WINSTON-SALEM, N.C. (Aug. 17, 2018) – When President Bill Clinton signed H.R. 1151 – the Credit Union Membership Access Act – on Aug. 7, 1998 it was the culmination of a battle that started in the lower courts, went to the U.S. Supreme Court, rallied a grassroots movement throughout the nation and ended on Clinton’s desk as landmark legislation.
AT&T Family Credit Union, now known as Truliant Federal Credit Union, and it’s then CEO and President Marc Schaefer were at the heart of the fight 20 years ago. Schaefer is now Truliant’s CEO.
“Today, I want to make sure the people of Asheboro feel some responsibility for the success,” Schaefer said. “It all started with the American Bankers Association and local banks being unhappy that AT&T Family Credit Union opened a branch in Asheboro to serve workers. There were 13 finance companies, including some that were owned by the big banks, serving a small town of 30,000 people. Then these five banks try to tell us we can’t serve the financial needs of these workers.
“To me, that wasn’t right. We were a robust alternative and they were trying to stop us from serving these members. These banks were charging much higher interest rates for loans and they were charging fees for services that were free at AT&T. We felt responsible to this community and the companies that were asking us to serve their employees. There was no question. We had to fight this fight,” Schaefer said.
When a behemoth (the banking industry $4.5 trillion in 1997) goes to war with a much smaller entity (credit unions $348 billion in 1997), a one-sided street fight usually takes place between lobbyists, lawyers, talking heads and large advertising budgets.
But the credit-union representatives changed the script. They added a potent and powerful messenger: credit union member-owners.
One of the significant differences between credit unions and traditional banks is that banks are in business to serve shareholders; credit unions are in business to serve member-owners.
The stakes for credit unions and their members were significant. A Depression-era law, the 1934 Federal Credit Union Act, specified that credit-union members must have a “common bond.” Relevant bonds could relate to occupation, association or residence in a geographic area – but there could only be one bond uniting the members at each credit union.
Most credit unions were formed through single employers – like AT&T Family Credit Union. But when an employer closed or moved production to another country, regulators were forced to close the credit union and pay off the depositors. During the economic turmoil in the 1970s and ‘80s these closures and moves became common and strained the credit-union insurance fund.
To resolve this issue, regulators adjusted their interpretation of the 1934 Federal Credit Union Act and started allowing credit unions to be formed around more than one “bond” – enabling the merger of many credit unions. It was this consolidation process that worried the American Bankers Association and led to court fights.
One of the lawsuits was initiated in 1990 by the First National Bank & Trust in Asheboro, three other North Carolina banks and the American Bankers Association. They were suing the National Credit Union Administration (NCUA), the federal regulator of credit unions. NCUA had approved a membership expansion for AT&T Family Credit Union in Asheboro, allowing them to serve employer groups not related to AT&T. The bankers said that the membership expansion was a violation of the 1934 law.
The case eventually wound its way to the Supreme Court. In February 1997, the Supreme Court agreed to hear the case, and on Feb. 25, 1998, the Supreme Court issued a close 5-4 decision in NCUA vs. First National Bank & Trust. The Supreme Court handed the bankers a victory, saying that credit unions could not consist of more than one occupational group as their common bond.
“I was very disappointed,” Schaefer said. “Our attorney was John Roberts, now Chief Justice of the Supreme Court, so we had really good representation.”
The ruling could have forced millions of members to leave their credit unions. But one month after the Supreme Court agreed to hear the case, H.R. 1151 was introduced into the House on March 20, 1997.
It was at this point that the credit-union representatives shifted their grassroots strategy into overdrive and employed the power of credit-union members. “We often say,” Schaefer said, “some trade associations use AstroTurf, we had real grassroots.”
“We realized we needed to make lawmakers understand that this legislation would benefit consumers, but if it wasn’t passed it would hurt consumers,” said John McKechnie, who was the Vice President of Legislative Affairs at the Credit Union National Association (CUNA). “That’s what provided us with the impetus to win.”
Buddy Gill was hired jointly by the National Association of Federal Credit Unions, CUNA and CUNA Mutual Group to be the principal strategist and architect behind the national campaign.
The credit-union campaign re-cast the message to Congress from “banks vs. credit unions to ‘what’s best for your district’s constituents’ by giving credit union members … a stake in the outcome,” Gill wrote in an essay, “How a Massive National Grassroots Campaign Beat the Well-Heeled Bank Lobby.”
Schaefer agreed with the strategy.
“It was the working population of Asheboro – and all working people in the country who used credit unions – that gave us the key advantage. We couldn’t win credit unions vs. banks. But we changed the focus. Banks serve stockholders and credit unions serve members. It wasn’t a difficult decision to put our strongest asset – member-owners – at the heart of the campaign,” Schaefer said.
But another group – members of Congress – needed to be convinced that they could support consumers and not be harmed politically by voting against the powerful bank lobby.
“Our objectives had a single purpose: How to best give our friends in Congress the political cover they needed to be with us and say ‘no’ to the banks when the hard votes came,” Gill wrote.
Gill organized credit-union voices throughout the country by using tools that brought pressure from credit-union members and credit-union friendly organizations to the steps of Congress:
• TV ads
• Local newspaper ads
• Media events
• Phonebanks in credit unions
• Letter-writing campaigns
• Large businesses with credit-union affiliations
Locally, AT&T Family Credit Union was active soliciting support from its member-owners. Lisa Warlick, who is currently a Campaign/Digital Analytics Specialist at Truliant, was a Marketing Representative at AT&T Family. She worked on the campaign.
“We just put our heads down and worked,” Warlick said. “We realized we had to get the laws changed. Since we had lost in the Supreme Court, there was no other way. If we hadn’t won, I can’t imagine what it would look like today – and I can’t imagine what would have happened to all those working-class people who depended on credit unions to help them with their financial dreams and goals. The banks, with their high rates and fees, simply weren’t a good answer for these workers.
“During the Campaign for Consumer Choice, our big thing was that we had people write to their congressmen and women."
“We did it the old fashioned way,” Warlick said. “We parked ourselves in our branches and asked everyone who walked through the doors if they would sign a letter for their congressman. The effort consumed much of the employees time – but we still made sure our members were taken care of first.
“Getting people to register to vote was also critical. We wanted to be able to say that everyone who wrote a letter was a registered voter. We didn’t want people writing a congressman and then not voting. It was said that Howard Coble, a Republican who represented North Carolina’s 6th congressional district, got so many letters through his mail slot, he couldn’t open his front door.
The result: Congressional representatives received thousands of calls and letters from credit-union members from all over the country – and 6,000 credit-union members rallied in Washington on July 14, 1998.
“If you get behind a good cause, it’s not hard to get support,” Warlick said. “Our members loved us and we loved our members. It was inspiring to be a part of this. AT&T Family chartered buses for staff and members. We left at 3 a.m. We marched in mid-morning. We were exuberant. It was a blast. Then we loaded back on the buses and came home.”
According to Gill, the reaction from Congressional offices to the voter outpouring was significant:
• “The credit unions make the Christian Coalition look disorganized.”
• “Obscene amounts of mail.”
• “These credit union people are driving us nuts.”
In addition to all the grassroots campaigning, credit unions made key Congressional alliances.
“I think credit unions won this legislation because of the groundwork we did politically,” McKechnie said. “The Georgia Credit Union Affiliates made friends early with Rep. Newt Gingrich. They worked to ensure that he knew the benefits of credit unions. It was a totally bipartisan effort that had strong appeal across the political spectrum.
“Gingrich was Speaker of the House at that time,” McKechnie said. “It’s rare for Speakers to sponsor legislation. But he went to a credit-union conference before the legislation was introduced and announced that he was going to co-sponsor the bill. It sent a message to the rest of the House that it was OK to support the bill.”
Clearly the message got through. On April 1, 1998 the House voted to pass H.R. 1151 by a vote of 411 to 8; and the Senate passed the bill 92 to 6 on July 28, 1998. Five months after the Supreme Court decision, H.R. 1151 was signed into law. The law allows credit unions to have multiple bonds among their member-owners.