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Last year, Sen. Elizabeth Warren (D-Mass.) and other Democrats in the House and Senate introduced legislation that would have made credit unions subject to the Community Reinvestment Act.

National union trade groups were unanimous in their opposition to the bill.

This year, Warren and others have introduced an amended version of their legislation.

CUNA is supporting the bill, saying that it removes provisions that would have subject credit unions to the CRA.

NAFCU opposes the bill, saying it creates a CRA-like regulatory regime for credit unions.

CU Times is letting our readers judge for themselves and is publishing questions and answers from the two groups over three days.

For today's portion of the Q&A, CUNA and NAFCU have answered questions about what this bill means for expanded credit union services and if the bill is fair or not to CUs.

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

QUESTION: Section 204 deals with allowing community credit unions to expand their services in underserved areas. Does this section adequately allow credit unions to expand?

CUNA's Response:

YES. Though CUNA neither explicitly endorsed nor opposed the Financial Services for the Underserved Act (H.R. 4665), some credit union advocates sought to have this legislation introduced during the 115th Congress and CUNA has consistently advocated for more credit unions to have the ability to expand, in order to reach underserved communities. Under existing law, only the subsection of credit unions with multiple-group charters can add underserved areas to their field of membership. Under the new provisions, any federal credit union would now be permitted to expand to an underserved area if the exact same criteria exists that the NCUA currently uses to assess whether to approve multi-group charter expansions to underserved areas. In addition, unlike HR 4665, Senator Warren's version of this language utilizes the NCUA's existing regulatory definition of underserved area—which is far broader that attempted to narrow the definition of “underserved areas” to a CRA-like income limitations of 80% area median income.

NAFCU's Response:

The ability of credit unions to grow and serve members is of paramount importance.  Under the terms of the bill, all FCUs approved to add an underserved area may do so, provided they comply with formal reporting requirements that will be evaluated as part of the examination cycle. If they fail to meet these requirements, they may have their membership terminated, which would be an extraordinary penalty. To the extent that this presents a tradeoff, FCUs must consider the burden of the supervisory framework section 204 embeds within the FCU Act, as well as the future cost of reduced agency flexibility.

QUESTION: Are there reporting requirements attached to this section that go beyond the reporting requirements that credit unions now face?

CUNA's Response:

In some ways, this question does not make sense because all credit unions do not currently possess the right to expand to underserved areas and, therefore, have no related reporting requirements. This is a new right and, accordingly, those who exercise it will bear new responsibilities. Having said that, Senator Warren's proposal parallels obligations already imposed on multiple common bond federal credit unions in that it requires the creation of a “significant unmet needs” narrative by the credit union and empowers the NCUA to require periodic service status reporting about the underserved area to “to ensure that the needs of the community are being met.” 12 CFR PART 701, APPENDIX B. A comparison of the language in the Financial Services for the Underserved Act (H.R. 4665), the Congresswoman Gwen Moore legislation that credit union advocates sought to have introduced during the 115th Congress, and the Warren bill language shows identical obligations, with the exception of the Warren bill's last requirement:

MOORE Bill Text: “(C) CREDIT UNION REPORTING REQUIREMENT.—Any Federal credit union which has an application approved under this paragraph shall submit an annual report to the Administration on the number of members of the credit union who are members by reason of such application and the number of offices or facilities maintained by the credit union in the local community, neighborhood, or rural district taken into account by the Board in approving such application.

WARREN Bill Text: ''(C) CREDIT UNION REPORTING REQUIREMENT. —Any Federal credit union that has an application approved under this paragraph shall, as part of the ordinary course of the examination cycle and supervision process, submit a report to the Administration that includes— ''(i) the number of members of the credit union who are members by reason of the application; ''(ii) the number of offices or facilities maintained by the credit union in the local community, neighborhood, or rural district taken into account by the Board in approving the application; and ''(iii) evidence, as specified by the Board by regulation, demonstrating compliance by the credit union with the significant unmet needs plan submitted by the credit union under subsection (h)(1), as specified by the Administration.

Though some have asserted that the Warren bill's last requirement, which imposes an obligation on the credit union to prove to NCUA that it is complying with the unmet needs plan, is brand new, that assertion is incorrect. It is important to remember that the NCUA's existing regulations already require a credit union to report to NCUA about its services in the underserved area in order to ensure the NCUA that the needs of the community are being met. Thus, multiple common bond federal credit unions already have the obligation to provide the NCUA with evidence on this matter.

Some have also suggested the bill's provision granting the NCUA authority to revoke a credit union's charter for failing to comply with a significant unmet needs plan is a new grant of authority. This assertion is also incorrect. Under existing statute, specifically 12 USC §1766 (b)(1), the Board already “may suspend or revoke the charter of any Federal credit union…upon its finding that the organization … has violated any of the provisions of its charter, its bylaws, this Act [12 USCS §§ 1751 et seq.], or any regulations issued thereunder.”

NAFCU's Response:

This bill adds regulatory burden. The specific “evidence of compliance” required in the reports would be dictated by future NCUA regulation if the bill were to pass, which is unlikely. Currently, reports regarding unmet needs plans are discretionary—except when a credit union has added an underserved area and wants to add another one—and not an explicit fixture of the examination cycle. The new language limits the NCUA's supervisory discretion by making formal reports an examination requirement and introducing an evidentiary component.

QUESTION: If there are additional reporting requirements, how onerous are they in your view?

CUNA's Response:

N/A. Please see response to previous question.

NAFCU's Response:

This bill will have real costs. An examination requirement for credit unions to report evidence of compliance is serious. There is a reason why bankers oppose their own CRA.  Depending on the size of the credit union and staff resources, those costs may be significant. The credit union industry would also be paying a price in terms of reduced agency flexibility and we would be open to more frivolous banker attacks due to the public hearing provisions and public reporting requirements.

QUESTION: Is the bill fair to credit unions? Why or why not?

CUNA's Response:

YES. CUNA believes that Senator Warren's bill recognizes that credit unions should not be subject to the same requirements applied to banks and other non-bank mortgage originators due to their inherent structure, statutory restrictions, and history of providing access to financial products and services to underserved communities. A bill that fairly recognizes those distinctions would not extend the Community Reinvestment Act to apply to credit unions. That is the result accomplished by Senator Warren's new legislation.

NAFCU's Response:

Credit unions should not be subject to CRA or CRA-like requirements.  The bill creates a statutory means for measuring service and gives NCUA the explicit authority to terminate membership of the credit unions. For us, there is no compromise or trade-off.  We support credit unions serving underserved areas, without new statutory burdens.