Week ahead: Credit unions watching Fed meeting, CRA plans and more

Though the Senate will be preoccupied with President Trump's impeachment trial, the House's return to Washington this week means some policymakers and legislators will be addressing various credit union-related issues.

Bloomberg News

The Federal Reserve meets on Tuesday for its first two-day meeting of the new decade. Experts predict that Chairman Jerome Powell will keep rates between 1.50 to 1.75%, which should allow credit unions to continue operating as they have been for the last few months.

The House Financial Services Committee this week will examine the Office of the Comptroller of the Currency’s plan to reform the Community Reinvestment Act. The new framework drafted by the OCC and the Federal Deposit Insurance Corp. would overhaul the current framework and if finalized, would be the first significant update to the law in over two decades.

Credit unions are not currently subject to CRA requirements but there were talks as recently as last year about possibly changing that policy, so many in the industry continue to watch the matter closely. The law was designed to encourage commercial banks to better meet the financial needs of consumers living in low- and moderate-income communities.

Credit union trade organizations continue to argue the industry should be exempt from CRA on the basis that CUs do not engage in illegal or discriminatory activities that they say banks do. For example, Citibank was fined $25 million in March 2019 for discriminatory lending. But some CUs have had their own problems in this arena, including Medford, N.Y.-based Suffolk Federal Credit Union, which in July 2018 reached a settlement regarding allegations of discrimination against African-Americans and Latinos in mortgage lending.

Aside from CRA, House Financial Services subcommittees this week will conduct hearings examining insurance availability for nonprofits, and the rise of mobile payments and the evolving role of cash in the payments sector.

This week also marks credit unions’ first opportunity to comment on the latest proposals from the National Credit Union Administration regarding subordinated debt and bank purchases, both of which were addressed during last week’s board meeting. While the planned reg on bank purchases brings together existing rules rather than changing anything, the new capital proposal could make it easier for CUs to purchase banks. That would likely help larger credit unions grow faster and further widen the gap between big shops – particularly those nearing the $1 billion-asset mark and above – and small and mid-size credit unions that struggle to grow.