ABA Letter to House Financial Services Committee: Opposition to The Expanding Financial Access for Underserved Communities Act

The Honorable Maxine Waters
Chairwoman
Committee on Financial Services
United States House of Representatives
Washington, D.C. 20515

The Honorable Patrick McHenry
Ranking Member
Committee on Financial Services
United States House of Representatives
Washington, D.C. 20515

Dear Chairwoman Waters and Ranking Member McHenry:

We write to oppose the tax-exempt credit union industry’s latest attempt at charter enhancement, the “Expanding Financial Access for Underserved Communities Act,” discussed at the July 21st committee hearing.

We share your interest in expanding financial access for the underserved and have previously outlined our support for important initiatives such as Bank On-certified accounts, which have produced real results in reducing the number of unbanked in the country. We cannot support this proposal, however, because growth-oriented credit unions with already expansive fields of membership have failed to demonstrate a commitment to serve the underserved despite a congressional mandate and federal tax exemption to do so. Instead, we view this proposal as yet another backdoor effort by the credit union industry to expand its membership rolls at the expense of tax-paying banks.

As credit union acquisitions of banks continue at an increasing pace, with more than 50 transactions announced since 2013 (and five acquisitions announced so far during August recess), the marketplace is demonstrating that credit unions have ample opportunity to serve additional communities under their existing authority. While credit unions, which are not subject to the same strict data reporting as banks, regularly tout their commitment to serving low- and moderate-income (LMI) communities, they have not stepped up to prove this service—and in fact evidence points to the contrary.

• Data indicates a general pattern of credit unions opening more branches (on net) in upper- and middle-income census tracts and closing more branches (on net) in LMI census tracts.
• Moreover, credit unions are asking for the additional authority provided by this proposed legislation without providing Community Reinvestment Act (CRA)-like metrics demonstrating their service to at-risk communities.
• This legislation would also inject the unrelated issue of the credit union industry’s desire for additional business lending authority into the discussion over how to best serve underbanked communities. The disappointing effort by the credit union industry to stand by small businesses during their recent time of need makes this legislation even more inapt. Many credit unions chose not to participate in the Paycheck Protection Program despite a hope and expectation lenders would step up.

Rather than expand credit union authority, Congress should hold these institutions accountable through bank-equivalent CRA requirements that would require demonstrable data of the extent to which they currently serve people of modest means.

Download the letter to read the full text.