Thursday, April 15, 2010

NCRC: CRA for Credit Unions

Testifying before the House Subcommittee on Financial Institutions and Consumer Credit on the Community Reinvestment Act (CRA), John Taylor, President of the National Community Reinvestment Coalition (NCRC), called on Congress to apply CRA to credit unions, as well as to other non-CRA covered entities.

In his testimony, Mr. Taylor said that credit unions have not satisfactorily served minority and working communities, thereby reducing the level of responsible loans in traditionally underserved markets.

Citing a study released last year by NCRC, Mr. Taylor states that “credit unions, which have a statutory duty to serve people of “small means,” issue lower percentages of home loans than banks to minorities, women, and low- and moderate-income communities.”

"NCRC analyzed banks’ and credit unions’ performance on three lending types: home purchase, refinance, and home improvement. Across the three loan types, banks and credit unions were assessed on 69 performance measures scrutinizing: 1) the percent of loans to various groups of borrowers, 2) denial rates confronted by minority compared to white borrowers and lower income compared to upper income borrowers, and 3) approval rates experienced by borrowers. In 2007, banks outperformed credit unions on 44 of the 69 performance indicators (or 64 percent of the time). Credit unions surpassed banks performance only 7 percent of the time, while banks and credit unions performed equally well almost 30 percent of the time. In 2006 and 2005, banks performed better than credit unions on 65 percent of the indicators."

He also pointed out that the NCRC study found that state chartered credit unions in Massachusetts, which are subject to a state CRA requirement, outperformed federal credit unions in Massachusetts in serving underserved communities in Massachusetts.

In his testimony, he states that "mainstream credit unions clearly have the assets, resources, and geographic reach to serve minorities, women, and low- and moderate-income communities."


  1. Banks are paid for CRA performance with grants from the CDFI fund (taxpayer money). Banks can make capital investments in community loan funds (and keep profits from such) to count as CRA activity. Banks can obtain tax credits for other CRA investments. Are credit unions eligible for CDFI fund grants? No. Can CUs make investments in community loan funds? No. Do credit unions take hard dollar tax credits just to make investments? No. If banks (who want to reduce CRA regs on themselves) want CUs to fall under CRA, then banks MUST support giving credit unions the same opportunities to make investments, loans and the like as they have that show compliance with CRA requirements. Credit unions must not be saddled with equal regulatory requirements with less than equal opporunities to meet such requirements.

  2. I believe that for full CRA compliance credit unions would need to eliminate all membership restrictions, therefore Field of Membership constraints on credit unions will need to be lifted in statute. Also, credit unions would most likely need to acquire secondary capital sources to match anticipated balance sheet expansion.

    Congressional action therefore seems necessary, as well as a change in opposition policy by ABA on FOM and secondary capital.

    Best not to mess with this issue. Credit unions would get expanded powers, the ability to serve all, and in the process CRA asset thresholds might be re-set downward to add regulatory burden to all small community banks --to match with the generally lower-asset size of credit union institutions. Sorry Keith, no sale. Banks have enough troubles as it is.

  3. Massachusetts developed a CRA requirement for state chartered credit unions that took into consideration the unique characteristics of credit unions.

    This did not require open fields of membership or access to secondary capital.

  4. The Mass. CRA is a “window dressing rule, that is more about fair lending, non-discrimination and equal access to retail credit – designed to make politicians look good by spending someone else’s money, to solve a problem that no longer exists. That’s why all of the state’s community banks and credit unions easily pass every time…and state officials continue to claim they’ve saved the world.

    And nationally so much of the CRA program is a sham. How many banks claimed compliance because of the amount of sub-prime RE product they pumped out? (Whoops) Or because they lent nothing, but instead funded a CRA cause associations like the National Community Reinvestment Coalition, the authors of the study you cite. Of course entitlement groups like NCRC that depend on CRA dollars for their existence have a rightful, unbiased, totally academic claim others should pay them too.

    Banks in many places can achieve CRA compliance by financially supporting local nonprofit credit unions. Given the deplorable state of American banking, in our future post-crisis world maybe CRA for healthy credit unions should mandate fixed funding for failing banks, or giving bankers more love.

  5. lets keep our eye on the ball, Rep. Jeb Hensarling's Congessional bill to repeal the Community Reinvestment Act for all.



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