Rep. Johnson Introduces Measure To Include Credit Unions in CRA

Credit unions may have to gear up to defend their lending practices and other efforts to serve the underserved.Last week, Rep. Eddie Bernice Johnson (D-Texas) introduced a bill that would expand the Community Reinvestment Act 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.”The bill would expand CRA to require that CRA exams consider how well a financial institution serves minorities as well as how well it serves low- and moderate-income groups. It would also require small-business loan data to include information on the race and gender of the small-business owner.Johnson’s spokeswoman declined to say why she was including credit unions in the bill or whether there were credit union practices that troubled her.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.Johnson is not a member of the House Financial Services Committee, which has jurisdiction over the issue, but the panel’s chairman Rep. Barney Frank (D-Mass.) has expressed support for expanding CRA to include credit unions; he has not set any timetable for taking up the legislation.The NCUA, CUNA and NAFCU all expressed opposition to the measure.NCUA Director of Public and Congressional Affairs John McKechnie said his agency “has never seen CRA as being necessary for credit unions, and we will convey that to Congress.”CUNA Vice President of Legislative Affairs Ryan Donovan said his group opposed the bill because “report after report shows that credit unions serve their members. Also, this is the worst possible time to add to the regulatory burden of credit unions.”NAFCU President/CEO Fred Becker said the measure isn’t needed because “credit unions, member-based, nonprofit financial institutions, have a solid history of serving those of lesser income and minority applicants and have consistently outperformed banks in a variety of customer satisfaction and cost effectiveness surveys.”Credit unions have not been covered by CRA and have worked to show that they have been responsive to the needs of underserved areas.The NCUA created an Outreach Task Force that recommended several ideas for documenting credit unions’ performance in this area.Last May, the board approved a rule change to collect additional data from credit unions to refute 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.Then-NCUA Chairman JoAnn Johnson (no relation to Eddie Bernice Johnson) told lawmakers that day that the tax-exempt status had enabled credit unions to “provide Americans from all walks of life greater access to affordable financial services.”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/or disclosing enough financial data.–[email protected]