Lobbying Stalls State Legislature Recommendation That CUs Be Added to CRA

Last-minute lobbying by former NCUA board member Rick Metsger and other credit unions advocates last week helped derail efforts to put the National Conference of State Legislatures on record as supporting federal legislation to expand the Community Reinvestment Act to credit unions.

The lobbying effort came just days before the NCSL was to adopt a series of resolutions on myriad subjects at its annual Legislative Summit, where some 6,000 state lawmakers, staff and federal officials were expected to gather.

After resolutions are adopted by the NCSL, they become the official position of the group and are conveyed to federal officials.

One of this year’s resolutions, sponsored by New York Democratic State Sen. David Carlucci called for Congress to modernize the CRA.

“People are being left behind,” Carlucci, co-chairman of the NCSL Communications, Financial Services and Interstate Commerce Committee, said, in an interview with CU Times. “Unfortunately, there is still discrimination.”

Policymakers are exploring ways to update the CRA, an effort that is needed, in part, because of technological advances since the legislation was enacted in 1977.

And so, Carlucci prepared a resolution for his committee that would have placed the NCSL on record as endorsing an update.

One section of that resolution stated, “NCSL supports modernizing CRA to apply it to non-bank institutions including mortgage companies, financial technology companies, and credit unions.”

Congress enacted the reinvestment act 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 has 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.

During the last Congress, Democrats, led by Sen. Elizabeth Warren (D-Mass.) introduced a comprehensive overhaul of housing programs intended to provide 3.2 million new housing units for low- and middle-income families. The bill also would have expanded the CRA to include credit unions.

When Warren and others unveiled a revised bill this Congress, the credit union provision was deleted.

But Carlucci’s resolution included credit unions.

Rhode Island Democratic State Rep. Brian Patrick Kennedy said he was first contacted by the Cooperative Credit Union Association, the group that represents many credit unions in his home state and others.

He said other legislators reported hearing from their credit unions as well. Kennedy said he first spoke to Carlucci on Sunday, Aug. 4; the committee was scheduled to consider resolutions on Wed. August 7.

And Metsger, a former Oregon state legislator, weighed in with a letter to Carlucci and committee co-chair Indiana Republican State Rep. Matthew Lehman.

“Applying CRA to credit unions is both unnecessary and counter-productive,” Metsger wrote. “That is why the federal regulatory agency I led has never, whether under Republican or Democratic leadership, ever advocated for Congress to apply CRA to credit unions.”

He said that the banking industry was subjected to the CRA because of their documented history of discrimination.

“Credit unions do not have that history,” he added.

As an alternative, Metsger suggested, the NCSL could support easing credit union field of membership limits to allow more credit unions to serve underserved communities.

When Carlucci’s resolution came up during the committee meeting, Kennedy moved to table it.

“We’d like to hear from the credit unions before this goes any further,” he said.

Carlucci acknowledged that there was a disagreement over the credit union issue. He said that credit unions do a good job of serving their members, but that he still believes that the CRA should be expanded to include other financial institutions.

“We tabled it, which was fine,” he said. “I’m open to debate. People can prove me wrong.”