The credit union industry's exemption from the Community Reinvestment Act came under attack during a hearing Thursday held by Rep. Joseph P. Kennedy 2d.

Bankers, a community activist, and the president of Lusitania Federal Credit Union, which is seeking a thrift charter, all called for bringing the industry into compliance with CRA.

Witnesses said expanded power, and liberal membership requirements made some credit unions more like banks, so they should operate under the same rules.

"CRA should be applied to geography-based or community-chartered credit unions

and to credit unions serving multiple employer groups from one metropolitan area," said Cornelius Mahoney, president of Woronoco Savings Bank, Westfield, Mass., who was speaking on behalf of the Savings and Community Bankers of America.

"It is these come-one, comeall credit unions, where the common bond has been severely, if not totally, diluted that application of CRA is needed."

The hearing was held before the House Banking subcommittee on consumer credit and insurance, of which Rep. Kennedy is chairman. Rep. Kennedy, D-Mass., has called for extending CRA to credit unions and nonbanks.

"It is entirely reasonable to apply CRA or its functional equivalent to credit unions, particularly larger multi-employer and community-based credit unions,"

Rep. Kennedy said in his opening remarks. "Those credit unions that are going to have all the privileges of banks and thrifts - like deposit insurance and a liberal charter - ought to have some of their responsibilities as well."

Defenders of the industry's exemption who numbered three witnesses compared to six urging compliance with the law - said CRA would be inapplicable to most credit unions, which serve occupational or associational groups and not communities.

Thomas J. Curry, the acting commissioner of banks for Massachusetts, took exception to that position. Massachusetts chartered credit unions have complied with a CRA-type law for 12 years.

"In applying CRA to credit unions in Massachusetts, I believe the fit is an easy one," he said.

Mr. Curry said the banking division evaluates community-chartered credit unions as it does banks. For occupationally based credit unions, examiners review how well they meet the credit needs of their members across income and demographic lines.

Credit union witnesses also argued that they fulfilled the spirit of CRA because they lend only to their members.

"I feel that we are doing an excellent job of serving our existing members and of reaching out to people of all income levels in our field of membership," said Armando Cavazos, president of Credit Union One in Ferndale, Mich., speaking on behalf of the Credit Union National Association.

But Thomas Callahan, executire director of the Massachusetts Affordable Housing Alliance, a Boston-based community activist coalition, said CRA ratings of Bay State credit unions show they are not doing a good job. He said 37% of the 78 ratings given to credit unions have been failing grades of "needs to improve."

Credit unions were penalized because their boards didn't discuss CRA and weren't marketing services correctly, he said. Mr. Cavazos referred to the federal regulator's examination earlier this year of 44 credit unions whose Home Mortgage Disclosure Act data suggested they were discriminating. The regulator failed to uncover discrimination, and that should justify not being brought under the law, he said. That argument seemed to backfire, however. "Then it should be no problem complying with CRA," responded Rep. Tom Barrett, D-Wis.

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