The House Financial Services Committee is scheduled to a hold a hearing on Wednesday on the expansion of CRA to include credit unions. A bill by Rep. Eddie Bernice Johnson (D-Texas) to cover credit unions along with independent mortgage companies, mortgage company affiliates of banks, insurance companies and securities firms as part of a group of "nonbank institutions" was introduced in March. The bill, which has 48 co-sponsors, could be a jumping off point for the discussion but not necessarily the one that lawmakers will ultimately consider. No companion bill has been introduced in the Senate.
Although sources told Credit Union Times that lawmakers aren't likely to take action on the bill this year because of other issues-such as the efforts to revamp the way financial services are regulated-there could be movement next year. Both House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher Dodd (D-Conn.) have expressed interest in expanding the reach of the CRA, and both are from states where state-charted credit unions are required to comply with the measure.
CRA was passed by Congress in 1977 in response to incidents in which banks were found to have discriminated in loan decisions against certain communities based on their racial composition.
Neither CUNA nor NAFCU had been invited to testify at the hearing, though a representative of the National Community Reinvestment Coalition, a bank-backed organization that has long pushed for expanding CRA is scheduled to appear.
Last week, the coalition issued a report aimed at backing up their argument and concluded that credit unions perform less well than banks on 65% of fair-lending practices.
"While mainstream credit unions have made progress in lending to lower-income individuals, credit unions as a whole are not meeting public expectations for institutions that receive tax exemptions and are entrusted with the mission of serving people of modest means," according to the report.
The report noted that credit unions had higher approval rates in most categories of minority and low-income consumers for mortgages, refinancing and home-improvement loans than banks and thrifts but lag behind in other indicators.
The report urges Congress to include credit unions under CRA and mandate that the NCUA perform more rigorous anti-discrimination reviews.
CUNA and NAFCU disputed the findings.
"Both lower-income and minority applicants are more likely to have their loans approved at credit unions than at banks," said CUNA Vice President of Economics and Statistics Mike Schenk.
He also noted that credit unions have fought to be able to serve more low-income communities, but the banks have "fought that every step of the way. We are trying to serve people not served by banks."
NAFCU Director of Research Tun Wai said that "historically, NCRC's assessment of credit union service to minorities and people of low-income has not been supported by a careful and in-depth analysis of Home Mortgage Disclosure Act data."
Credit unions and the NCUA have been sensitive to criticism from banks and others that credit unions don't do enough to help low-income consumers, especially given their tax-exempt status.
The NCUA created an outreach task force that recommended several ideas for documenting credit unions' performance in this area. In May 2008, the board approved a rule change to collect additional data from credit unions to rebut criticism about credit unions' lack of hard numbers to support their claims of service to the underserved. The agency will upload credit union membership data during regular examinations and use geo-coding software to generate a membership income profile. The software will determine the census tract for each member account, extract median family income information from the U.S. Census Bureau, and create individual FCU membership profiles.
The NCUA's task force report was the culmination of a more than two-year process that started after a Nov. 3, 2005, House Ways and Means Committee hearing on whether credit unions were earning their tax-exempt status.
At that session, then-Chairman Bill Thomas (R-Calif.), said he wouldn't push to repeal credit unions' tax-exempt status but asked the Government Accountability Office-Congress' investigative arm-to examine how well credit unions were serving underserved areas and whether they were collecting and disclosing enough financial data.
A year later, the GAO concluded that "credit unions lagged behind banks in serving low- and moderate-income households." The report also concluded that "credit union executive compensation is not transparent." That prompted the NCUA to create the task force.