Think Tank Releases CRA Policy Analysis, Recommends Against Expanding CRA to Credit Unions, Fintechs

The Cato Institute this week released a policy report, The Community Reinvestment Act in the Age of Fintech and Bank Competition, which among others reinforces the position that the Community Reinvestment Act (CRA) should not be expanded to include credit unions.

The CRA was enacted in 1977 because some banks were found to be “redlining,” or discriminating against some communities by accepting their deposits but not lending those deposits back to the community. Because credit unions are member-owned, not-for-profit, financial cooperatives that serve defined fields of membership, they are structurally are unable to “redline” or discriminate against their members and therefore should not be subject to the CRA.

The report says “It would be a mistake to expand the CRA to cover online (fintech) lenders and credit unions, which already serve LMI borrowers as well as, or better than, many lenders that are subject to the act.”

The report also notes that "Credit unions appear to be achieving the CRA's policy goals without being subject to its regulations. Applying the CRA to credit unions would impose substantial new compliance costs that are both unnecessary and incompatible with the nature of credit unions themselves. If policymakers are concerned about the changing business model of credit unions – particularly larger ones – the appropriate route to address such concerns is to revise the FCUA."

CUNA and the state leagues consistently work to set the record straight on the differences between credit unions and banks as the banking industry continues to lobby to have their requirements relaxed while at the same time trying to have those requirements extended to credit unions.