WASHINGTON -- House Financial Services Committee Chairman Barney Frank (D-Mass.) has had a good relationship with credit unions, but that will not shield them from consideration under an expansion of the Community Reinvestment Act.
While the chairman has promised a hearing in his committee on the Credit Union Regulatory Improvements Act (H.R. 1537) this fall (See sidebar, page 34), at NAFCU's Congressional Caucus last week he also alerted credit unions that he planned to hold a hearing in early 2008 to explore expanding CRA, which would cover a variety of financial services entities including credit unions. He acknowledged that the credit unions with more focused fields of membership are already doing what CRA requires, but "Some of the very large credit unions are going to have to show how you're doing that." Frank said what he had envisioned would not create "any new burdens for most credit unions."
Talking with press outside the Caucus room, Frank added, "Credit unions are not a major focus of this or even an important focus." However, he said CRA needs freshening up because currently enforcement only occurs "when there's a merger or sale and that's just not good enough."
NAFCU President/CEO Fred Becker said after Frank's remarks, "We're opposed to CRA on credit unions and we remain opposed...and we're opposed to dividing the industry."
CUNA Senior Vice President of Legislative Affairs John Magill agreed, "We continue to oppose CRA--definitely--period. We will do so in a hearing if it comes to that." He believes credit unions would get the opportunity to testify in a hearing if credit unions were involved. "If they're going to have something on credit unions, I can't imagine [Frank] wouldn't call us," Magill said. He welcomed the chance for credit unions of all sizes to show how they are serving their communities and that CRA for credit unions is unnecessary.
After his remarks at the Caucus, Senator Bernie Sanders (I-Vt.) said he had not heard much talk of CRA on the Senate side. "The sense is on the Senate side," NAFCU's Becker confirmed, "there's not much possibility for CRA." The lobbyists, as well as Frank, noted that it takes 60 votes in the Senate to pass anything even slightly controversial given the 51-49, Democrats to Republicans, split.
But that is really not the point, Becker emphasized. "I think everybody's kind of forgetting why banks got CRA," he said.
"CRA is unnecessary. We never redlined," Magill stated.
Frank had noted during his remarks that credit unions in Massachusetts are already subject to CRA and it does not seem overly burdensome to them. Massachusetts Credit Union League Senior Vice President of Marketing and Public Relations Rob Kimmett was inclined to agree, noting that CRA has been a part of doing business for Massachusetts state credit unions since 1982, though he said no one wants more regulatory paperwork to fill out.
He explained that the credit unions there have worked with the state regulator to create credit union-specific CRA examinations based on field of membership and the size of the credit union. Kimmett added, "We're not a proponent of expanding it. It's a fact of life here." He said the credit unions in Massachusetts are divided about 60% federal to 40% state-chartered.
According to the Massachusetts Division of Banks, all of the state's credit unions received at least a satisfactory CRA rating; then again, so did all the banks.
David Snow, president of Alpha Credit Union in Massachusetts, disagreed with the statement that CRA was not much of a burden, not to mention it is unnecessary. "As credit unions, by our regulatory structure, its what a credit union already does," he stated.
Alpha Credit Union received a "High Satisfactory" rating on its last CRA exam, according to the regulator. The credit union offers credit counseling and low-rate loans as low as $500, Snow said, as well as working with the unbanked. "The turn down rate on our loans is very, very low," he added. According to Snow the credit union's membership penetration rate is about 45%.
Mike Lussier, president/CEO of the $440 million Webster First Federal Credit Union based in Webster, Mass., said he knows of the additional burden and cost CRA places on a credit union. "I'm not in favor of CRA for the credit union. I've been through that personally as a state charter prior to 1995," he commented. Lussier added that credit unions across the country of every size are doing all they can to serve their members.
He also said he did not think it was a good idea to divide CRA obligations strictly based on size. "Many credit unions look the same, large or small," he said.
Magill concurred that all size credit unions are doing their respective part.
If an expansion of CRA is considered, there is nothing saying credit unions will definitely be a part of it. Nearly everyone who took the stage at Caucus noted the strong support credit unions have around Capitol Hill. As Frank acknowledged, "You exist in everybody's district...If you were not popular with the people you deal with you would not have the political influence you have." Credit unions are also able to mobilize the voters.
After all, he concluded, "Consumer satisfaction is the best test." Referring to the banking lobby, Frank added, "The main problem your critics have is you're too high in the consumer satisfaction."