NAFCU Among Panelists at FCRA Hearing; Vadala Out to Set a Good Example

WASHINGTON-NAFCU Board Secretary Mike Vadala, CEO of The Summit Federal Credit Union, has been asked by Congress to testify on issues relating to the reauthorization of the Fair Credit Reporting Act. The House Financial Institutions and Consumer Credit Subcommittee had scheduled a hearing, “The Role of FCRA in the Credit Granting Process,” just after deadline last week. NAFCU Senior Legislative Representative Murray Chanow, who is helping to write the testimony, explained that Vadala was asked to focus on how his credit union uses credit reports and scores in making lending decisions. Vadala told Credit Union Times that credit unions have the opportunity with these hearings to set a good example for the rest of the lending community. He pointed out that The Summit does not reject loans solely based on a credit score, which he said many institutions do. We talk with the member and offer them an appeals process to try to get the money they need, he said. Not only does this give the consumer more than one chance to obtain a loan, according to Vadala, but it also helps the credit union weed out errors on a credit report. “We view it as a tool, not as the be-all-end-all,” he said. Vadala added that his credit union does track delinquencies by credit score and it is true that the borrowers with lower credit scores tend to have the loans that become delinquent or get charged off. Credit scores have helped The Summit in its lending decisions. Vadala explained that prior to 1997, the credit union did not use credit scores in lending decisions and was writing off 1.8% of its loans annually for nearly $3 million. Now the delinquency rate is just 0.13%, but he also said they do not do as much unsecured lending. Of course, knowing your facts is not all that is needed to testify before Congress. In preparation, Vadala endured several hours of grilling from NAFCU staff, as well as reading and rereading his oral testimony for timing and flow. Certain provisions of FCRA preempting state laws regarding lending practices will sunset at the end of the year if the law is not reauthorized. CUNA and NAFCU have said they would like some sort of reauthorization, which keeps financial institutions operating in different states from having different policies and allows for broader, less expensive access to credit, but have not been specific. CUNA Vice President of Communications and Media Outreach Pat Keefe commented that while CUNA does not have anyone testifying in this investigative part of the process, “We absolutely expect to testify once legislation is drafted and hearings are held on that.” -