Credit unions were originally chartered to serve people of “small means.” In return for serving this public purpose, they were granted non-profit status and operated tax free, giving them an advantage over their bank competitors. Overtime, credit union regulators have allowed an increasingly broad interpretation of “small means,” while expanding the allowable service area of credit unions to very large geographical areas. These changes allow the largest credit unions to operate like banks.
“Large credit unions function like banks, but they are not regulated like banks,” said John Taylor, president and CEO of the National Community Reinvestment Coalition. “The report’s finding that credit unions lag banks at meeting the credit needs of underserved communities is troubling, because credit unions were chartered with the express purpose of serving people of small means. This report suggests that the credit union industry requires performance-based measures that affirm their obligation to expand financial access and promote financial inclusion.”
NCRC has proposed that the Community Reinvestment Act be expanded to cover credit unions; the law currently only applies to banks. The Community Reinvestment Modernization Act of 2009 (H.R. 1479) would apply CRA to roughly half of the 7967 federally insured credit unions, with exemptions for low-income creditunions and smaller institutions. NCRC released the following set of recommendations as part of the report:
1. Expand the Community Reinvestment Act to apply to credit unions
2. Designate underserved areas in a meaningful way
3. Enhance the rigor of NCUA anti-discrimination reviews
4. Mandate that NCUA act on the GAO recommendations to measure credit union perfomance
5. Amend HMDA to require smaller institutions to report their home lending data
6. Require credit unions and mid-size banks to disclose data on small business lending
7. Require that banks, larger credit unions, and others support community development credit unions
The report can be found at www.ncrc.org.
The National Community Reinvestment Coalition is an association of more than 600 community-based institutions that promote access to basic banking services, including credit and savings, to create and sustain affordable housing, job development and vibrant communities for America’s working families.