CHICAGO – The Woodstock Institute, a community reinvestment non-profit and occasional critic of mainstream credit unions, has drafted a comment to the FDIC that will ask the insurer to deny DFCU Financial Federal Credit Union's insurance application unless and until the credit union makes significant changes to its proposed CRA plan. The $1.8 billion credit union applied to the Office of Thrift Supervision and the FDIC to change to a mutual bank charter in December 2005. Both the OTS and the FDIC need to sign off on the application in order for it to move forward. The FDIC accepted comments from the public on the CRA portion of the application until Jan. 13. In the CRA part of its application, the applying credit union proposes the geographic area for which it will be assessed for CRA compliance as a bank, along with what level of compliance it expects to have to meet and what plans it will put into place for passing the lending, investment and service tests that CRA mandates. Woodstock's senior vice president Marva Williams questioned how prepared DFCU was to meet these tests in the draft of her letter. “Our concerns are with the Community Reinvestment Act (CRA) plan of DFCU Financial, which does not adequately meet the community reinvestment needs of the proposed bank's assessment area,” Williams wrote. “Woodstock Institute requests that the OTS deny this application unless certain conditions.are imposed. We also request an extension of the comment period, the disclosure of certain additional information, and a public hearing be conducted to discuss the community and other impacts of this conversion,” she added. In its CRA plan, DFCU Financial proposed Wayne and Oakland counties as its service assessment area, a locale which DFCU Financial said is roughly one-third low-income, one-third middle-income and one-third upper-income. But most of the branches the credit union proposes to serve this area with are in the upper-income parts of the counties and the credit union didn't outline any plans to build additional branches. Woodstock's draft letter objected to the credit union's CRA proposal on all three of CRA's tests – lending, investment and service – and included the credit union not having done an assessment of its own membership to show how it is currently serving low- and moderate-income households among its members. Doing so, Woodstock argued, would help provide a benchmark by which the former credit union's progress could be measured. On lending, Woodstock worried, DFCU Financial did not indicate that it had any experience working with low-and middle-income families on mortgage financing. The institute also was concerned that DFCU did not go into more detail about what groups or with whom it planned to market its services into the low- and middle-income communities it designated. “[T]he plan does not fully explain which community and consumer organizations it will engage or the nature of those relationships” Williams wrote, “leading one to believe that the credit union has no history of these strategic partners. In addition, churches are also a strategic partner of outreach efforts in LMI (low and middle income) communities.” DFCU Financial should also consider adopting more flexible underwriting standards for at least some of its loans to lower and middle income households, Woodstock said, such as the rent and non-traditional payments other banks sometimes use to asses credit ratings. It should also plan to market refinances in the low- and middle-income market since predatory lenders often target low-income communities with fraudulent refinance offers. When it came to the service test, Woodstock noted that DFCU's plan shorted the assessment area of the number of branches that would be available in low- and moderate-income neighborhoods as well on any sort of alternative to payday lending. “Only one or 9 percent of DFCU Financial's 11 current and proposed branches is located in a moderate-income census tract and there are no branches in a low-income census tract,” Woodstock said. “The CRA plan should include goals to add at least 2 full service branches in LMI census tracts.” Woodstock appreciated that DFCU's application indicated that the bank would have products aimed at low- to middle-income households, but questioned whether the credit union as a bank might employ “barriers” such as credit checks to low-income households being able to access them. Research had indicated that things like not having credit checks, five dollars or less account opening requirements, and no minimum monthly balance played key rolls in helping low-income households use a bank's financial products, the Institute said. “Without the conditions requested, DFCU Financial's CRA activities will only make minimal commitments to the communities,” the institute concluded its letter. It asked that the OTS grant its request for an extension of the comment period to more fully consider these issues and urged the OTS to refrain from granting approval without imposing the conditions it suggested. [email protected]