Banks and thrifts are arguing that credit unions should meet tougher standards if they want to obtain long-term loans from federal Home Loan banks.
In letters filed with the Federal Housing Finance Board, which regulates the Home Loan banks, banks and thrifts argue that while they are required to meet a host of regulations, including Community Reinvestment Act requirements, to borrow the funds, credit unions are getting off scot-free.
"We want credit unions to be accountable to the same record keeping and regulations as banks," said James Lauffer, president of the Independent Bankers Association of America, a community bank trade association.
The IBAA and other industry representatives have fired off letters to the Federal Housing Finance Board, which in September posted a notice of future rulemaking regarding review of the community investment activities of the system's nonbanks.
"We have to have some kind of review," said Sylvia Martinez, an finance board official. "The question is what kind of review is necessary." But, she said, "we would do something that would be appropriate for individual circumstances" of credit unions.
Comments on the notice had been due Nov. 1., but the deadline was extended to Dec. 31.
A letter by the National Association of Federal Credit Unions argued that credit unions already meet community-support requirements. "The majority of a credit union's business is making small loans to individual consumers, providing services such as check cashing and direct deposit, encouraging member savings, and issuing credit cards at low interest rates," the letter said.
Credit unions, along with banks and insurance companies, were allowed to join the system under the thrift-bailout law of 1989. As of Oct. 31, 54 credit unions have joined, and have borrowed $220 million in long-term, low-interest loans.
Loans with Low Interest Rates
Institutions join the system to take advantage of low-interest loans as well as investment advice and above-average-yield capital stock.
Banks and thrifts facer a tougher review of their commitment to community investment by Home Loan banks than do credit unions. Banks and thrifts must submit CRA data, information on assistance to first-time homebuyers, and summaries of final rulings for fair lending or fair housing violations.
Credit unions, which aren't bound by CRA, only need to explain how they identify customers' credit needs and how they meet community-support requirements.
The IBAA says credit unions should have to provide more information before getting the loans. In particular, they should provide data such as assistance to first-time homebuyers and fair lending practices.
Home Savings Chief Weighs In
In a letter, Charles R. Rinehart, chairman of Irwindale, Calif.-based Home Savings of America, said credit unions seeking long-term loans must "comply with relevant portions of the CRA."
They also should submit to CRA examinations by federal examiners, he wrote. Mr. Rinehart suggested the Office of Thrift Supervision conduct the examinations.
Pennsylvania State Employees Credit Union, Harrisburg, hasn't borrowed money from the Federal Home Loan Bank of Pittsburgh, but its president, Gregory A. Smith opposes community investment reviews for credit unions.
"One of the reasons credit unions were excluded from CRA is that we deal with membership groups," he said. "Credit unions reinvest in their members."
Mr. Lauffer doesn't think the argument washes, because community banks can argue the same point.
"Some community banks don't have loans outside of a 20-mile radius," he said. "Why should we meet the standards?"