State banking associations from all 50 states are speaking out against a federal bill that would allow credit unions to more easily make business loans to underserved communities.
The bill, the Expanding Financial Access for Underserved Communities Act, is sponsored by House Committee on Financial Services Chair Maxine Waters (D-Calif.) and Ed Perlmutter (D-Colo.). The bill would allow federal credit unions to add underserved areas to their field of membership; exempt credit union-issued business loans to underserved areas from the CU-member business lending cap; and expand the definition of an underserved area to include any area that is more than 10 miles from the nearest branch of a financial institution.
In an April 7 joint letter to Waters and Ranking Member Patrick McHenry (R-N.C.), the associations said the bill “creates a major new loophole in the credit union business lending cap, a necessary statutory element to ensure this tax-exempt industry continues to fulfill its specified mission of ‘meeting the credit and savings needs of consumers … through an emphasis on consumer rather than business loans.’”
The trade groups say though credit unions are limited by statute to serving “well-defined local communities,” multiple regulatory paths allow CUs to add multi-state areas to their membership to technically fit that definition without effectively doing so. “What [the bill] seems to provide, however, is the ability for credit unions to expand out-of-market, a reality that the credit union lobby has attempted to obfuscate in this debate. Congress should not help facilitate tax-exempt regional or national banks.”
The banking associations allege that credit unions have increasingly served wealthier customers over the last decade by opening more branches on net in upper- and middle-income areas while closing branches in less affluent areas. “Field of membership is no longer a serious limiting factor for many credit unions, including almost all of the largest bank-like credit unions,” the associations wrote. “The rapidly increasing trend of bank buying proves this point, since all bank customers must be eligible to become customers of the credit union.”
The Credit Union National Association supports the bill. Early this year, CUNA wrote in a letter to the Senate Banking, Housing, and Urban Affairs Subcommittee that the bill would help provide financial services to the unbanked and underbanked “by making it easier for consumers in areas without sufficient financial services providers to access credit unions.”