The bill is being spearheaded by Sen. Elizabeth Warren (D-Mass.) and two other Democrats in the Senate and by Rep. Cedric Richmond (D-La.) and 14 other Democrats in the House.

Over the next three days, the CU Times will publish a series of questions and answers we've posed to both trade groups.

The answers will be published verbatim, with only the grammar and formatting corrected. The answers provided appear in the order CU Times received them.

In this first part, the two groups address the re-introduction of the bill this year and their initial assessments.

On Friday, the two groups will answer questions about what this bill means for expanded credit union services and if the bill is fair or not to CUs.

On Monday, CUNA and NAFCU representatives will address the specifics of the bill and what they like and don't like about it.

First, a little background.

Congress enacted the reinvestment act in 1977, as part of an effort to encourage banks to meet the credit needs of their communities, including low- and moderate-income communities. Federal banking regulators enforce the law by conducting examinations. In 1995, the law was tailored in an effort to account for different sizes and business models.

The Treasury Department last year issued recommendations on how to update the law; that document did not recommend adding credit unions to the law. However, the Government Accountability Office has suggested that the law be expanded to include non-banks, including credit unions.

Banks have argued that credit unions should be subject to the CRA, but credit unions have argued that their mission is the same as the CRA's, so such a requirement is not needed.

The Democratic housing bill would attempt to control the cost of rent or purchasing a home by building up to 3.2 million new housing units. It also would create incentives for local governments to eliminate unnecessary land-use requirements and provide assistance to people hurt by other federal policy failures.

QUESTION: Sen. Warren first introduced this bill in the last Congress. Is this current bill an improvement over that bill and if so, how?

CUNA's Response: 

YES. The American Housing and Economic Mobility Act of 2019 is a big improvement over Senator Warren's last version of the bill, which required credit unions to comply with the Community Reinvestment Act (CRA). In this context, it is important to understand exactly what is at stake.

CRA is not a reporting requirement. It is a law that would force credit unions to, if necessary, change their business models to target their products and services to households earning less than 80 or 60% of the area median income. That requirement would apply without considering the impact that a credit union's existing field-of-membership restrictions might have in limiting the actual number of its members that fall within that income range. Though CRA does not explicitly impose quotas, regulators do measure performance by directly considering the number of loans and investments extended to these demographics in comparison to an institution's overall lending and investment portfolios. That measurement would also be a big problem for credit unions because, unlike banks, we operate under laws that directly limit and cap our investment and business lending activities.

Under the new legislation, however, Senator Warren—who is arguably one of the most visible progressive members of Congress on financial regulation matters—has conceded that the Community Reinvestment Act should not apply to credit unions. Her new position is in direct opposition to her previous bill and years of effort by both consumer advocates and the banking lobby to have CRA expanded to not-for-profit cooperatives.

Senator Warren's new bill does two things specific to credit unions:

1. It adopts the Financial Services for the Underserved Act of 2017, a bill that credit union advocates successfully sought to have introduced last Congress, and
2. It would turn some of the regulations that credit unions must already abide by under the NCUA's Chartering and Field of Membership Manual into laws.

NAFCU's Response:

NAFCU cannot support legislation that impedes credit unions ability to grow or serve their members. This bill is not necessarily an improvement; it depends on charter type and a number of factors. Removing credit unions from the explicit CRA requirements in Section 203 is a good thing, but a true comparison of the two bills demands consideration of both the changes to section 203, which relate to CRA requirements, and the provisions specific to credit unions in section 204. NAFCU has reviewed the new language in section 204 and determined that this bill adds statutory burdens that are unwarranted given credit unions' history of good conduct and service in their communities.  We also believe there is ambiguity in the bill as to whether or not these new requirements would apply to the hundreds of credit unions that have already added underserved areas.

Our main concerns include:

• The creation of a statutory mandatory requirement for a "significant unmet needs plan" AND a statutory requirement for NCUA to monitor such plans.
• Giving NCUA the ability to terminate the membership of a federal credit union (FCU) for failing to meet the terms of the "significant unmet needs plan."
• Statutorily requiring credit unions to report through the examination and supervision process evidence demonstrating compliance with the "significant unmet needs plan" and NCUA being required to publish evidence of compliance.
• The creation of new statutory requirements for community credit unions including what could be construed as a requirement for a "significant unmet needs plan" and a statutory requirement for a public hearing on certain charter applications.

QUESTION: Obviously, something changed Sen. Warren's position on whether credit unions should be subject to the Community Investment Act. Why do you think the senator and others changed their minds?

CUNA's Response:

ADVOCACY. This bill is a shining example of 360-degree advocacy in action. It was a team effort by credit unions in Senator Warren's home state, the Cooperative Credit Union Association, the MD|DC Credit Union Association, and CUNA.

Like she did in the prior Congress, Senator Warren's initial plan was to expand CRA to include credit unions in her current bill. CUNA collaborated with our League partners to show the Senator and her previous co-sponsors:

1. That practical statutory constraints exist that would stop credit unions from being able to successfully comply with CRA while preserving their safety and soundness, and
2. That, in many ways, credit unions have already been meeting the needs of underserved communities under existing regulations and without the history of redlining and other abusive, discriminatory tactics that were employed by banks.

Senator Warren and her co-sponsors recognized the benefits that credit unions bring to underserved communities and acknowledged the futility of imposing burdensome and duplicative requirements. As a result, and with CUNA's direct assistance, they changed the language in the bill.

NAFCU's Response:

Under this bill, credit unions are still subject to CRA-like requirements. Extending an explicit CRA requirement to credit unions does not have a lot of support in Congress, and was unlikely to pass. NAFCU has made the case many times for why credit unions should not be subject to the CRA and we think the sponsors recognized that there was validity to the argument to not explicitly subject credit unions to CRA. However, with the compromise, it appears that this bill, while well-intentioned, still creates CRA-like obligations in statute for credit unions.

While NCUA's chartering manual has some of these requirements, there is much more discretion. Adding requirements by statute, rather than regulation, often gives them more stature and makes them harder to amend or interpret in a flexible manner. The ability for credit unions to add underserved areas has long been supported by NAFCU, but with minimal red tape. The Warren bill goes further than any bill that NAFCU has supported. It requires credit unions to not just report on their activities, but requires them to give evidence demonstrating compliance. The bill also makes certain community charters subject to examinations on how they have met the needs of every demographic in their field of membership. Those are hallmarks of what CRA does.

QUESTION: Please describe any lobbying efforts/meetings you had with supporters of the bill between the time she introduced the first bill and when she introduced the second bill.

CUNA's Response:

MULTIPLE. CUNA joined with our league partners to meet with a series of individual Members of Congress on this legislation before introduction. Those meetings culminated with a joint meeting between CUNA, our league partners, and staff from Senator Warren's and her co-sponsors' offices to share our concerns. After these meetings, CUNA actively corresponded and met with Senator Warren's staff as they made efforts to address the concerns we collectively raised by modifying the bill's language. In the end, CUNA worked with the Senator to model the language on existing regulatory requirements in the NCUA Chartering and Field of Membership Manual and the Financial Services for the Underserved Act of 2017 that the National Association of Federally Insured Credit Unions successfully sought to have introduced last Congress.

NAFCU's Response:

NAFCU opposes CRA for credit unions in any form. NAFCU met with Senator Warren's staff immediately after she introduced the first bill. We opposed the inclusion of CRA in the bill and entered into discussions with her staff. We engaged with the House sponsors of the bill when a similar version was introduced last year. We also met with Senator Warren's staff this week to express our thanks for the changes they made, but expressed continued concerns with the legislation as it has been introduced.