A recent federal law enforcement settlement with Citadel Federal Credit Union illustrates why the Community Reinvestment Act’s (CRA) omission of credit unions from its rules is a dangerous mistake, a leading community development and financial regulation advocate said Tuesday.
“It no longer makes sense to let credit unions out of the common-sense obligations that CRA puts on traditional banks,” said Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition (NCRC). “Citadel’s alleged conduct in the case it just paid $6.5 million to settle is a timely demonstration of the problem and the need to enhance fair lending protections for credit union customers. Despite their public perception as a gentler, kinder, more community-minded provider of retail banking services, credit unions are just as capable of violating borrowers’ civil rights as any other financial institution.
“Whatever the driving causes underlying such violations,” Van Tol said, “we know how to fix the problem: Supervise credit unions under CRA so that they can prove their actual actions live up to their public image.”
Citadel FCU in October agreed to a $6.5 million settlement with the Department of Justice (DOJ). DOJ alleged that Citadel discouraged would-be homebuyers in Black and Hispanic neighborhoods of Philadelphia from applying for mortgages and systematically declined to make mortgages in those neighborhoods. Citadel maintains its innocence in the settlement.
Such failures and business practices are commonly uncovered in traditional banking through regular federal CRA examinations, which are conducted every few years. While not a perfect universal detection system, extending CRA to cover credit unions would both improve oversight and drive new capital into neglected communities as the firms move into compliance with the law’s requirements. While Citadel’s CEO described the settlement as “a vital opportunity to enhance our commitment to proactive community engagement,” bringing credit unions under CRA would ensure that they face an affirmative and binding obligation to those same people and places – instead of leaving communities to depend upon the goodness of executives’ hearts.
