110th CONGRESS, LEGISLATIVE ISSUES A - Z

ISSUE: Congress enacted the Community Reinvestment Act (CRA) in 1977 in response to the unjustified “redlining” of lower income and minority neighborhoods by banks and thrift institutions during the 1960s and early 1970s. The purpose was to ensure that for-profit financial institutions (including both federal and state-chartered commercial and savings banks) were adequately meeting the financial service needs of all parts of the communities from which they draw deposits. Periodic CRA examinations and ratings assess the extent to which banks and thrifts are meeting the credit needs of lower income and minority consumers, providing needed and affordable services to all customers and investing in local economic and community development projects. CRA ratings are taken into consideration by the banking regulatory agencies when banks or thrifts seek to open new branches, initiate mergers or acquire other financial institutions.

Credit unions, as not-for-profit, community based institutions, have been exempt from CRA requirements. There was an effort during the passage of the Credit Union Membership Access Act (H.R. 1151) to place CRA-like marketing requirements on community credit unions, but the provision was stripped from the final Senate version of the bill.

CUNA POSITION: CUNA is opposed to any effort to include credit unions under CRA requirements. Credit unions, by their nature and mission of “people helping people,” already meet the financial needs of a broad spectrum of people that fall within their fields of membership, and play an active role in community development and growth. Therefore, credit unions should not be subject to burdensome regulatory requirements when they are already meeting and exceeding the intent behind CRA.

OPPOSING VIEWS: The banking industry continues to insist that CRA be applied to credit unions, despite their continued objection to having to meet CRA obligations themselves. Understanding that the credit union tax-exemption is unlikely to be in jeopardy this Congress, the bankers have shifted their efforts to impose CRA on credit unions. The most recent attempt came from the National Community Reinvestment Coalition (NCRC), an organization that gets partial funding from the banking industry, which issued a misleading study on credit unions and their service to low-income individuals.

IMPACT ON CREDIT UNIONS: It would not make sense to implement additional regulatory burdens on credit unions since (1) credit unions did not participate in the “redlining” activities that prompted Congress to impose CRA requirements on the banks and thrift institutions, (2) credit unions serve people within their fields of membership and all income levels, and (3) Congress is looking to reduce regulatory burdens on financial institutions, not increase burdens. If credit unions were subjected to CRA requirements, the time and resources used to document the work they are already doing would take away from new initiatives to enhance existing services and expand to new underserved areas.

STATUS/OUTLOOK: There is no legislation at this time that would implement CRA requirements on credit unions. Rep. Eddie Bernice Johnson has introduced the Community Reinvestment Modernization Act of 2007 (H.R. 1289), that would place some insurance companies, financial holding companies, mortgage banks, and securities firms under CRA. H.R. 1289 does NOT place credit unions under CRA.

CONTACTS: Allen Chew, (202) 508-6796, achew@cuna.coop

Related Documents:

CUNA Response to the National Community Reinvestment Coalition (NCRC) Study

NCRC Study: Credit Unions: True to Their Mission?

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