<p>WASHINGTON – In many ways the furor over the repeal of the Community Action Plan reopened the debate over CRA. What impact would a Community Reinvestment Act regulation have on a credit union? What would it mean for its operations? To help answer those questions, Credit Union Times solicited the opinions of four credit union CEO’s who have significant experience serving institutions which have had a CRA obligation. Three of them responded. Two, Rodney Staatz and Henry Prior, oversee multi-million dollar state chartered institutions while the third, Ed Jacob, runs a federally-chartered, small, low-income community development credit union on Chicago’s North Side. All three of them have significant experience either working closely with CRA regulations or, in Jacob’s case, actually supervising a bank’s CRA compliance. The consensus of the three men who contributed to this story included two conclusions. First, any CRA regulation for credit unions could not just transplant bank CRA onto credit unions. A credit union CRA regulation would have to be tailored to credit union particularities in order to be at all useful, the men agreed. Second, the great majority of credit unions probably wouldn’t change their day-to-day operations significantly, but would have to add additional employees and procedures designed to document what they are already doing for CRA purposes. “I don’t for a moment concede that credit unions need any kind of CRA,” said Henry Prior, president/CEO of the $262 million Power 1 Credit Union in Hialeah, Florida, who has 25 years experience working in different parts of the savings and loan industry. “But CRA really would only make sense for community chartered credit unions,” he said. The majority of credit unions still have closed fields of membership that would preclude the kind of geographical analysis common in other financial institutions CRA compliance and examination, Prior said. In Power 1′s case, Prior said the credit union probably wouldn’t change any of its standard operations but would have to hire at least one, if not more, staff people and train them to keep up with the record-keeping requirements of any CRA-like regulation. “The key to CRA compliance is very detailed record-keeping,” Prior said. Credit unions would have to document everything they do for CRA purposes since the whole purpose of the regulation is to make sure the financial institution is doing what it is supposed to be doing. In Prior’s view that “additional layer of administration” would be the chief burden Power 1 would face from a CRA regulation that, he maintained, remained “entirely unnecessary” for credit unions. Rod Staatz, president/CEO of the $504 million University of Wisconsin Credit Union who has over 19 years experience in varying aspects of bank management before starting his credit union career, agreed with Prior’s observations about both the record keeping that a CRA regulation would mean and with how unnecessary it would be for credit unions. “You have two words you have to include whenever you look at the history of CRA,” Staatz said, “red lining.” Staatz pointed out that CRA for banks came in the wake of proof that some banks were actually working to avoid making investments in low-income areas and that, even then, the regulation had come in after the actions of a “a few bad apples” which may not have represented banks as a whole. Credit unions generally aren’t doing anything that would warrant regulation and, even if some were, it wouldn’t be enough to deserve giving all credit unions an additional regulatory burden, Staatz said. He also expanded on Prior’s observation that CRA would only make sense for community chartered credit unions by pointing out that almost none of the current bank CRA regulation would be appropriate for credit unions. Staatz explained that CRA has a three-pronged testing scheme that includes areas like lending and investment, where credit union activities are strictly regulated and limited already. Any CRA-like regulation for credit unions would have to be pretty closely crafted to match credit union activity, he argued. Ed Jacob, president of the $6 million North Side Community Federal Credit Union, who spent seven years overseeing a large bank’s CRA compliance, agreed with Staatz and Prior that any CRA regulation of credit unions would have to be tailored to match credit union activity and that credit unions would face greater record-keeping requirements if faced with a CRA-like regulation. He differed, however, in his assessment of a role a CRA-like regulation would play for credit unions. Whether the regulation is CRA-like or not, Jacob predicted, as more credit unions adopt community charters there are liable to be more questions about how well credit unions do in serving low-income people. He admitted feeling “frustrated going to credit union conferences where they trumpet the numbers of low-income people added to fields of membership as though that means they have done something. Potential credit union members are not the same as real members,” Jacob pointed out. But he conceded that in adding those low-income areas, credit unions have set a marker for themselves and have given the non-credit-union world a way to evaluate what they do. “It should be possible to go back to those credit unions that have added low-income areas in a couple of years and see how they have done with them, whether the credit union’s membership has grown, whether the credit union has had any additional impact on the area,” Jacob said. Jacob agreed that it would not be fair to judge the credit unions solely on the numbers of low-income members they had managed to add, but he said it would be “reasonable to look at what the credit union has done to try to bring them in.” Jacob predicted, based on his experience as a CRA compliance officer, that credit unions “probably” would never face a CRA exam in a CRA regulation but would probably face an additional “CRA section” of the current safety and soundness exam. He also agreed with the other CEO’s that a credit union CRA regulation would have to be tailored to credit union activities but pointed out that it might be tailored to credit union problems as well. He described a phenomenon he called “skimming” where another credit union had added an area institution that was part of North Side’s field of membership to its field of membership. The second credit union had not been interested in all the institution’s employees as potential members, Jacob maintained, but instead had marketed itself heavily to the institution’s higher salaried employees – “skimming” the additional field of membership for the higher-income members. Practices like skimming could be part of a CRA-like regulation for credit unions, if it were to come, he said.</p>
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