Rep. Joseph P. Kennedy 2d may figure that what works at home can work for the nation.
The Massachusetts Democrat wants to expand the reach of the Community Reinvestment Act to credit unions and other industries.
This month he is expected to hold hearings on whether non-federally insured financial companies should comply with CRA. Credit union executives are worried their industry may be included.
If Rep. Kennedy wants to extend the law to credit unions, he can look to his home state, where state credit unions have been following a CRA-type law for 12 years.
Part of the Mission
Bay State credit union managers generally don't object to the state's CRA rules.
"When you think about it, credit unions were formed to help people in need," said Joseph Barbato, president of $75 million-asset Millbury (Mass.) Credit Union. "Credit unions ought to find it simple to meet CRA requirements."
But federal regulators and the industry's most powerful trade group vow to fight the plan.
"There's no need for credit unions to be under CRA," said Charles O. Zuver, director of governmental affairs for the Credit Union National Association. "They can't make loans outside of their lending community, and I just don't think there's an opportunity to discriminate in a credit union."
No Evidence of Bias
Norman E. D'Amours, chairman of the National Credit Union Administration, has said he would oppose attempts to bring credit unions under CRA.
Earlier this year, the NCUA examined credit unions whose Home Mortgage Disclosure Act data suggested they might be discriminating. The agency said it found no evidence of overt discrimination.
But a House Banking Committee staff member said credit unions' exemption from CRA needs to looked at, particularly in light of U.S. Central Credit Union's $255 million investment in a troubled Spanish bank.
"When billions of credit union dollars go overseas, it raises the question of whether that money should be going into their communities," he said.
Massachusetts groups generally get lower CRA marks than banks, said Thomas Curry, acting state banking commissioner.
"Lower ratings reflect technical noncompliance," he said. "Credit unions are weaker on procedural requirements but seem to make it when it comes to offering services to different sectors."
Of the 43 credit unions examined, 60.5% received a "satisfactory" rating, while 39.5% received "needs to improve." None have received an "outstanding" rating.
There are 142 state-chartered credit unions in Massachusetts, with $5.9 billion in assets.
So few credit unions have been examined because the department initially focused on banks. The department is doubling its CRA examination staff to 20, and it plans to review all institutions on a two-year cycle, Mr. Curry said.
An Easy Fit
After making adjustments for credit unions' limitations, applying CRA has been simple, he said.
Massachusetts credit unions are chartered to serve whole communities and "fit in with CRA easily," he said.
For employer-based credit unions, examiners check for a fair distribution of services among the customers according to income level instead of where they live, Mr. Curry said.
Some examiners don't understand that employer-based credit unions can't serve communities, said Ed Saunders, general counsel for the Credit Union League of Massachusetts.
"We get a lot of industrial credit unions kicking about that," he said.
Way to Assess Performance
Mr. Saunders and Mr. Kimmett said although many credit unions don't see a need for CRA and compliance is costly, the law is not a big problem.
No state-chartered credit union has switched to a federal charter to escape the regulation, Mr. Kimmett noted.
Mr. Curry said he saw no reason why all credit unions shouldn't comply with CRA.
"It does work and it is useful for a credit union to assess how well it is meeting the needs of its membership," Mr. Curry said.
Mr. Barbato of Millbury Credit Union said CRA can be good business if a credit union has a positive attitude.
"If you admit you can learn something, it can help," he said.
The credit union, which serves Millbury, a city of 14,000, received a "needs to improve" CRA rating in its February 1992 examination because of record-keeping deficiencies. The credit union has since hired a CRA officer.
Millbury received another CRA examination last week, and Mr. Barbato said he expects to get a better rating this time.
"I want us to be the first credit union to receive an 'outstanding' rating," he said.