Banks Call for Housing Discrimination Scrutiny for Credit Unions

A banker told Congress Wednesday that it should require credit unions to comply with the Community Reinvestment Act, which was created in 1977 to stop banks from discriminating against minorities for home loans.

But credit union trade groups responded by saying they didn’t have the discriminatory history of banks and their field of membership restrictions make the measures used by CRA inapplicable.

Quentin Leighty, CFO/president of The First National Bank of Las Animas in southeast Colorado ($580.4 million in assets), testified remotely during a two-hour subcommittee hearing of the House Financial Services Committee called “Better Together: Examining the Unified Proposed Rule to Modernize the Community Reinvestment Act.”

Leighty testified on behalf of the Independent Community Bankers of America on a range of proposed changes. Only half a page of his 10-page written testimony and less than 30 seconds of his oral comments touched on credit unions.

Leighty said field-of-membership restrictions to a strict common bond have faded, and are no longer a meaningful constraint on most credit unions. Credit unions have grown larger, more complex and have gained market share.

“We fully expect their expansion to continue unabated and transform the financial services marketplace,” Leighty said. “In the absence of CRA, credit unions are unaccountable for their service to [low and moderate-income households], and enjoy a substantial regulatory advantage at the expense of consumers.”

NAFCU SVP of Government Affairs Greg Mesack said credit unions have a duty to serve their members, who are the owners, and the communities they live in — “a mission ingrained in the industry’s cooperative not-for-profit nature.”

“Imposing CRA requirements on credit unions would only distract and potentially undermine their ability to fulfill this mission,” Mesack said.

CUNA Chief Economist Mike Schenk said despite field-of-membership constraints, credit unions meet or exceed “the vast majority of metrics” on lending to minorities in Home Mortgage Disclosure Act data.

“Credit unions have never been accused of engaging in the behaviors that banks did to get them in this position,” Schenk said. “Credit unions are very careful with how they treat their owners.

“Banks are looking to handicap credit unions wherever they can,” he said.

Darryl E. Getter, a specialist in financial economics at the Congressional Research Service, submitted written testimony that noted that “CRA does not apply to credit unions, insurance companies, securities companies and other nonbank institutions because of the differences in their financial business models.”