NCUA To Pilot Plan For Data Collection On Underserved

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Prompted by continuing Congressional prodding, NCUA said it will begin a pilot program to examine some federal credit unions for how well they provide service to the underserved.

NCUA Chairman JoAnn Johnson said the new data collection program was in response to growing requests by Congress, which were enunciated during last fall's hearing before the tax-writing House Ways and Means Committee, and by a General Accountability Office report, to illustrate that credit unions are providing services to people of modest means-something broadly seen as central to the credit union mission.

Some lawmakers during last fall's hearing even suggested that continued service to the underserved is the price credit unions will have to pay to retain their federal tax exemption. "With this data collection, NCUA is responding to specific congressional requests and looks forward to the opportunity for enhancing the clarity of credit union service to Americans from all walks of life," said Johnson in a statement.

Under the pilot program, 481 credit unions will be examined and evaluated in two areas of concern raised by lawmakers, their service to the undeserved and financial compensation for management, something that remains a bit of a mystery in the credit union movement. The examiners will review the extent and type of services the credit union provides to members and the income distribution of members.

The initiative is widely seen as an effort by NCUA to fend off a growing push by the bankers to convince Congress to enact a Community Reinvestment Act-like requirement on credit unions, something credit unions have fought hard against for several years. The opposition of credit unions to such an initiative has been so strong that the movement convinced NCUA to rescind a community reinvestment-like requirement four years ago, known as Community Action Plan, which would have assessed community credit unions on the underserved service.

NAFCU, which helped defeat the earlier NCUA proposal, was quick to condemn the NCUA plan. "NAFCU believes it is very important for credit unions to be able to demonstrate their success in reaching out to the underserved.

The data collection program that NCUA announced today, to the extent it is intended to provide a profile of credit union membership, unfortunately may not accomplish that objective," said NAFCU President Fred Becker. "In particular, it is questionable whether the data collected will provide a meaningful assessment of credit union service by income levels. AIRES (NCUA's electronic data collection system) share and loan data may not adequately capture actual member income, providing an incomplete picture of credit union membership."

CUNA was also lukewarm to the pilot program, neither endorsing or condemning it, but acknowledged the need to impress Congress with evidence of credit union service to the underserved.

But CUNA President Dan Mica said that CUNA will support the NCUA pilot to see where it goes and how much it can do to satisfy Congress, and emphasized there has been increasing pressure on credit unions to demonstrate their service to the underserved, not just by Congress.

He was referring to several outside studies, conducted by the GAO, the National Community Reinvestment Coalition and the liberal think tank Woodstock Institute, suggesting that credit unions are not adequately reaching out to lower income and minority communities.

NCUA said examiners have been trained on a data collection methodology, which will be limited and focused on discussions with management.

Unlike the earlier CAP proposal, the new program does not entail any kind of evaluation or enforcement mechanism.

In a letter to credit unions issued along with the announcement of the program, NCUA said the collection of data on underserved service and executive compensation will have minimal impact on the credit unions chosen to participate.

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