NCRC Renews Call For Credit Union CRA, Says CUs Over $100 Million Not Doing Enough

WASHINGTON – Credit unions with over $100 million in assets have forgotten their social mission and need to be included in the Community Reinvestment Act in order to be forced into serving minorities, women, and other people of modest means. That is the message of Credit Unions: True To Their Mission? the latest report from the coalition which has been a long-time critic of credit unions’ efforts to serve members of modest means. NCRC is the umbrella group of more than 800 groups and institutions, including the National Federation of Community Development Credit Unions and a few individual credit unions. The organization previously sued the NCUA over how the agency revoked its Community Action Plan regulation which would have imposed a rule similar to bank Community Reinvestment Act regulations on credit unions. John Taylor, president of the NCRC, kicked off the sparsely attended May 19 press conference announcing the report that credit unions, as an industry, would equal a bank the size of CitiGroup and quoted CUNA estimates that the industry would reach $3 trillion in assets by 2009. But while the majority of credit unions are small and have retained their focus on helping low-income communities, a few large ones have forgotten their mission, Taylor said. “NCRC’s study finds that large credit unions are failing in their original promise to their members,” Taylor said. “Big credit unions lag behind banks and thrifts in lending to credit-worthy, hardworking, low-income and minority Americans – the very communities they were established to serve. Isn’t it time to hold these non-profit bank-like financial institutions accountable?” Taylor and the NCRC defined large credit unions as those above $100 million in assets, citing the General Accounting Office Report of 2003 which found that while 89% of credit unions in the U.S. have fewer than $100 million in assets, the remaining 11% control 75% of the industry’s assets. The report also asserted that a greater percentage of households of low- or moderate-income are bank customers than credit union members. With Taylor on the platform were Hillary Shelton, chief lobbyist for the civil rights organization’s Washington D.C. office; Lot Diaz, deputy vice president for community development at the National Council of La Raza, the nation’s largest Hispanic organization; and Gary Flowers, vice president for public policy at the Rainbow/Push Coalition. All three joined Taylor in praising the work of small and community development credit unions in serving low-income and minority communities and all three called for CRA to be applied to large credit unions who, Shelton said, “needed to be refocused on their mission and their priorities.” Significantly, Taylor recognized Norm D’Amours, the former head of the of the NCUA who was responsible for the wildly unpopular CAP regulation, which Taylor called CRA-lite, and used the phenomenon of credit unions seeking to convert to mutual banks as an indication of how credit unions had forgotten their original mission. D’Amours was in attendance. While he did not name the two Dallas-area credit unions seeking charter changes, the $1.4 billion Community CU and the $1.2 billion OmniAmerican CU, Taylor did identify them by their asset size and pointed out how large a market each institution now served in the Dallas area. Here are two credit unions that are so focused on growth that they are trying to become for-profit mutual banks, Taylor noted. Taylor also made the point that the experience of state chartered credit unions in Massachusetts, which have had CRA since the early 1980s “provides a good way to see what would happen if credit unions had CRA.” According to the study, Taylor said, banks and state-chartered credit unions, both which have CRA, outperformed federally-chartered credit unions in lending to lower income communities in each of the three years studied. The idea for the report arose, Taylor said, after a number of the groups affiliated with the NCRC reported that they had not had much success seeking the assistance of large credit unions in attaining their goals. Taylor promised to provide examples of such alleged failures but NCRC provided none as of press time. NCRC Did Not Consult The Federation Despite Taylor’s statement from the podium that the NCRC had consulted with the NFCDCU about its report, Federation executive director Clifford Rosenthal denied that any detailed collaboration took place. While taking care to note the importance of drawing attention to lending practices as a way of helping better low-income communities, Rosenthal said that he and Taylor had not spoken for at least three months and that the Federation had no idea that a report calling for CRA for credit unions was in the works. “Of course we have talked to NCRC from time to time, but they never told us they were preparing a report, they never consulted us on the report, I never saw a rough draft of the report and I had no idea that they were releasing a report today,” Rosenthal said. “In fact, I still don’t know what the report says.” Rosenthal said that the NCRC had approached the Federation about asking for CRA for credit unions in early 2005 but that the Federation had said it was sticking to its long-standing position that applying CRA to credit unions would not be appropriate. “If they had asked our opinion on the matter I would have told them that, in our view, mainstream credit unions are doing much better at working with low-income parts of their fields of membership,” Rosenthal said. Significantly, even the part of the report that drew attention to community development credit union efforts to work with low-income members did not mention any of the Federation’s efforts, several of which are partnerships between CDCUs and larger, mainstream credit unions. Murray Chanow, director of political affairs for NAFCU, attended the press conference and pointed out afterward that the report appeared to overlook some of the other facts of how credit unions work with low-income people. “Obviously I haven’t read this yet,” Chanow said, holding the report, “but it doesn’t seem like they acknowledged the 1,000 low-income areas that credit unions have added to their fields of membership in the last three years or the 76 million potential members in those areas,” he said. “Of course that is only potential members since no one can force anyone to join a credit union, but the potential is certainly there.” CUNA didn’t send anyone to the press conference but released a detailed set of data that, the Association said, would refute the claims made in the NCRC study. For example a 1999 report from the Filene Research Institute, which had been updated in 2004, showed that households that only use banks had average incomes of almost $79,000 and consumers that used primarily banks had incomes of just over $74,000. Whereas households that only use credit unions had average incomes of only $43,000 and those which primarily use CUs have incomes of only $67,000. Later in the morning CUNA CEO Dan Mica challenged some of the report’s conclusions by pointing to some of the same home lending data that the NCRC had used. “CUNA rejects this report, as the analysis used on credit union lending is misleading,” Mica said. “A better method would have been to compare approval and denial rates for given groups across lenders. Data from 2003 HMDA reports show that low-income borrowers are substantially more likely to be approved for a mortgage at a credit union,” he added. He also challenged the notion that there are somehow two credit union industries, large and small. “Groups such as the NCRC don’t get it: It’s the structure of credit unions as not-for-profit, cooperatively owned, democratically controlled and volunteer directed institutions – regardless of size or products offered – that sets credit unions apart from all other financial institutions,” Mica said. “Credit unions cannot be arbitrarily split between large and small, nor should they be.” Coincidently, a report recently prepared by the Credit Union Executive Society, with a grant from the Ford Foundation, also looked into this question. Making a Difference: Credit Unions Reaching Out To Members of Modest Means blamed regulators for some of the problems mainstream credit unions have working with low-income members. “While regulators acknowledge in theory the need to serve low-income individuals, on-site examiners are more likely to focus exclusively on financial ratios in their audit operations,” the report noted. -