NCUA Board Clear: No CRA For Credit Unions

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Words are powerful in the nation's capital.

That's why a tax increase can be called "revenue enhancement." Or a tax on the estates of the richest Americans is dubbed the "death tax." Some dictators are our friends, while others are labeled despots. Nuclear non-proliferation means nobody can have nuclear weapons who doesn't already have them.

And that's why officials at NCUA are stressing that the agency's new "member service pilot program" is not anything like the Community Reinvestment Act or even an attempt at enacting a CRA-like requirement for credit unions. Because for years CRA has been fought like crazy by credit unions on the grounds that, unlike banks, credit unions do not discriminate against eligible members, meaning credit unions do not need a federal rule requiring them to serve all segments of their fields of membership.

That's even after a former chairman of the NCUA Board, Norm D'Amours, who was on top of the credit union world for almost eight years, suggested that credit unions do need a rule to ensure they are serving all segments of their FOM.

So it was last week that each of the three NCUA Board members took the stage at CUNA's annual Government Affairs Conference and emphasized one after the other that NCUA has no plans to enact CRA for credit unions.

"I would like to make something very clear: This agency is not about to impose CRA on credit unions. I will repeat: NCUA, under my leadership, is not about to embark on a path that would lead you to CRA," stated NCUA Chairman JoAnn Johnson to the biggest credit union gathering of the year. "Credit unions simply don't deserve that kind of burden which would inhibit, rather than enhance, your efforts in reaching out to Americans from all walks of life."

Johnson's assurances were repeated by her two colleagues on the NCUA Board, Rodney Hood and Gigi Hyland, during their GAC remarks.

Each of the three regulators insisted the agency's efforts were aimed at simply collecting data on credit union services in order to appease members of Congress who have suggested that credit unions need to focus on service to the "underserved" in exchange for retention of their federal tax exemption.

Of course, none of the three regulators explained what NCUA will do with the data or how credit unions might react to data that might run counter to some CU claims or might be interpreted in different ways. What will NCUA do if they discover that some credit unions find it too difficult to market to so-called underserved communities?

In short, what if NCUA discovers from its own data collection that conclusions reached by non-partisan groups like the National Community Reinvestment Coalition and the Woodstock Institute, that credit unions are lacking in their service to the underserved, are valid?

Each of the NCUA board members is already on the record that they do not plan any kind of CRA-like requirement that would force credit unions to reach out. As a result, some bankers are going to argue that the results of this member service data collection pilot program were preordained.

And more importantly, what happens if the NCUA data points up laxity in credit union services to the underserved and that data is provided to Congress? Will congressional critics then use it to make a case for CRA for credit unions?

The argument in support of NCUA's effort is that if the credit union regulator does not act to gather such data then Congress will. That's not certain.

Last year's hearing by the tax-writing House Ways and Means Committee on the credit union tax exemption, when the issue of service to the underserved was raised, was the first ever on the tax exemption.

But the hearings were good for credit unions because numerous lawmakers, including Committee Chairman Bill Thomas of California, insisted there was no threat to the credit union tax exemption. That was an important moment because it put a congressional leader on record in support of the tax exemption.

Because there was broad consensus, if not unanimity, on the credit union tax exemption, it's not likely this issue will resurface in Congress any time soon, despite the banking lobbies' best efforts to make it an issue.

That's not to say that the issue has been put to bed permanently, but Congress has far too many other issues before it to focus closely on this.

But the danger exists, if credit unions continue to make it an issue, it will be hard to make the matter disappear.

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