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ICBA Exec: Credit Unions Straying from Mission

Washington, D.C. (July 20, 2004) - Questioning whether or not expanding the commercial lending authority of credit unions is prudent and in keeping with the historical mission of the credit union industry, the president of the nation's community bank trade group today urged Congress to reject legislation that would nearly double the authority of credit unions to make commercial loans.

Camden R. Fine, president and CEO of the Independent Community Bankers of America (ICBA), noted that even the GAO, Congress's investigative arm, recently cited the need for greater risk management by credit unions because of the growing concentration of industry assets in large credit unions. "Credit unions should be reducing their risk portfolio, not increasing it," Fine charged.

In a letter to House Financial Institutions and Consumer Credit Subcommittee Chairman Spencer Bachus (R-Ala.), Fine wrote that the funding advantage credit unions enjoy over community banks by way of their tax exemption and exclusion from CRA regulations already tilts the competitive playing field in their favor. "This may have been justifiable when the scope of credit unions was limited by the obligation to serve members of a single employer," Fine wrote. "However, it is difficult to justify today as credit unions have expanded their scope to serve the general population through community charters. This makes their aggressive pursuit of expanded commercial lending opportunities all the more troubling."

Bachus chaired a hearing today on H.R. 3579, the Credit Union Regulatory Improvements Act of 2003, which would, among other things, significantly expand credit unions' commercial lending. Fine contended that Congress never intended for credit unions to become primary lenders in commercial markets, noting that the Credit Union Membership Access Act of 1998 (CUMAA) imposed a strict limit on commercial lending.

"The Senate Banking Committee report on this bill stated clearly that Congress intended that business lending by credit unions be incidental to, and not the main focus of, the services provided to their customers," wrote Fine. The credit union industry has pursued an aggressive expansionist agenda that "is not consistent with credit unions' historic mission, or their favored tax status," he continued. He quoted from a study conducted by the Woodstock Institute of Chicago, which refuted claims by the credit union industry that they were meeting their statutory mission of serving people of small means.

Fine concluded that if credit unions want to compete with banks and thrifts on expanded product lines in an open market, "they should be willing to comply with the same laws and regulations as banks and thrifts, and that includes the obligation to comply with the Community Reinvestment Act and pay taxes."