ICBA Urges Credit Union Agency to Rethink Redlining Plan

Dec 09, 2019

ICBA Press Release Banner 2020

Washington, D.C. (Dec. 9, 2019) — 
The Independent Community Bankers of America® (ICBA) today called on the National Credit Union Administration to withdraw and redraft a proposed rule that would allow tax-exempt credit unions to cut urban communities out of the membership areas they serve. In a comment letter, ICBA said the agency's proposal does not adequately address a circuit court ruling that this redlining policy could be discriminatory.

"The NCUA's flawed proposal allowing credit unions to discriminate against urban areas is the latest example of this captive regulator bowing to the growth-obsessed financial firms it is charged with regulating at the expense of local communities," ICBA President and CEO Rebeca Romero Rainey said. "It is long past time for Washington and Americans nationwide to 'Wake Up' to the risky practices, costly tax subsidies, and irresponsibly lax oversight of these tax-exempt institutions."

The NCUA plan would allow federal credit unions to include wealthy suburbs of metropolitan areas in their fields of membership while leaving out their urban cores. Amid a court challenge, the U.S. Court of Appeals for the District of Columbia Circuit ordered the agency to explain how its plan would prevent redlining. As today's ICBA comment letter makes clear, however, the NCUA has not addressed redlining concerns.

While the NCUA notes that some areas have a higher percentage of low- and moderate-income populations outside their urban core, that does not prevent the type of redlining raised by the circuit court, ICBA said. The NCUA claims legal protections will prevent illegal discrimination, but its 25 yearly on-site compliance and lending exams are insufficient for an industry that serves 117 million members.

ICBA called on the NCUA to rescind its proposed rule until the legal challenges against it have been addressed by the courts, though it also recommended ways to improve the proposal. For instance, the agency could require individual credit unions to demonstrate a compelling need to exclude urban cores from their service areas, allow community groups to protest exclusion from credit union service areas, and permit credit union members to vote on these kinds of decisions.

ICBA’s “Wake Up” campaign encourages policymakers to open their eyes to the growing threats posed by these financial firms. More information on how credit unions have abandoned their original mandate and failed the communities they're supposed to serve is available on ICBA's "Wake Up" resource center.

About ICBA
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. With more than 50,000 locations nationwide, community banks constitute 99 percent of all banks, employ nearly 750,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5 trillion in assets, nearly $4 trillion in deposits, and more than $3.4 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at
www.icba.org.

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