It's hard to pin down precise numbers, but anecdotal reports in news outlets across the country suggest that hundreds of thousands of Americans responded to "National Transfer Day" campaign by switching their deposits from major banks to credit unions.
But did those consumers accomplish what the campaign's supporters wanted — to vote with their dollars for institutions with more concern and responsibility for their communities?
It's always a good thing for consumers to hold financial institutions and other businesses accountable, but moving one's money alone doesn't lead to a just and equitable society. It may be comforting to view the world in black and white (e.g. big banks = bad, credit unions = good), but reality usually comes in shades of gray. In this case, large credit unions need to be held accountable every bit as much as banks.
Banks and credit unions both have a moral responsibility to serve low and moderate income communities. And there are many "low income credit unions" — designated as such by the National Credit Union Administration — that are doing amazing work, for which they deserve acknowledgement. But the awkward truth is that we don't know nearly enough about the extent to which credit unions overall serve low- and moderate-income consumers. They aren't required to collect and report details on the incomes or other characteristics of members, and because they aren't covered by the Community Reinvestment Act, they do not have to report much of the information that is required from banks.
Congress made an effort to nudge credit unions in that direction with the 1998 Credit Union Membership Access Act. The law did successfully encourage credit unions to add offices in underserved areas, but it remains unclear to what degree, if any, this actually increased the number of disadvantaged people who became members.
Under CRA, banks have to report small business lending, small farm lending, and community development loans, investments, and services. That includes things like loans for affordable housing construction and lending to nonprofit organizations serving low- and moderate-income community development needs, community development financial institutions, community development corporations, and minority- and women-owned financial institutions.
Because of all this data, we have a reasonably good idea of what the banks are doing or not doing to promote development in underserved communities. We don't know this about credit unions because they are exempt from CRA.
The limited data we do have on credit unions all predate the recent economic difficulties, but suggest areas of concern. A 2003 General Accounting Office study of large credit unions, for example, found
The GAO recommended that the NCUA gather information from its members to determine whether credit unions are providing greater access to services in underserved areas, similar to what banks are required to report under CRA. But NCUA rejected the recommendation on the grounds that it would impose "substantial expanded record-keeping and reporting burdens on federally insured credit unions" and that such burdens were not "cost-justified."
Indeed, credit unions have consistently resisted participating in CRA or anything like it. For example, National Association of Federal Credit Unions president Fred Becker wrote in a February 2010 letter to Massachusetts Rep. Barney Frank, then chair of the House Committee on Financial Services, that
There is a tendency to think of credit unions as small, local institutions, but many are quite large. According the most recent figures available, at least 10 credit unions have assets over $5 billion — sometimes way over $5 billion — a figure that might well have grown due to the "Move Your Money" campaign. It appears that none of the top 25 credit unions in California are designated as low income credit unions, meaning they have no explicit commitment to low-income communities.
None of this is to say that banks are saints or that the "Move Your Money" folks don't have legitimate criticisms of the industry. And the positive contributions of low income credit unions are real. But all financial institutions should be accountable to the communities they serve, and that should include credit unions.
Preeti Vissa is Community Reinvestment Director of The Greenlining Institute
