ABA: Credit Unions Don’t Deserve Expanded Fields of Membership

A proposal that would allow all credit unions to provide financial services to underserved areas simply is a power-grab by an industry hungry for expansion, the American Bankers Association charged Monday.

“Tools exist for credit unions to serve underserved areas if they have the will to do so,” American Bankers Association President/CEO Rob Nichols told House Financial Services Committee members in a letter Monday. ‘We view this proposal as yet another backdoor effort by the credit union industry to expand its membership rolls at the expense of tax-paying banks,” he added, citing recent credit union purchases of banks.

Democrats on the House Financial Services Committee have released a discussion draft of legislation that would allow credit unions to expand their fields of membership to include underserved communities, including areas that lack a depository institution branch within ten miles. The bill also would exempt loans made by credit unions to businesses in underserved areas from the National Credit Union Administration’s member business lending cap.

The legislation has not yet been introduced in the House, but the committee’s Consumer Protection and Financial Institutions Subcommittee listed it for discussion during a hearing last month on how to expand services to areas that lack banks and credit unions.

Nichols said that community credit unions already have the ability to serve underserved areas if they identify a need. He told committee members that rather than allowing credit unions to expand their fields of membership, Congress should establish metrics like those in the Community Reinvestment Act to test if the institutions are serving low-income areas. Credit unions are exempt from the CRA.

“To ensure the substantial tax and regulatory preferences awarded to the credit union industry are appropriately targeted, service metrics to low-income communities should be required,” Nichols said. He added that credit unions want expanded business lending powers but said that many credit unions did not “stand by small businesses” by participating in the Small Business Administration’s Paycheck Protection Program.

When the House Financial Services Committee’s Consumer Protection and Financial Institutions Subcommittee held its hearing last month, credit unions called for passage of the legislation.

“Rather than create a new government program or increase federal spending, reforming archaic field of membership restrictions through the Expanding Financial Access for Underserved Communities Act is a market-based solution leveraging the success of the credit union model,” Credit Union National Association President/CEO Jim Nussle wrote in a letter to the committee.

Credit union field-of-membership rules hamper the industry’s desire to help, Brad Thaler, vice president of legislative affairs at the National Association of Federally-Insured Credit Unions, wrote in a letter to the committee.

“Credit unions are proud to be at the forefront of efforts to expand financial services access to rural areas, many of which are underserved, and want to do more,” Thaler wrote. “However, not all credit unions can add underserved areas to their field of membership, making it challenging for some to expand in rural areas.”


ABA Letter to House Financial Services Committee: Opposition to The Expanding Financial Access for Underserved Communities Act

NAFCU Letter to Subcommittee on Consumer Protection and Financial Institutions on Banking the Unbanked

Link to Download CUNA Letter on Banking the Unbanked

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