Overview
Title
To amend the Federal Credit Union Act to permit credit unions to serve certain underserved areas, and for other purposes.
ELI5 AI
H.R. 10511 is a plan to help credit unions, which are like banks, include people who live in places that many banks don’t serve. It means these credit unions might have to do extra work and spend more money to show they can help these communities.
Summary AI
H.R. 10511, titled the “Expanding Financial Access for Underserved Communities Act,” aims to amend the Federal Credit Union Act to help credit unions serve underserved areas. The bill allows federal credit unions to change their membership to include people from underserved areas and requires them to submit a business plan demonstrating their ability to serve those communities. For larger credit unions, it mandates the establishment of a consumer advisory panel to provide ongoing advice on serving these areas. Additionally, the bill stipulates regular reporting by credit unions and defines "underserved area" for the purposes of these provisions.
Published
Keywords AI
Sources
Bill Statistics
Size
Language
Complexity
AnalysisAI
Summary of the Bill
The bill titled "Expanding Financial Access for Underserved Communities Act" aims to amend the Federal Credit Union Act. Its primary focus is to enable credit unions to extend their services to areas identified as underserved. In essence, this legislation seeks to allow these financial institutions to broaden their membership base by including individuals and businesses located in regions lacking adequate access to financial services. The bill outlines procedures and requirements for credit unions that wish to serve these new areas, including developing business plans, forming advisory panels, and adhering to specific regulatory guidelines.
Significant Issues
Several key issues arise from the bill. Firstly, the definition of "underserved area" appears somewhat ambiguous, relying on various criteria and cross-references to other legal texts. This complexity might lead to confusion among credit unions attempting to implement the expansion authentically and compliantly.
Secondly, the bill imposes different obligations based on the size of the credit union. Smaller credit unions, defined as those with $10 billion or less in assets, face potentially burdensome reporting requirements. In contrast, larger institutions must establish consumer advisory panels, which could add to their operational complexities and costs.
Moreover, the timeline for issuing effectiveness reports by the National Credit Union Administration is vaguely stated, which might lead to confusion about when and how oversight is performed. This lack of clarity might weaken the bill's oversight mechanism if such reports are not meticulously prepared and delivered.
Impact on the Public
For the general public, this bill aims to foster greater accessibility to financial services in underserved areas. This could potentially lead to increased financial inclusion, as individuals in these regions might gain access to loans, savings accounts, and other financial products previously unavailable to them. By expanding services to underserved communities, this legislation could help bridge gaps in financial inequality and stimulate local economic growth.
Impact on Stakeholders
Credit Unions:
Credit unions are significant stakeholders, and the impact on them varies with size. Smaller credit unions might feel strained by the additional compliance and reporting requirements, potentially diverting resources from other operational needs. Conversely, larger credit unions could face higher operational costs due to the need to establish and maintain consumer advisory panels. However, the chance to expand into new markets might ultimately lead to an increased member base and business opportunities.
Underserved Communities:
Residents and businesses in designated underserved areas stand to benefit the most. They could enjoy improved access to financial services, which might enhance their financial security and economic opportunities. Enhanced financial inclusion could have long-term positive effects on these communities, helping to alleviate poverty and support local businesses.
Regulatory Bodies:
The National Credit Union Administration and other financial regulatory bodies will need to adapt their oversight strategies to accommodate and monitor these changes effectively. Ensuring compliance while facilitating smooth expansion into underserved areas will require careful balancing of regulatory oversight and support for credit unions.
In conclusion, while the bill has the potential to improve financial access for underserved communities significantly, its success will largely depend on how effectively its regulations are implemented and interpreted by credit unions and regulators alike.
Financial Assessment
The presented bill, H.R. 10511, aims to amend the Federal Credit Union Act with specific provisions that indirectly impact financial aspects, particularly concerning the operations of credit unions. The bill does not directly allocate spending or appropriations but introduces requirements that may have significant financial implications on credit unions, especially concerning operational costs, compliance, and reporting.
Financial Implications for Smaller Credit Unions
The bill imposes additional reporting requirements on smaller credit unions, defined as those with $10,000,000,000 or less in assets. Section 2 mandates that these smaller institutions submit detailed reports, including the number of members from underserved areas and the financial services utilized by these members, two years post-application approval. While this requirement does not involve direct financial spending by the federal government, it may lead to increased operational costs for these credit unions as they allocate resources to comply. Such financial strain is compounded by the need to update implementation plans regularly and engage in thorough tracking of member services.
This burden corresponds to one of the issues pointed out: the potentially burdensome nature of the reporting and compliance requirements on smaller credit unions. The financial and operational strain could impact the credit union's ability to serve their entire membership efficiently or to remain financially stable.
Financial Implications for Larger Credit Unions
For larger credit unions, those with more than $10,000,000,000 in assets, the bill requires the establishment of a consumer advisory panel. While this requirement emphasizes community engagement, it likely involves additional costs related to forming and maintaining these panels, including administration and compensation for panel members. There is also an ongoing cost associated with consulting with these panels every six months to assess how best to serve the underserved community members.
This financial requirement aligns with concerns raised in the issues regarding increased operational costs and complexity. Without clear standards on panel composition or their roles, larger credit unions might face uncertainty in financial planning and increased administrative burdens that could impact their bottom line.
Reporting Requirements
The bill emphasizes ongoing reporting for larger credit unions, mandating biannual reports every two years after an application is approved. This continuous cycle of reporting could incur significant administrative costs and resource allocation, potentially diverting attention from core financial services and member engagement.
The issues highlight the administrative burden these reports could pose, questioning the tangible benefits such reports provide against the operational inefficiencies they might introduce. Without clear advantages or streamlined processes, the financing and time invested in these reports could appear disproportionate to the purpose they serve.
In summary, while H.R. 10511 does not specify direct financial allocations from the federal government, it introduces significant operational and compliance costs for credit unions. These requirements are designed to enhance service to underserved areas but may inadvertently impose financial strain, particularly for smaller institutions, impacting their overall capacity to deliver services efficiently. This underscores the importance of balancing regulatory goals with the financial realities faced by credit institutions.
Issues
The amendment in Section 3 lacks a clear definition of 'underserved area,' leading to potential ambiguities in its application and enforcement. This could result in favoritism or unequal treatment in distributing lending opportunities to members or associated borrowers, impacting both credit unions and community members financially and legally.
Section 2 imposes potentially burdensome reporting and compliance requirements on smaller credit unions (those with $10,000,000,000 or less in assets), including the submission of detailed reports as part of their ordinary examination cycle. This could strain smaller credit unions financially and operationally.
The requirement in Section 2 for larger credit unions to establish consumer advisory panels, while well-intentioned for community engagement, may lead to increased operational costs and complexity without clear guidance on the standard composition or responsibilities of such panels.
Sections 4 and 2 introduce complexity by defining 'underserved area' using multiple criteria and references to other legal definitions, which may lead to confusion and difficulties in ensuring compliance across credit unions. This is relevant legally and operationally for credit unions trying to implement new directives.
The ongoing reporting requirements every two years, as described in Section 2 for larger credit unions, could become administratively burdensome without clear indications of the benefits derived from such reports, impacting operational efficiency.
Section 5 outlines a report issuance timeline that could cause confusion due to unclear wording ('not later than 3 years after the date of enactment but no sooner than 2 years'), which might impact transparency and accountability regarding the amendments' implementation.
Section 4's measurement criteria for 'more than ten miles from the nearest branch' do not account for actual transportation accessibility or geographical barriers, possibly affecting practical service delivery and financial access which might be crucial for some communities.
There are no outlined repercussions in Section 5 if the National Credit Union Administration fails to issue the required report, potentially leading to a lack of accountability and oversight regarding the Act's implementation.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
This section states that the act can be referred to as the “Expanding Financial Access for Underserved Communities Act.”
2. Credit union service to underserved areas Read Opens in new tab
Summary AI
The amendment to Section 109 of the Federal Credit Union Act allows credit unions to expand their membership to include underserved areas by submitting a business plan. Smaller credit unions, with assets of $10 billion or less, must report on their efforts within two years, while larger ones must also form a consumer advisory panel and comply with additional regulations, including adherence to consumer protection laws.
Money References
- “(2) REPORT BY SMALLER CREDIT UNIONS.—Not later than 2 years after the date on which a Federal credit union with $10,000,000,000 or less in assets has an application described under paragraph (1) approved, the credit union, as part of the ordinary course of the examination cycle and supervision process, shall submit a report to the Administration that includes— “(A) an estimate of the number of members of the credit union who are members by reason of the application; “(B) a description of the types of financial services utilized by members of the credit union who are members by reason of the application; and “(C) an update of the credit union’s implementation of the plan described under paragraph (1).
- “(3) ADDITIONAL REQUIREMENTS FOR LARGE CREDIT UNIONS.—With respect to a Federal credit union with more than $10,000,000,000 in assets: “(A) CONSUMER ADVISORY PANEL.—If an application described under paragraph (1) is approved, the Federal credit union shall— “(i) establish a consumer advisory panel that is representative of the population of the underserved area; and “(ii) consult with the consumer advisory panel at least once every 6 months on how the credit union can best serve the convenience and needs of the population of the underserved area.
3. Member business lending in underserved areas Read Opens in new tab
Summary AI
The section modifies the Federal Credit Union Act to include a new rule that allows credit unions to offer business loans to members or associated borrowers living or operating in underserved areas.
4. Underserved area defined Read Opens in new tab
Summary AI
The section modifies the Federal Credit Union Act by defining an "underserved area" as a region with specific characteristics such as being an investment area, having primarily low-income communities, or being far from any bank or credit union branch.
5. Reports by the National Credit Union Administration Read Opens in new tab
Summary AI
The National Credit Union Administration is required to issue a report to specific committees in the House and Senate on how the changes made by this Act are being implemented. The first report is due between two to three years after the Act is enacted, with additional reports every two years after that.