Financial Inclusion Bill Could Reignite Credit Union-Bank Conflict

Source: American Banker (Subscription may be required)

The trend of credit unions buying banks has grabbed a lot of attention in recent years, but two other key issues have raised tensions between the two industries. 

Bankers have long opposed attempts by credit unions to expand their field-of-membership and  their business lending capabilities, but proposed legislation would open the door to both. The bill, H.R. 7003, the Expanding Financial Access for Underserved Communities Act, was approved last week by the House Committee on Financial Services by a 27-22 vote.

Introduced by the committee’s chair, Maxine Waters, D-Calif., the bill would allow all federal credit unions to apply to the National Credit Union Administration to expand their field of membership to include underserved communities, including those without a branch within 10 miles.

It would also exempt loans made by credit unions to businesses in those areas from the credit union member business lending cap. Under current law, credit unions are restricted from lending more than 12.25% of total assets to member businesses.

According to the Credit Union National Association, the bill’s member business lending exemption would apply to 2,207 federally insured credit unions that are not already exempt due other designations. 

CUNA also points out that there are no provisions in the bill restricting banks from opening operations in those underserved areas.