WASHINGTON Credit unions do a better job of serving their communities than other types of financial institutions and could do even more if they were not hamstrung by regulatory impediments, said Fred Becker, the president and chief executive officer of the National Association of Federal Credit Unions.
Credit unions are better at serving everyone than banks, Mr. Becker said, referring to an American Banker survey last July that revealed credit unions are on a 10-year run for drawing the loudest applause from customers.
Critics accused credit unions and their regulator, the National Credit Union Administration, of not caring enough about low- and moderate-income people when the agency with support from Mr. Beckers organization and others pulled the plug on a community reinvestment rule in December before it took effect.
The rule, known as the Community Action Plan, would have required credit unions with community charters to file plans on how they intended to serve all segments of their membership.
Mr. Becker said that the statistics show that credit unions already reach out to minorities and underserved individuals.
Credit unions approved mortgages for 84% of applicants with household incomes of $40,000 or less, while banks approved 62% and thrifts 72%, said Mr. Becker, citing 2000 Home Mortgage Disclosure Act data. Also, credit unions lent to 70% of the minorities in that income bracket who applied for mortgages, while banks granted 56% of similar applications and thrifts 63%, he said.
There is a fundamental misunderstanding among critics namely the National Community Reinvestment Coalition and the Woodstock Institute, Mr. Becker said.
Credit unions dont serve the general public, he said. You cant just walk in and join a credit union. Only recently have they been able to expand their membership fields.
The critics may want to take a different approach in dealing with us and work with us, he said. Anyone can always do better.
The sole purpose of the tax-exempt, nonprofit institutions is to serve members, and most offer higher-quality loans at a lower cost than consumers can get at any other type of institution, he said.
But Mr. Becker said he envisions credit unions doing even more to reach those who are not well served by mainstream and fringe financial institutions, if Congress will allow it. For example, credit unions could aid small-business owners who find it difficult to have their lending needs met, he said.
Credit unions business-loan portfolios cannot exceed roughly 13% of an institutions total assets. If that limit were raised or lifted, credit unions could fill the void in small-business lending, he said.
Mr. Becker also wants lawmakers to allow more credit union participation in the Small Business Administrations 7(a) loan program. Right now only community-chartered credit unions may participate, and each must get individual permission. Credit unions, as an entire class, should be allowed to make SBA-backed loans, he says.
Rep. Stephanie Tubbs-Jones, D-Ohio, has written a proposal to broaden SBA participation for credit unions, but her attempts to attach it as an amendment to other legislation have so far failed.
Credit unions are in a Catch-22, Mr. Becker said they cannot participate in the program because they do not serve the general public, but they are barred from serving the general public by law. That logic is ludicrous, he said.
Mr. Becker also called for the removal of other restrictions, such as the rule that credit unions cannot cash checks for nonmembers. If that rule were changed, consumers without checking accounts would have a cheaper alternative to check-cashing outlets, he said.
A House Financial Services subcommittee is scheduled to vote Wednesday on a regulatory relief bill that would eliminate the prohibition and grant other items on Mr. Beckers wish list.
