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Federal Reserve Governor Michelle Bowman raised concerns with credit union acquisitions of banks, noting the tax-exempt financial firms are exempt from the Community Reinvestment Act.
Details: In remarks in Stevenson, Wash., on increasingly stringent merger-and-acquisition policy, Bowman raised questions about how credit union bank acquisitions could affect the availability of certain products and services as well as incentives for serving all consumers in a particular community.
Key Point: While credit unions historically have had limited membership requirements and have not engaged in the same range of activities as banks, that is changing, Bowman said. “In recent years, their memberships have expanded, and they are offering more of the same products and services that banks provide,” she said. “Yet, unlike banks, credit unions are not required to meet the requirements of the Community Reinvestment Act or other laws that apply to banks.”
Chopra Testimony: Bowman’s remarks come after Consumer Financial Protection Bureau Director Rohit Chopra said policymakers should consider applying CRA requirements to credit unions and other nonbanks. Testifying before the House Financial Servies Committee earlier this month, Chopra said many states have enacted CRA requirements for certain nonbanks, and “we should really see if a more level playing field is appropriate.”
Lending Disparities: Chopra was responding to a question from Rep. Emanuel Cleaver (D-Mo.) on whether CRA-like standards should apply to credit unions amid reports of lending disparities at Navy Federal Credit Union. During the Q&A, Cleaver noted that bankers have been demanding lawmakers apply CRA to credit unions since he was elected to Congress two decades ago.
Navy Federal Fallout: Members of Congress have launched several inquiries on CNN’s report about Navy Federal’s racial disparities in mortgage approval rates. ICBA has urged congressional committees to convene a broader hearing on credit union lending practices and oversight following the report.
Momentum for Action: According to ICBA polling, 68% of adults said credit union customers should have the same CRA protections that banks provide. Following the latest acquisition of a tax-paying bank by a tax-exempt credit union earlier this month, ICBA said that while several states have restricted these deals, this trend is a matter of federal policy and requires congressional action.
Grassroots Resources: Community bankers can use ICBA’s Be Heard grassroots action center to call on their members of Congress to hold a hearing on credit union policy. Additional resources are available on the ICBA website.