Credit union trade groups are pushing back against proposed legislation from Sen. Elizabeth Warren that would potentially wrap some credit unions under the Community Reinvestment Act.
Introduced yesterday, the bill is part of a broader effort to address the overall housing crisis by appropriating close to half a trillion dollars. The money would be used to build as many 3.2 million affordable housing units, rehabilitate homes for low-income Americans, invest in the Middle-Class Housing Emergency Fund and in a new Indian Housing Block Grant program.
The bill not only seeks to bring more credit unions under CRA, but also some non-bank mortgage originators, a move that Warren cites as needed due to weak CRA rules.
“Credit unions’ commitment to community reinvestment is unlike any other financial institution. Credit unions exist to provide provident credit, and every loan made and every dollar earned serves the membership,” Carrie Hunt, executive vice president of government affairs and general counsel at the National Association of Federally-Insured Credit Unions, said in a statement. “The CRA was designed to ensure banks reinvest in their local communities, rather than using deposits gathered from one community and lending them to another. Extending CRA regulations to member-owned democratically controlled credit unions would add to their regulatory burden, while providing no additional benefit to American consumers.”
Passed in 1977, the CRA is part of an effort to encourage banks to meet the credit needs of their communities including low- and moderate-income communities. Federally insured credit unions are not subject to the CRA, but some states, including Massachusetts, requires credit unions to participate in state CRA requirements and examinations.
The bill has received plenty of criticism over the years and the OCC is currently soliciting comments on how to best modernize the law.
“Credit unions have not and do not engage in the discriminatory lending activity that prompted Congress 40 years ago to enact the Community Reinvestment Act. Therefore, it makes no sense to subject them to the type of punitive requirements that banks with a history of redlining must follow,” Jim Nussle, president and CEO of the Credit Uniona National Association, said in a statement. “Credit unions are not-for-profit, member-owned financial institutions who deliver $15 billion in benefit to consumers every year. Make no mistake: this bill would jeopardize this benefit and the ability for credit unions to serve their members. It will make it more difficult for low and moderate-income borrowers to access credit from credit unions.”
