The United States Copyright Office is seeking feedback on how the “notice and takedown” system created by the Digital Millennium Copyright Act, also known as the “DMCA Safe Harbors,” is working. Congress decided that in this country, users of the Internet should be allowed to share their ideas with the world via Internet platforms. In order to facilitate this broad goal, Congress established a system that protects platforms from liability for the copyright infringement of their users, as long as the platforms remove material when a copyright holder complains. The DMCA also allows users to challenge improper takedowns.

We filed comments this week, explaining that the DMCA is generally working as Congress intended it to. These provisions allow platforms like the Internet Archive to provide services such as hosting and making available user-generated content without the risk of getting embroiled in lawsuit after lawsuit. We also offered some thoughts on ways the DMCA could work better for nonprofits and libraries, for example, by deterring copyright holders from using the notice and takedown process to silence legitimate commentary or criticism.

The DMCA Safe Harbors, while imperfect, have been essential to the growth of the Internet as an engine for innovation and free expression. We are happy to provide our perspective on this important issue to the Copyright Office.

[background, NYTimes]

Internet Credit Union board and staff in April 2014.

[previous, NYtimes]

Dear National Credit Union Administration,

You win, we lose.
This is our notice of Voluntary Liquidation of the Internet Credit Union.
We write this hoping many of you will read it.

You did not need to crush this credit union.
You did not need to make it take over 18 months to charter, forcing 5,000 changes to our application documents.
You did not need to restrict our total loan portfolio to $37,000 when we had $1,000,000 in reserve for bad loans.
You did not need to keep us from lending $8,000 to a student, forcing him from college.
You did not need to keep us from originating mortgages for permanently affordable housing.
You did not need to keep us from working with other credit unions on their loans and our loans.
You did not need to force us to revoke the membership of our migrant farm worker members.
You did not need to send people into our offices every month for 2 years taking up our time.
You did not need to treat us like children. And yes, your people said they were “treating us like children” in a meeting with our board.
You didn’t need to laugh when Occupy sent you an application to start a credit union, snarking
”That is not going to happen.” And yes, an NCUA official said that while we were in your offices in DC.
You do not need to overreact every time the Federal Reserve sends you a letter like you did over bitcoin.
You do not need to sow fear into every small and medium sized credit union with your subjective rating system.

You can stop hurting, and start helping.

You need to stand up to the banks that want our membership rules to be arbitrary and shifting under us.
Technology has made starting and running a Credit Union easy.
We need you to not shut down 200 to 300 Credit Unions a year.
We need you to not start 1 or 2 Credit Unions a year, but start 500 credit unions a year (as used to happened before the NCUA existed).
You can create a 5 page application, that any group can submit in a month to get started.
You can leave new credit unions alone for a couple of years.
Clean house of your agents of shutdown, and replace them with agents of start-up.
Thousands of communities are not geographically clumped, let them start credit unions.
27% of our citizens are “underbanked” – your organization is part of the reason for this.
We need a distributed and robust banking system for deposits, transactions, and grassroots credit.
NCUA: Please fix yourself.

We need you… We need you to change.

Your Sincerely,
Members of the Board of the, now dead, Internet Credit Union

Internet Credit Union 2011-2015

sources: Credit Union National Association, NCUA (via the Wayback Machine)

Dear Friends,

Today is #GivingTuesday, the one day you are encouraged to give to your favorite charities. This GivingTuesday, I hope the Internet Archive will be at the top of your list. By giving a small amount, you can put knowledge in the hands of millions of people, for years and years.

I’ve always believed in public libraries. Now is no different. We need a library for the digital generation. A special place we can go to learn and explore. That’s why I founded the Internet Archive—to give everyone access to our cultural treasures. Forever. For free.

I made it a non-profit because this library is powered and enabled
by everyone else. By those who are building the collections and those who are using the collections. Other people are not working for us, we are working for them. I thought a non-profit was the right way to do that.

In our Wayback Machine, we’re saving one billion Web captures each week. People download 20 million books on our site each month. The key is to keep improving—and to keep it free. That’s where you can help us.

The Internet Archive is a non-profit library built on trust. Reader privacy is very important to us, so we don’t run ads that track your behavior. We don’t sell your personal information. But we still need to pay for the increasing costs of servers, staff and rent.

This is the one time of year I ask you to help keep the Internet Archive free and free of ads. Please consider donating $25, $50, $75 or whatever you can afford. It’s is a small amount to inform millions. Help us do more. I promise you–it’s money well spent.

Thank you.

Brewster Kahle

Founder & Digital Librarian, Internet Archive

Brewster Kahle, Chairman of the Internet Archive Federal Credit Union, November 2015

[NYtimes story, Motherboard, BoingBoing. Liquidation.]

All deposits are safe, all loans performing, great and dedicated staff, wonderful members. So why difficult? Despite five years of effort, $1 million in donations spent (from the Internet Archive) and $1 million in the bank to back any bad loans (from the Kahle/Austin Foundation), we are only further from our goal: To create a financial institution that can justly serve our communities. It now looks likely that overwhelming regulatory burden will force us to give up our quest. But don’t worry, even in this case we have more than enough money for all depositors and can place our few outstanding loans. So all is safe, but we thought we should give an update.

Started in New Brunswick New Jersey in January 2011 and then chartered 19 months later, we invested in growing our membership based on a dream of a new kind of credit union, but now our membership is shrinking because the regulators (the National Credit Union Administration, or NCUA) kept tightening our requirements for membership. Also, the services they allow us to offer have been restricted to payday-like loans and small car loans– ones we were not excited to offer in the first place and not lucrative enough to break even. So now we serve only about 100 members and a total of about 400 account holders, and we are not even serving them in ways we wanted to. We wanted to do 3 types of things, none of which we are succeeding at, which makes losing money even harder to endure.

Brewster Kahle and Jordan Modell, at our grand opening celebration November 2012.

We wanted to help the under-served, but the restrictions made this too difficult. We tried to offer student loans, but we were limited to lending only $5,000. This was a particular problem when, for example, an under-documented local Rutgers student with a 700+ credit score and a part-time job needed $8,000 to stay in school but others would not help him. We sought an exception from the NCUA, but they said no. In another case, we worked with a migrant farm workers association to offer their members access to the credit union. We set up a system that allowed them to send money back home with much lower fees than organizations such as Western Union. We had set up services to help undocumented workers so they could pay their fair share of taxes and put them on a path to citizenship. But after ruling that we could accept members of this migrant farm workers as members then a lower level examiners reversed this decision and we had to move all of those members to non-members effectively killing our relationship with the migrant farm workers association. Also, our members wanted to send outgoing wire transfers but the NCUA would not allow it resulting in many members leaving. You probably get the idea, we certainly did.

Internet Credit Union board and staff in April 2014.

We wanted to create permanently affordable housing by offering targeted mortgages. With the banking crisis leading to millions going into foreclosure, we thought we could find ways to help. With abundant capital for our credit union (in this case donations) and experience from Jordan Modell, a banker of over 20 years, we built a great team, board, and partnerships, we gave it a whirl. We were encouraged by how generous the other credit unions and community members were. But as I said, the regulators never let us lend more than $5,000 to anyone much less originate mortgages. The Internet Archive has made progress anyway in affordable housing by starting a “Foundation House,” but unfortunately the credit union is not allowed to build on this example.

We also wanted to make a model so that thousands of credit unions could be started to serve their local communities as happened in the 1930’s and 40’s. Our CEO, Jordan Modell, wrote a blog so others might learn from us and spent hundreds of hours with others wanting to start credit unions. But even though it is logistically easy to start and run a fully functional credit union given the technology back-end services available today, the regulators made it very hard to succeed. After a year and a half of full time work on our application, and their demands for 5,236 changes (really) to our application documents, we were learning they were not interested in new credit unions. We found that generally only a handful of new federal credit unions are allowed to start each year. One of the four our year was a Navajo credit union that spent 44 months getting through the process. We were stunned to find we were the first full service credit union chartered in New Jersey since the NCUA was formed 1970.

After years of losing money I asked our board, which included several that ran credit unions, “How do we break even?”  They said we should find those that need services that are financially lucrative, and they suggested we look to our unique relationship with the Internet. Since we were prevented from making significant loans, we thought that maybe we could get enough deposits and invest them in CDs and wait for the NCUA to let us serve the communities. Fortunately there was an opportunity was opening up. In 2013 bitcoin firms were in the news and banks were closing their accounts. The Internet Archive had some experience with bitcoin because people had donated bitcoins for a couple of years. The Internet Archive used them as partial pay their interested employees, to buy books at the neighborhood bookstore, and buy sushi next door. I suggested the credit union present at a bitcoin conference, which was well received.  Our credit union asked permission from the NCUA to bank bitcoin companies and they granted it. We opened accounts for three small firms. All good– until it wasn’t. The NCUA suddenly demanded we close the accounts. So we reluctantly closed them forcing one of the companies into bankruptcy. The NCUA suggested we open accounts for the individual customers of one of the failed firms so they could receive their money. But then the NCUA kept auditing and investigating us at a level that often took more hours than what we spent on all member services combined. They have been in our branch now around once a month for 2 years, driving up our costs and driving down our services.

sources: Credit Union National Association, NCUA (via the Wayback Machine)

I don’t think it is just us. For sure, we made mistakes but also had unusual advantages: experienced banker CEO, almost unlimited capital, and a market that wanted alternative banking options. I now believe it is not just us, because 200 to 300 credit unions are shut down every year, many of which by the NCUA which was started in 1970. Only a few are allowed to start. All the while, it has never been easier to create and operate a small full-service credit union, complete with debit cards, ATM’s, and online banking. We have heard many tales from other credit unions and the associations that try to help new ones that echo our experiences. “By any measure, the future for small credit unions looks bleak,” says the Financial Brand. We now know first hand how they go after small and medium sized credit unions and force them to merge their assets into bigger credit unions. If you have an account in a credit union, especially a small or medium sized one, I would worry that they will go after yours.

I told my tale of woe to a friend, John Markoff, at a party and he suggested I tell it to another New York Times reporter Nathaniel Popper, who turned out to be interested. Few go to the press because there is little upside as the regulators hold absolute power and could react negatively to critical press.

We decided to go to the press as part of our original idea– share our experience so others may learn from us. Unfortunately, we do not have a successful model for others to copy. It may have just been us, but I don’t think so. The United States may not be the place to sustain a grassroots community banking system, at least one that has anything to do with the existing regulators. Maybe the regulators will change, and there are some bringing up issues. Maybe people will build a new system, but so far, the US regulators are aggressively resistant. Maybe some other country will be interested in new ideas and welcome entrepreneurs. Maybe other credit unions that have felt crushed by the regulators will come forward and tell their stories creating momentum for change. I see a system as unhealthy if regulators put 200 to 300 institutions out of business every year for decades on end while only allowing a few to start.

Part of the reason the regulators may act this way is how technically insecure the money system is. As an engineer, when I looked at how the transaction systems work, I was shocked to see few technological safeguards. I imagine there is major fraud activity. Ironically, the bankers and regulators need exactly the technologists that they are pushing away.

All in all, we are sad. Many people have spent years building a new credit union and we have little to show for it. We had hopes. When I was young I had a passbook from my village’s savings and loan– they helped me save my paperboy money so I could spend it on my stamp collection. But through the 80’s I saw the regulators, and the de-regulators, take our beloved savings and loans across the country and roll them up and blown them up– mine was gone in 1989. I wonder if this is what is happening to our small and medium sized credit unions.

More as it happens, but these are difficult times for our credit union. Thank you for all of the help.

Appendix:

Number of Credit Unions in the United States and the number change each year (NCUA started in 1970). Source: CUNA.