WASHINGTON - Community activists have long argued that credit unions, like banks, should be subject to the Community Reinvestment Act, and on Thursday they unveiled a study that they say bolsters their case.
But the Credit Union National Association responded quickly with its own statistics, saying credit unions do a much better job of serving underserved communities than banks.
The study by the National Community Reinvestment Coalition analyzed three years of Home Mortgage Disclosure Act data on lending. It concluded that "banks consistently exceed credit unions' performance in lending to women, minorities, and low- and moderate-income borrowers and communities."
"Credit Unions: True to Their Mission?" compared bank and credit union lending by examining how each did on 14 fair-lending measures, including how many loans were made to minorities, loan denial rates for minorities and low-income borrowers, and concentration of loans in low- and moderate-income census tracts.
For example, in 2003 banks made 13% of their home purchase loans in low- and moderate-income census tracts, versus 10.8% for credit unions.
The study notes that credit unions' performance has improved in several lending categories. In 2003 credit unions actually fared slightly better than banks in making home loans to low- and moderate-income borrowers, African-Americans, and women.
However, the coalition contends that credit unions should hold a significant advantage over banks in lending to underserved communities since their stated mission is to serve low- and moderate-income people whose needs are not being met by traditional lenders.
"Credit unions are afforded certain benefits, such as federal tax exemptions, to help them fulfill their mission," the study said.
John Taylor, the coalition's president, said large credit unions were to blame for the lending disparities.
"We're not trying to expand CRA to community-based development credit unions," Mr. Taylor said at a news conference at the National Press Club. "We're really trying to get at the larger credit unions that look and act and quack and sound and smell and appear to be everything like a bank."
The NAACP and the National Council of LaRaza, the Hispanic umbrella group, joined the reinvestment group at the news conference. Hilary Shelton, the director of the NAACP's Washington office, echoed Mr. Taylor's concerns.
"A small percentage of our nation's credit unions have grown so large that they have forgotten or chosen to ignore their initial mission," Mr. Shelton said.
But in a response released just after the study came out, the credit union trade group said, "Very large credit unions are among the most committed to the credit union vision and focus, and many of them provide services to members that no bank would ever consider."
The group also faulted the NCRC's analysis of denial disparity rates. The coalition concluded that low- and moderate-income borrowers were 2.19 more likely than middle- and upper-income borrowers to be denied loans by a credit union. For banks, they were 1.75 times more likely.
CUNA said it was more useful to compare credit union denials against all other lenders, saying in 2003 credit unions "denied 15.6% of mortgage loans to low-income borrowers. Non-credit-union lenders, it said, "denied 27.7% of the loans to low-income borrowers."
"Data from 2003 HMDA reports show that low-income borrowers are substantially more likely to be approved for a mortgage at a credit union," the credit union group said.
Still, the reinvestment coalition called on Congress to apply the Community Reinvestment Act to credit unions, and cited Massachusetts as an example of how this would benefit underserved communities.
"In Massachusetts, one of the only states where there is CRA for credit unions, state-chartered credit unions outperformed their federally chartered counterparts," the study said.
"That CRA regulation does not apply to federally chartered credit unions helps explain why they lagged behind banks and CRA-covered state-chartered credit unions in the state of Massachusetts."
