House Preparing to Consider Credit Union FOM Expansion Measure

If passed, legislation could have major impact on both underserved area additions and CDFI program.

The House is preparing to consider legislation that would allow all credit unions to expand their fields of membership (FOM) to include underserved areas.

The House Rules Committee has indicated it is likely to meet next week to consider a rule governing floor debate on the measure. After the panel approves a rule, it would go to the House floor. Should the House approve the rule, the bill itself would then be considered on the House floor.

The credit union measure is very different from the one that the House Financial Services Committee approved last month. That bill, H.R. 7003, has been added to H.R. 2543, a measure that, among other things, expands the Community Development Financial Institutions (CDFI) program.

The credit union provisions would expand the ability of all credit unions to serve census tracts in which 85% of the area qualifies as low-income as well as areas that are at least ten miles from a branch of a depository institution.

Response From Industry Trade Groups

Credit union trade groups have endorsed the legislation, while banking trade groups have termed it a power grab by the credit union industry.

The Independent Community Bankers of America (ICBA) has issued a new alert to its members, urging them to contact lawmakers and express their opposition to the bill. The ICBA says the legislation “would expand credit unions’ fields of membership and commercial lending powers to include low-income and underserved areas without subjecting credit unions to proper documentation or oversight to determine if low-income people are served.”

The future of the legislation is uncertain since even if it passes the House, it is unclear whether the Senate will consider it. When it was considered by the Financial Services Committee as H.R. 7003, Republicans opposed the bill.

What Else Would the Bill Change?

In addition to the credit union provisions, H.R. 2543 would, among other things:

–Authorize $4 billion for the CDFI Emergency Capital Investment Fund. Those funds would still be required to be provided through the appropriations process. The Treasury Department would be permitted to use the funds to provide financial and technical assistance to CDFIs.

–Require the Treasury Department and banking regulators, including the National Credit Union Administration (NCUA), to establish a grant program for providing capital for creation of CDFIs or Minority Depository Institutions (MDIs).

–Create a set-aside in the CDFI program for MDIs and create an Office of Minority Depository Institutions within the fund’s offices.

–Create a process to allow both CDFIs and MDIs to have access to the Federal Reserve’s discount window.

–Require banking regulators to include a diversity and inclusion component in the examinations of financial institutions.

–Include women's financial institutions in the definition of a MDI.

–Develop a process for streamlined applications for the CDFI program. (The NCUA had such a program, but ended it this year, saying that the Treasury Department was expected to make changes in its application process.)

–Decrease the CDFI Bond Guarantee Program minimum issuance threshold from $100 million to $25 million.

To learn more about underserved areas and how they could help your credit union expand its FOM, visit our field of membership page or contact us directly today!