Posted by:
Steve Dubb
Federal rules discourage lending to low-income communities
At the annual meeting of the National Federation of Community Development Credit Unions, Gigi Hyland, a Board member of the federal credit union regulatory agency (National Credit Union Administration) acknowledged that the agency needs to do more to change its examination process so that credit unions are not penalized for serving the poor.
Executive Director Clifford Rosenthal stated that, “changing the culture of NCUA” is at the top of the Federation’s agenda. “We can’t have fine-sounding principles on one hand and on the other hand see small, low-income credit unions being merged away,” Rosenthal said. In particular, the Federation is seeking greater federal regulatory leeway to enable credit unions to make somewhat higher risk loans so they may increase their lending services to low-income communities.
Melissa Marquez, CEO of Genesee Co-op FCU (Rochester, NY) who chairs the Federation’s Governmental Affairs Committee, noted that mainstream credit unions are often reluctant to serve low-income members, because they fear being penalized by their examiner if they accept the higher delinquency rates and write-offs that higher-risk loans to low-income borrowers might entail.
“If we are going to serve the low-income community, we need to know that examiners are not going to see that as a negative and penalize our credit union,” Marquez said.