Could Peace Break Out Between CUs and Some Of Their Critics?

ARLINGTON, Va. – Although no one is declaring a cease fire, it seems as if peace between so-called mainstream credit unions and some of their fiercest critics among housing and other advocates for low-income communities might be drawing closer. Critics like the National Community Reinvestment Coalition and the Woodstock Institute have long argued that mainstream credit unions, i.e. not community development credit unions or low-income credit unions, should be forced to comply with some form of the Community Reinvestment Act which regulates and monitors the community activity of banks. Credit unions have countered that such credit unions have long served low-income members as soon as they have had fields-of-membership that have allowed them to do so and that they have not been guilty of the sorts of egregious neglect of low income areas that brought the banking industry CRA. But while the two sides are still sniping over the CRA topic, there are signs of some movement from the low income advocates. The first sign came in a report from the Woodstock Institute which, while it reiterated the call of CRA for credit unions, also sought to highlight some best practices credit unions have put into place to work with low income members. Financial Services for People of Modest Means: Lessons from Low Income Credit Unions highlights the work of three low income institutions, the $138 million El Paso Employees FCU, headquartered in El Paso, Texas; the $9 million Greater Abbeville FCU, headquartered in Abbeville, South Carolina and the $80 million Trustar FCU headquartered in International Falls, Minnesota. The report highlights the three credit unions’ successes with financial counseling, forming partnerships with different institutions and organizations, obtaining financial support for their work, cross-selling products and services to keep their efforts sustainable and getting to know their low income communities. But the report’s call for CRA for credit unions also drew a rebuke from CUNA CEO Dan Mica. “The recommendations outlined in the report seem absolutely unnecessary for credit unions, Mica said. “Further, there is absolutely no evidence that credit unions are guilty of redlining abuses that ultimately led to the imposition of the Community Reinvestment Act on the banking industry.” Still, the mixed message from the Financial Services report was partially eased by news of the second sign of possible movement. The Woodstock Institute, author of that report and longtime mainstream credit union critic, announced that it had received money from foundations to bring low-income people to mainstream credit unions. The Institute will use grants from the Annie E. Casey Foundation and the Ford Foundation to help five associations and organizations establish relationships with so-called mainstream credit unions, in their communities. The Institute hopes the relationships will, in turn, result in more of the organizations’ members becoming credit union members and gaining access to credit union services. The Institute is promoting the opportunity to local organizations that work with low-income people through direct mail and email. Although the effort began only on March 29, the Institute reported it already had over 80 responses. Marva Williams, senior vice president of the Woodstock Institute, said the Institute hoped to have identified the groups with which it will work as soon as possible. Cliff Rosenthal, executive director of the National Federation of Community Development Credit Unions, has long had strong relationships among both sides of the controversy and has always maintained that credit unions do not need CRA. But he said that the numbers of credit unions adding underserved areas to their fields of membership have helped to highlight the efforts credit unions have been making and drawn attention to the help they need serving those members. The Federation itself has started an effort, the community development partners’ initiative, to match mainstream credit unions seeking expertise and best practices in working with lower income communities with credit unions who have been doing that work and gaining that experience for years. It will be the experience of mainstream credit unions and low income communities in efforts like the Federation’s and Woodstock’s that will eventually quiet the charges that mainstream credit unions haven’t cared enough about low income members, Rosenthal explained. -