ABA: CRA Should Be Applied to Large CUs

Congress must do more to ensure that the nation’s largest credit unions are accountable to their statutory mission to serve individuals in low- to moderate-income areas, the American Bankers Association (ABA) said in a new ABA Data Bank post.

Citing data from S&P Global, ABA Chief Economist James Chessen noted that among large credit unions with more than $500 million in assets, the majority of branches—73%—are currently concentrated in middle- and upper-income communities, while just 6% are located in low-income areas.‌

“These largest credit unions receive the highest dollar benefit from the tax exemption, yet they have chosen to focus their resources on the well-to-do rather than using their tax advantage to help expand cheaper credit to those who need it most,” Chessen wrote. “Simply put, they are using their tax-exempt status to make profitable consumer and business loans to people who do not need taxpayer-subsidized financial services and can afford to shop around for financial products elsewhere.” By contrast, he noted that of all the credit union branches headquartered in low-income communities, two out of three are operated by small credit unions.‌

One way Congress could ensure greater accountability for large credit unions would be to require them to comply with the Community Reinvestment Act (CRA), as taxpaying banks are required to do, Chessen said. “If these credit unions are in fact meeting the needs of low- and moderate-income people, they should have no fear of demonstrating that explicitly as banks must do.”‌

ABA’s blog post echoed findings from a report issued last year by Federal Financial Analytics that highlighted the need to impose mission-related requirements on credit unions. In recent days, writings by the National Taxpayers Union and the Tax Foundation have also emphasized the immediate need for Congress to revisit the credit union tax exemption.

Read the blog post.