CFPB: States Are Subjecting Credit Unions to Reinvestment Laws

Federal government does not include credit unions in CRA rules.

David Baumann


Nov 7



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David Baumann

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David Baumann

A squiggly pink arrow pointing downward and to the right.
CFPB logo on an office door.

While the federal government has chosen not to include credit unions in the Community Reinvestment Act, several key states impose CRA-like obligations on those institutions in their state laws, the CFPB said in a new report.

“The financial market has changed considerably since the passage of the Community Reinvestment Act, and nonbanks are now capturing a large share of the mortgage market,” CFPB Director Rohit Chopra said, as he released the report. “States have responded by creating reinvestment obligations for mortgage companies and have tailored state reinvestment requirements to meet the needs of their local communities.”

Congress enacted the reinvestment act in 1977 as part of an effort to push banks to meet the needs of their communities, including low- and moderate-income communities. Federal banking regulators enforce the law by conducting examinations. In 1995, the law was tailored in an effort to account for different sizes and business models.

States Examined

The CFPB examined state CRA laws in seven states and Washington, D.C. Of those states, Connecticut, Illinois, Massachusetts, New York, Rhode Island, and the District of Columbia include credit unions in their CRA laws. Two states—West Virginia and Washington--do not include those institutions.

Bankers have long said that many credit unions are similar to banks and should be subject to the same laws that they are—including the federal CRA.

Credit union trade groups argue that field of membership rules limit their lending and imposing CRA requirements would not be fair.

The federal banking agencies last month issued final rules governing the CRA. However, adding credit unions to the federal law would require action by Congress, so the rules do not impose requirements on those institutions.

How Credit Unions Are Examined

In its report, the CFPB said that states that conduct CRA reviews of credit unions use those institutions’ field of membership. In Connecticut and Rhode Island, only credit unions with a geographic field of membership are subject to the state law.

However, several state laws are similar to the federal one, the CFPB said.

In New York and Massachusetts, credit unions and banks are evaluated based on their performance in state-designated assessment areas, the CFPB reported.

“Massachusetts determines these areas based on facility location and lending activity,” the agency said. “New York primarily determines these areas based on facility location, though lending activity is also considered. Illinois has proposed a lending and deposit-based process for determining state assessment areas.”

The CFPB said that Illinois, Massachusetts, and New York, conduct their own CRA examinations and include mortgage, small business, and small farm lending assessments in their review.

How Results Are Used

The eight states reviewed required state regulators to consider a financial institution’s CRA performance during an application for a merger or acquisition and every state considered CRA performance during an office or branch application, the report stated. The District of Columbia does not examine CRA performance during an office or branch application.

In addition, Connecticut reviews a credit union’s CRA record when considering a field of membership amendment, according to the CFPB.


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