1997. It aimed to amend the language of the Federal Credit UnionAct so it would allow credit unions to serve multiple groups.

“It sounded like something that could help people out,”Kanjorski told CU Times. He said he came around to thereligiosity of that idea after he met with credit union members andheard how they felt about their cooperatives.

“It really is something that goes to the soul of people withtheir financial matters, I think it's healthy,” he recalled.

Members in the industry had to pull togetherto pass the bill. It languished in the House for almost a yearafter being introduced, until the Supreme Court announced itsdecision: In a 5-4 vote on Feb. 25, 1998, the court ruled in favorof the banks.

That decision accelerated the push to pass the bill. However,one of the initial challenges was to find a Republican co-sponsorfor a bill that would benefit credit unions. Banks were deeplyentrenched with some Republican members of Congress and the GOPcontrolled both the House and the Senate.

The search ultimately ended in a nod from the 27^thranking member of the House Banking and Financial ServicesCommittee – as it was known as at the time – Rep. Steven LaTourette(R-Ohio).

Some observers credit the bill’s support by then-Speaker of theHouse Newt Gingrich (R-Ga.) as the reason why it was able to movethrough the House so quickly. Gingrich signed onto the bill on Feb.24, 1998, one day before the Supreme Court’s decision.

Despite the late support, after Gingrich added his name to thebill Republicans in the House supported the bill in droves.Gingrich announced his support during CUNA GAC that year, as theSupreme Court handed down its decision.

Many in the credit union space saw the Supreme Court decision asa potential disaster to the future of credit unions.

Dan Mica, who was new in his position of CUNA president/CEO,said, “The one thing that my general counsel told me is that wecould lose this case and it would shut down credit unions.”

The timeframe from when the Supreme Court handed down itsdecision until the House Banking and Financial Services Committeepassed the bill was a truncated few months.

During a March 11, 1998 committee hearing, Chairman Jim Leach(R-Iowa) opened the discussion of the bill with a condemnation ofthe Supreme Court ruling.

“It is apparent to me from discussions with numerous members ofthe House, on both sides of the aisle, that there is a generalrecognition that there's a degree of merit in all sides, and thatthe precision of a legislative solution will take reasoned judgmentand compromise,” he said. “It is inconceivable to me, however, thatCongress will allow a court ruling to cause millions of Americansto be kicked out of the financial institution of their choice.”

The push to pass the Credit Union Membership Access Act was nowin full swing. However, the bill was not out of danger. During thedebate at the House Banking and Financial Services Committee, avote was called for another measure and Leach called for arecess.

During the recess, he told Mica there were not enough votes topass the measure.

“He told me during the break, ‘You are at least one or two votesshort, but my recommendation is that if you don't get another vote,you pull the bill because they have a dozen other amendments thatwould put credit unions out of business,’” Mica said of thediscussion.

“Talk about swallowing hard,” Mica said.

He made a call to Gingrich’s office, who inturn made a few calls.

“We got the votes. We ended up winning by one vote,” Micasaid.

H.R. 1151 passed out of the House Banking and Financial ServicesCommittee on March 30, 1998.

“A lot of people don't realize that if we had lost in the House,in that committee, it would have disassembled the whole creditunion movement,” Mica said. “If we had lost the whole thing, a hugepercentage of credit union members would have received notes sayingthat, under a legal decision which was not overturned by theCongress, you have to give up your membership at your creditunion.”

However, H.R. 1151 was turning into something altogetherdifferent from what credit unions had sought.

It began to morph as the bill moved through the legislativeprocess. Kanjorski summed up the bill’s move through Congress asakin to carving ones initials into a tree.

“As the tree grows, sometimes the initials become distorted.That happens with legislation,” he said. “The things you pay littleattention to, as you are formulating, they sometimes have adastardly effect on you or the people around you or theinstitutions around you that you never anticipated at thetime.”

The bill fell victim to the whims of its opponents. Bankerspushed for changes to the bill, as did others within thegovernment.

Prompt Corrective Action was a policy devised during thefailure of the Federal Savings and Loan debacle. During this timeit was being applied to the banks and savings and loans and thethen chief counsel to the Senate Banking Committee Richard Carnellpushed for it to include credit unions, but the credit unions wereable to fight it back.

“Before Congress does anything, they check with the TreasuryDepartment, and in the Treasury, they check with the Undersecretaryfor financial institutions. That was Rick Carnell,” Bill Hampel,who was an economist at CUNA at the time, told CU Times.Carnell wanted to add PCA to the bill. “Basically, Congresswouldn't have passed (H.R. 1151) without Treasury's blessing andTreasury would not bless it without prompt corrective actionincluded.”

H.R. 1151 was also compromised with a cap on member business lending, as well as a change in how a creditunion can convert to a mutual savings bank.

However, there were other amendments thatcould have changed the face of the bill that were defeated. Anattempt to add H.R. 10 to the legislation, which later becameGraham-Leech-Bliley, was met with a fiery and passionate speech byKanjorski, who observers said effectively argued against a rule ontwo separate issues. After Kanjorski’s speech, Rules CommitteeChairman Gerald Soloman (R-N.Y.) pulled it from the floor.

“I spent 26 years in Congress and I never experienced a chairmanof the rules committee pulling the rule, as was done in that caseby Gerry Soloman,” Kanjorski said. “He actually pulled the ruleafter we got particularly testy on the floor.”

When it finally came up for vote, a deal was struck to pass H.R.1151 on a voice vote. That could have killed the bill’s momentumonce it reached the Senate, according to Mike Radway, chief policyadviser to NCUA Vice Chairman Rick Metsger, who was legislativedirector for Kanjorski at the time.

There was a convergence of three things that helped the billalong: The Campaign for Consumer Choice, which provided grassrootssupport in an unprecedented way, the immediacy of the Supreme Courtdecision, and the acceleration of overwhelming support in theHouse.

“It made the Senate say they needed to pass this,” Radway toldCU Times. “They added some things that credit unions areless happy with, but at least they solved the immediate problem ofhaving credit unions divest their members.”

Karen Thurmond (D-Fla.) asked for a recorded vote and H.R. 1151passed the House by a 411-8 vote, giving the bill the momentum itwould need in the Senate.

Support on the Senate Banking Committee would prove to bechallenging, as the committee was split among Democrats in supportof the bill and Republicans opposed it. H.R. 1151 came up for voteout of the Senate Banking Committee on May 21, 1998.

“The committee was split, 50/50,” Mica said. “Republicans votedagainst it, but (Committee Chairman Alfonse) D’Amato (R-N.Y.) votedwith us.”

The Senate passed the bill on July 28, 1998, in a 92-6 vote. Itreturned back to the House for approval of changes made by theSenate, and was sent to the White House on Aug. 4, 1998. Just threedays later, on Aug. 7, President Bill Clinton signed the bill intolaw in the Oval Office.

Read more about the massive grassroots campaign that helpedpass H.R. 1151 and how that effort changed credit union messagingto Congress and the public in the second part of CU Times’ H.R.1151 coverage.