SNELLVILLE, Ga.–Calling it a “harmful decision” by NCUA, leaders from the African American Credit Union Coalition, the National Association of Latino Credit Unions and Professionals and Hope Credit Union have sent a letter to the NCUA board stating the 15-year limit made to the term of Emergency Capital Investment Program (ECIP) investments in CUs will “severely impact” Black and Latinx-owned credit unions, as well as their members.
Some $9 billion was appropriated for the Emergency Capital Investment Program (ECIP) in the December 2020 Consolidated Appropriations Act.
“In enacting this legislation, Congressional leadership made clear that a primary objective of ECIP was to close financial service gaps in communities of color, and others hit hardest by the far-reaching impact of COVID-19 by providing vital capital infusions to Minority Depository Institutions (MDIs) and other financial first responders in the nation’s most vulnerable communities,” the letter states, citing several prominent members of Congress who have expressed support.
‘Unintended Consequences’
“Unfortunately, by limiting ECIP investments in credit unions to 15 years, NCUA’s action has the unintended consequence of undermining the intent of Congress that the appropriated funds promote financial inclusion and reduce longstanding racial and economic disparities,” the letter continues. “NCUA’s ruling stands in sharp contrast to the Treasury Department’s determination that ECIP funds may have a 30-year term. Notably, bank recipients of ECIP funds do not face a similar constraint, and certain banks have the option to utilize these funds in perpetuity.”
According to the organizations, the “disparate treatment of credit unions relative to banks will exacerbate massive racial disparities within the financial sector.”
The letter notes there are currently 402 Black and Hispanic owned credit unions compared to 50 such banks.
“Given their comparative prevalence in communities of color, the NCUA ruling significantly disadvantages MDI credit unions and the people we serve relative to our banking peers,” the organizations wrote. “The harm is intensified due to the relative impact of MDIs in underserved communities.”
The Mississippi Example
The letter-writers pointed to an analysis of mortgage lending in Mississippi, where 36% of the population is Black, showing that only 11% of HMDA reported loans made by the state’s CDFI banks were made to Black borrowers, compared to 17% of all Mississippi HMDA reported loans.
“By contrast, 83% of mortgages in the state made by Hope Credit Union, a local MDI, were made to Black homebuyers,” the letter states. “Similarly, MDIs and minority CDFIs played an outsized role in making SBA Paycheck Protection Program loans to minority businesses, most notably sole proprietors, which comprise roughly 95% of all Black businesses.”
The letter argues the limits on ECIP will have “dire consequences, perpetuating disparate access to capital for businesses and homeowners of color, and widening a racial opportunity gap that undermines America’s economy and overall stability.”
If left unresolved, the organization told NCUA they estimate that limiting the length of credit unions ECIP investment to 15 years will “crater” the impact of this program to one-third to one-fifth of what would be achieved with a 30-year investment.”
‘Destructive Impact’
“As you execute your duties with regard to implementing ECIP, a historic injection of capital into underserved communities, we want to make sure that you are keenly aware of the destructive impact of NCUA’s recent actions on MDI credit unions and the communities we serve, and urge you to rectify this harmful rulemaking by implementing ECIP in a manner consistent with Congressional intent, and in a way that closes, rather than widens centuries-old opportunity gaps that limit the potential of an emerging majority of Americans,” the letter told the NCUA board members.