WASHINGTON–A coalition of community bank groups led by the Independent Community Bankers of America (ICBA) has sent a letter to House Financial Services (R-NC) Ranking Member Maxine Waters (D-CA) calling on the committee to hold an oversight hearing on the NCUA, alleging numerous issues the groups say must be addressed.
In the letter the bankers’ groups say NCUA is among agencies that also include the Consumer Financial Protection Bureau that are “overstepping statutory authority and effectively creatingpolicy through social media and other informal channels that circumvent the Administrative Procedures Act.”
Specifically, the bankers allege that NCUA “routinely oversteps statutory authority, circumvents thewill of Congress, and fails to hold the industry accountable for its consumer practices and mission to serve low- and moderate-income consumers. Unlike the banking agencies, the NCUA acts as an industry advocate and promoter, without regard to the broader financial ecosystem in which credit unions operate or the impact on small business borrowers and consumers. The result is a distorted, anti- competitive financial landscape that poorly serves the American people and our economic interests.”
‘Overstepping Authority’
The banking group claimed that NCUA “routinely oversteps statutory authority, circumvents the will of Congress, and fails to hold the industry accountable.” The bankers made several false claims related to credit unions serving underserved communities, bank-credit union mergers, and interest rate caps.
In response, NAFCU Senior Vice President of Government Affairs Greg Mesack has sent a letterdesigned to “set the record straight” on points made by the bank groups, stressing credit unions continue to serve underserved communities, especially those left behind by banks.
In addition, wrote Mesack, “Banks have averaged closing almost 200 branches per month since the beginning of 2020, according to a study by the National Community Reinvestment Coalition,” Mesack wrote. “In 2022 alone, banks closed over 1,500 branches while during the same time credit unions actually ADDED branches."
What the Bankers Are Saying
Among the statements made in the bankers’ letter, which is signed by more than 45 bank trade groups:
- Members are ‘Suffering.’ “In recent years, as large credit unions have prioritized rapid growth and non-traditional financial product offerings, the NCUA has failed to keep pace with the evolving character of the industry, and credit union consumers have suffered as a directresult. A hearing is needed to update Congress’s understanding of the industry and its impact.”
- Field of Membership Rules are a Problem. “NCUA field of membership (FOM) rules distort the marketplace, promote acquisitions of banks and industry consolidation, and exceed theagency’s statutory authority,” the letter reads. “We appreciate Chairman McHenry’s opposition to legislation in the last Congress that would expand FOM. Below we quote from the then- minority’s markup memo on H.R. 7003, the Expanding Access for Underserved Communities Act. ‘Currently, multiple common bond credit unions may cover underservedcommunities, regardless of geographic location. Moreover, low-income designated credit unions are already empowered to serve unbanked, underbanked, and low- and moderate-income populations and are not restricted by member business lending limits. This type of credit union is already permitted to serve non-members (public), and more than half of all credit unions already have a low-income designation.
“As the minority noted, H.R. 7003 would have benefitted ‘larger and wealthier credit unions’ and further expansion of FOM would come at the expense of other financial institutions. FOMhas already expanded well beyond the parameters of the Federal Credit Union Act and the purpose of the credit union tax exemption.’”
- No Accountability. “Banks are subject to the Community Reinvestment Act (CRA) and thereby held accountable for their service to low- and moderate-income consumers in thecommunities in which they operate,” the bankers’ letter states. “No similar regulatory mechanism applies to credit unions, though they were created and granted a generous tax exemption for the purpose of serving consumers of “modest means.” The credit union exemption from CRA is steadily eroding the scope and coverage of the law as credit unionsgrow and acquire community banks, thereby removing CRA-covered institutions from the market and leaving more low-income communities without an accountable financial services provider. Credit union-bank acquisitions cut safeguards for low- and moderate-income consumers.”
Additional Allegations
The letter further alleges that NCUA has sought to increase the loan interest rate ceiling over objections of the Treasury Department, that NCUA is not up to the task nor executing on its responsibilities around fair lending enforcement, and that the agency has failed in its oversight of CU acquisitions of banks.
Regarding the latter point, the letter points to the increasing number of such bank purchases and adds, “In July 2021, a Michigan state-chartered credit union, carrying the “low income” designation,announced the purchase at twice book value of a Florida bank specializing in private aircraft financing for high-net- worth individuals. Credit unions have also been targeting larger community banks. Also in 2021, Vystar Credit Union, an acquisitive Florida-based institution, announced the proposed acquisition of a Georgia bank with $1.6 billion in assets…”
‘Look Past The Hysteria’
In response, Mesack stated in the NAFCU letter that while bankers continue to oppose mergers with credit unions, there were only 16 credit union-bank mergers in 2022 compared to 163 bank mergers. He further noted that bank customers must fall within the credit unions’ established field of membership.
“Once you look past the community bankers’ hysteria, you will see that in almost all cases the merger allows a community to keep a trusted financial institution from closing its doors,” Mesack wrote.
‘This is Their Moment’
John McKechnie, a long-time advocate for credit unions in Washington, added, "Over the last couple weeks, it's become apparent in conversations with Hill staff that the ICBA is feeling its oats after small banks dodged the banking-crisis bullet. It's not at all surprising that they are going on the offensive against credit unions. They apparently sense that this is their moment."