WASHINGTON —During a congressional hearing here, a bank trade group called on Congress to apply the Community Reinvestment Act (CRA) to credit unions.
NAFCU responded by calling the testimony another “feeble attack” on CUs and said banks are subject to CRA rules for a reason, and are using the attack to distract from branch closures and other issues.
Testifying on behalf of the Independent Community Bankers of America (ICBA), Quentin D. Leighty, CFO and president of First National Bank in Las Animas, Colo., told the House Financial Services Subcommittee on Consumer Protection and Financial Institutions that “modern credit unions are no longer subject to any meaningful limits established by Congress to justify their tax exemption,” and further said CUs are using the tax exemption to acquire taxpaying community banks.
“When a community bank is acquired by a credit union, a Community Reinvestment Act-covered institution is removed from the market with an adverse impact on low- and moderate-income communities,” Leighty testified. “ICBA and community banks urge this committee to hold a hearing in the near future to examine the community impact of credit union-community bank acquisitions and the possible application of CRA to credit unions.”
‘Guilty’ of Discrimination
In response, NAFCU’s senior vice president of government affairs, Greg Mesack, said, “The credit union structure and its requirements still seem unclear to banking trade groups. The CRA requirement is meant to ensure banks meet the financial needs of the communities they serve and abstain from illegal, discriminatory behavior, something they were found guilty of. Serving their communities and members is already a principle all credit unions live by.
“To be clear, credit unions’ sole purpose is to serve only their members and communities, a mission ingrained in the industry’s cooperative not-for-profit nature. Imposing CRA requirements on credit unions would only distract and potentially undermine their ability to fulfill this mission,” Mesack continued. “Another feeble attack by banking trade groups is now focused on the voluntary bank-credit union merger process. What banks are trying to distract lawmakers from is the alarming rate of their branch closures, which now stands at nearly 200 a month. Meanwhile, as banks aggressively close branches in rural and underserved areas to focus on wealthy clients, credit unions have actually added branches in those areas.
“NAFCU will continue to reaffirm these truths and ensure policymakers have accurate information on the differences between credit unions and banks,” he said.
Update Being Considered
The testimony came as federal banking regulators are considering a proposal to update CRA regulations. Among other things, the ICBA is calling for:
- Updating CRA asset thresholds to reflect the current banking environment and allowing smaller institutions to continue to use the current CRA framework.
- Expanding and consistently applying CRA-qualifying activities.
- Employing alternative approaches for minority- and women-owned financial institutions and community development financial institutions.
- Applying CRA equitably to all financial services providers that serve consumers and small businesses, including credit unions and fintech companies.
- Advancing the proposal’s provisions to allow institutions to receive CRA credit for qualifying activities outside their assessment areas and to maintain a public list of activities eligible for CRA consideration.