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Avoiding pitfalls of being involved in the political process.
The federal mid-term elections are virtually upon us, which brings to mind the constraints that are placed on credit unions concerning their participation in our democratic election process.
Certainly, credit unions have a significant interest in election outcomes. Legislative positions are championed and opposed through elected representatives.
Therefore, it is critical to understand how credit unions can participate in the political process—that is, what actions can be taken and those actions that are prohibited. The Federal Election Campaign Act, implemented through rules established by the Federal Election Commission, establishes the metes and bounds of credit union participation in the election process. Within the bounds of the law, a credit union’s board of directors should establish a policy about the institution’s participation. In addition, an institution should confer with legal counsel who has expertise in such matters before taking any action.
Nonetheless, some general observations can be made concerning political activities undertaken by credit unions. Above all, the guiding principle is that federal credit unions are prohibited from making campaign contributions or expenditures on behalf of federal, state or local office candidates. Notably, the rules for state-chartered institutions are less onerous.
Hence, a credit union that wants to engage in a permissible election-related activity needs to know what a contribution or expenditure is and isn’t.
A contribution includes “... payments, services, or other things of value described in this subpart.” This definition includes loans or other transfers to support the election process of an individual that are made in kind. The granular explanation of what constitutes a contribution is amplified at 11 CFR § 100.52. Expenditure is comprehensively defined by the FEC here.
The FEC regulations create a number of exceptions to the non-contribution rule that constitute a number of political activities in support of candidates that credit unions can take during the course of an election campaign.
For example, credit unions can establish and administer a separately segregated fund, more commonly referred to as a political action committee. Moreover, if a credit union chooses, it can associate itself with another entity’s PAC.
Notably, a credit union cannot contribute its own funds; however, it can solicit contributions to the PAC from its members, employees and the families of such groups.
Another political activity that is not deemed to be a contribution is hosting candidate communications through the use of credit union resources.
Illustratively, the various communication avenues that credit unions have can be used to transmit information about the candidates and their positions. These might include both paper and electronic newsletters and messages. Further, credit unions can host candidate forums on their premises with refreshments paid for by the institution.
Credit unions also can open campaign election accounts for candidates. The focus of this candidate support activity is that the campaign election committee that will be establishing the CEA must be within the credit union’s field of membership.
The process of offering an election committee the opportunity to become a credit union member and thereby open a CEA is no different than making this service available to any other organization. The credit union’s charter applies.
For example, are all of the campaign committee members within the field of membership of the credit union, thereby entitling the committee itself to become a member? Or, is the entity already within a general chartering section that would broadly embrace the campaign committee, such as being located within a particular community?
In providing a campaign account, the point is that the credit union must conduct its business in exactly the same way it would for any other member. This includes ensuring that the supporting documentation of the campaign committee entitles it to open an account. Moreover, the credit union’s policies must enable it to open commercial accounts.
This is the season in which credit unions will want to be involved in the political process. Doing so may help the credit union help the industry, itself and its members. Participation also requires a credit union to pay attention to the rules governing such activity.
Stephen A.J. Eisenberg is of counsel with CU Counsel PLLC, Washington, D.C.
If you liked this post, you might like to read “Better Regulator Discussions,” also by Eisenberg.
