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Credit union trade groups once again are badly divided over a Democratic plan to expand the Community Reinvestment Act and address a shortage of affordable housing in the U.S.
The plan, unveiled by Sen. Elizabeth Warren (D-Mass.) and others late last week, would not expand the CRA to credit unions, but would codify certain requirements for community credit unions in an effort to ensure they serve their communities.
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CUNA was among the groups that immediately endorsed the legislation, while NAFCU said the reporting requirements are burdensome and unnecessary — reactions that mirror the positions the two trade groups took during the last Congress, when Warren introduced a similar measure.
"The legislation rejects a one-size-fits-all approach by explicitly excluding credit unions from the Community Reinvestment Act and instead codifying the already existing community outreach, input and oversight policies that credit unions have been abiding by for more than 20 years under National Credit Union Administration regulations," CUNA President/CEO Jim Nussle said in endorsing the bill.
NAFCU officials vehemently disagreed.
"NAFCU appreciates policy changes that would allow credit unions to proactively serve our nation's underserved communities," NAFCU EVP of Government Affairs and General Counsel Carrie Hunt said. "However, adding reporting requirements and putting into statute that a credit union's charter can be revoked for failing to hit arbitrary benchmarks is completely counter to good public policy."
"The answer to serving the underserved is simply allowing the credit union model to thrive, not creating new burdens," Hunt added.
The bill would require officials from an institution that wants to be classified as a community credit union to submit a business plan to the NCUA providing details about how they plan to address the needs of the various demographic groups in the community.
The bill also would provide for a public hearing for certain credit unions that attempt to fill unmet needs.
However, the legislation would not subject credit unions to CRA requirements that banks must follow. It would expand the law to cover non-bank mortgage companies.
The bill would invest $445 billion over 10 years in the Housing Trust Fund to provide almost two million homes for low-income families. It also would invest $25 billion in the Capital Magnet Fund to leverage private capital to construct about 750,000 new homes. The measure also would provide $4 billion in a new emergency fund to build homes for middle-income buyers and renters. It also would invest $500 million in rural housing programs and $2.5 billion to build or rehabilitate homes for Native Americans and Native Hawaiians.
The programs would be paid for by returning the estate tax thresholds to the levels at the end of the George W. Bush administration and instituting more progressive rates above that threshold.
When the bill was introduced in the 115th Congress, CUNA and state credit union leagues touted the fact that it did not call for credit unions to be included in the CRA. Before that, supporters of the bill had included credit unions in the CRA — a position that was supported by banking trade groups.
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.
Nussle said the new legislation will have a significant impact on housing, saying that it is "an important effort to improve access to the housing market for members of all communities and, in the process, properly recognizes the distinctions that exist between credit unions and banks when meeting community needs."
But NAFCU decried the new credit union requirements in the bill, saying it would "put in statute new regulatory burdens via a form of 'CRA-lite' for some community-chartered credit unions and credit unions that seek to add underserved areas. NAFCU opposed putting these new statutory burdens on credit unions when they were first proposed and continues to do so."
The National Community Reinvestment Coalition applauded the credit union provisions.
"The bill would improve the rigor of credit union requirements to meet needs in underserved areas and could rescind permission to add underserved communities to a credit union's membership base if the credit union does not deliver on its plan for serving these communities," the group said. "It would also require public hearings in cases of credit unions seeking to serve a geographical area of more than 2.5 million people."
In addition to Warren, the Senate cosponsors of the bill were Sens. Edward Markey (D-Mass.), Kirsten Gillibrand (D-N.Y.), Bernie Sanders (I-Vt.), Mazie Hirono (D-Hawai'i) and Jeff Merkley (D-Ore.).
In the House, the bill is sponsored by Reps. Emanuel Cleaver (D-Mo.), Ro Khanna (D-Calif.), Eleanor Holmes Norton (D-D.C.-At-Large), Jesus Garcia (D-Ill.), Steve Cohen (D-Tenn.), Jan Shakowsky (D-Ill.), Ayanna Pressley (D-Mass.), Gwen Moore (D-Wis.), Suzanne Bonamici (D-Mich.), Barbara Lee (D-Calif.).
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