The Government Accountability Office last week released a report outlining recommendations to further incentivize financial institutions to provide banking services and small-dollar consumer loans in low- to moderate-income communities, including extending the Community Reinvestment Act framework to credit unions.
Under the current CRA framework, evaluations of small-dollar, non-mortgage consumer loans are not required for all banks, and are typically only conducted “if consumer lending is a substantial majority of the lending or a major product of the institution, which generally is not the case across all institution types,” GAO noted. As the Treasury Department undertakes a review of the Community Reinvestment Act framework, GAO recommended that it consider modifying the tests conducted as part of the CRA exam to focus more on how institutions are offering these products and expanding the scope of entities examined to capture more types of institutions, including credit unions and other nonbank entities.
ABA has long called for credit unions to be required to demonstrate through measurable standards that they are meeting their service obligations. In a white paper last year on CRA modernization, ABA urged Treasury to apply CRA-like requirements to credit unions and other financial firms.