Read more at the Washington CU Daily
An influential community group last week joined bankers in telling Congress that credit unions are not fulfilling their mission and are not sufficiently accountable to the communities they serve.
“Credit unions are not held accountable to fulfill community reinvestment activities, creating a regulatory inconsistency between banks and credit unions, even though both take deposits and should thus have similar requirements to meet needs and conveniences of the communities where they operate,” the National Community Reinvestment Coalition, the American Bankers Association and the Independent Community Bankers of America wrote last week in a letter to key House and Senate committees. “Absent such expectations, some credit unions are not making efforts to invest in lower-income areas.”
The groups go on to call on Congress to make credit unions comply with the Community Reinvestment Act and to closely examine the credit union tax exemption.
The NCRC, formed in 1990, is an association of more than 600 community-based organizations that work to increase the flow of capital into traditionally underserved areas. This is not the first time that the coalition has questioned whether credit unions are serving people of modest means. As far back as 2009, the NCRC said in a report, “While mainstream credit unions have made progress in lending to lower-income individuals, credit unions as a whole are not meeting public expectations for institutions that receive tax exemptions and are entrusted with the mission of serving people of modest means.”
The precipitating factor this time seems to be two final rules the National Credit Union Administration board has passed—one expanding the activities that Credit Union Service Organizations may engage in and one dealing with shared facilities.
The groups noted that the two rules were forced onto the NCUA agenda by two members of the board, over the objection of its chairman.
“The entire process for finalizing these rules is highly unusual, with a formal agency action to allow two board members to usurp control of the agency’s staff and board agendas from the current Chairman,” they wrote.
The three groups quoted NCUA Chairman Todd Harper as saying that the CUSO rule would create a “Wild West” within the industry, with little accountability.
The final shared facility rule was an improvement over the proposed rule, the ABA said, after the agency board adopted it last week.
“We still have significant concerns about this rule and the more general pattern of NCUA actions to expand credit union field of membership at the expense of the low-income communities they were chartered to serve,” the ABA said.
The three groups called on Congress to hold a hearing with the three NCUA board members and then to make credit unions subject to the Community Reinvestment Act, a law that evaluates whether banks are investing money in their communities.
Credit union trade groups have long argued that credit unions should not be subject to the CRA since their mission is to serve people of modest means.