CRA Changes Should Strengthen Existing Bank, CU Partnerships

As Congress ponders ways to improve the Community Reinvestment Act’s (CRA) impact on redlining and discrimination, CUNA urged it to consider ways to strengthen partnerships between banks and credit unions. CUNA submitted its letter for the record of a House Financial Services sub-committee hearing on the CRA.

“Credit unions have a track record of fairly meeting the needs of all members-regardless of their race, gender, or socio-economic background,” the letter reads. “Thus, facilitating the partnerships between banks and credit unions can serve as an important mechanism for ensuring that the goals of the Community Reinvestment Act are reached.”

The letter states that while credit unions are not, and should not, be subject to CRA requirements, they play a “critical role” in helping banks meet their obligations to traditionally underserved communities.

“Specifically, many of the loans originated by credit unions on behalf of their members fit within the criteria of CRA-eligible products due to credit unions’ own statutory mission of serving people of modest means. Credit unions sell these loans to banks as part of the banks’ overall efforts to satisfy their CRA mandate,” the letter reads. This process, in turn, serves as a liquidity resource for credit unions as they then seek to continue their lending efforts in traditionally underserved communities.”

Accordingly, the resulting Community Reinvestment Act partnerships between banks and credit unions are an important piece of credit unions’ efforts to extend financial services to rural, minority, and other traditionally underserved communities across the United States,” it adds.

CUNA, leagues and credit unions recently demonstrated credit unions’ strong track record of meeting those needs in meetings with Sen. Elizabeth Warren (D-Mass.) regarding the American Housing and Economic Mobility Act of 2019.

The version of the bill in previous Congress would have required credit union compliance with the CRA, but after numerous meetings, the version introduced in this Congress does not require credit union compliance with the CRA.

The months of engagement successfully demonstrated to Warren and other bill sponsors that credit unions already abide by rules ensuring they provide safe and affordable housing products to a variety of populations, and that placing credit unions under CRA would require them to shift resources away from these service