WASHINGTON—The American Bankers Association is once again asserting the nation’s largest credit unions are not living up to their mission to serve individuals in low- to moderate-income areas.
ABA Chief Economist James Chessen—in an ABA Banking Journal post—suggested that among large credit unions with more than $500 million in assets, the majority of branches—73%—are currently concentrated in middle- and upper-income communities, while just 6% are located in low-income areas.
“There are 21,200 credit union branches in the U.S., but just under 14,500 of them are located in middle- and upper-income census tracts according to data from S&P Global’s Market Intelligence,” Chessen wrote. “That means less than one-third of credit union branches are actually located in the low and moderate income communities they were created to serve. More disturbing is that fewer than 6% of the branches of large credit unions (those with over $500 million in assets) are in low-income communities. These largest credit unions receive the highest dollar benefit from the tax exemption, yet they have chosen to focus their resources on the well-to-do rather than using their tax advantage to help expand cheaper credit to those who need it most. Simply put, they are using their tax-exempt status to make profitable consumer and business loans to people who do not need taxpayer-subsidized financial services and can afford to shop around for financial products elsewhere.
‘A Deeper Dive’
“This is why it’s important to distinguish the large, profit-driven credit unions from those smaller credit unions that are mission-focused and serving consumers in low-income communities. A deeper dive into the data shows that of all the credit union branches in low-income neighborhoods, two out of three are from small credit unions (under $500 million in assets),” continued Chessen. “Congress has the tools to make sure large credit unions do a better job of meeting their 1934 statutory requirement to serve people of modest means, and that starts with the Community Reinvestment Act.”