Let Credit Unions Help More Underserved Communities

I believe in credit unions; I believe in their mission and consumer-oriented mandate; and I believe in their ability to meet the needs of low- and moderate-income consumers across the country.

The credit union industry is not about taking advantage of consumers, padding shareholders’ pockets or pushing our economy to the brink – those exploits are reserved for the banking industry. We joined the credit union industry to serve people, to serve communities, and to serve the millions of Americans in need of affordable loans and safe and sound financial products.

For credit unions, every loan made and every dollar earned serves their membership and is reinvested into their local community. Consumer safeguards and fair lending practices are deeply embedded in credit unions’ member-directed, non-profit business model. Given this special structure, credit unions only lend to consumers that have deposited funds – further ensuring that those funds stay within a given community.

More so, credit unions remain proactive in ensuring community needs are met, and are ready and willing to serve their members who need help the most. However, they remain shackled by outdated laws that detract from their mission.

Placing credit unions under Community Reinvestment Act regulations would only add an unnecessary regulatory burden, subject them to hefty compliance costs and paperwork, and, more importantly, provide no additional benefit to consumers.

Now, the CRA serves a vital role in ensuring banks reinvest in their local communities, rather than using deposits gathered from low- and moderate-income areas and lending them elsewhere. But there is precedent for this as banks have a history of discriminatory lending practices, such as refusing to lend to particular consumers based solely on their zip code and socioeconomic background. These practices are downright appalling, and have been outright rejected by credit unions. Simply put, credit unions do not engage in this type of shady behavior.

It is important to recognize that all regulations impact consumers. Every dollar credit unions spend on compliance is another dollar that cannot be lent to a low-and-moderate income consumer. Regulation for the sake of regulating is counterproductive and benefits no one.

Instead of looking to expand regulations on credit unions, Congress should look to remove regulatory barriers and allow them to serve more low- and moderate-income communities.

Currently, only a limited number of credit unions are able to assist underserved communities outside of their membership base. However, Reps. Gwen Moore (D-Wis.) and Paul Cook (R-Calif.) introduced a NAFCU-sought bipartisan bill that would allow all credit unions to add underserved areas to their respective fields of membership. In recent testimony before the Senate Banking Committee, NCUA Chairman J. Mark McWatters openly supported this policy as well.

This is the type of bipartisan solution that will provide results by empowering credit unions to do what they have always done: Serve their local communities and provide financial assistance to those who need it most.

B. Dan Berger is President/CEO of NAFCU. He can be reached at 703-522-4770 or dberger@nafcu.org.