Rewarding Banks For Opening Branches
By Joyce Moed, Reporter

LATHAM, N.Y.–Two states are considering duplicating a New York program that rewards banks for opening branches in neighborhoods with little or no banking services, as reported in the Credit Union Journal’s sister publication American Banker.

Lawmakers in Texas and California introduced bills recently that would create "bank-development districts," specially designed low-income areas that are underserved by banks.

The Credit Union Journal questioned whether credit unions would be able to receive the same incentives–government deposits­–as banks, if they create branches in these districts, too. The answer was a unanimous "no."
"A lot of credit unions are already doing that," said Bonnie Sklar, public relations coordinator for the New York State Credit Union League, of the topics of banks going into underserved areas. "I don’t think credit unions need an incentive."

Sklar stressed that credit unions typically place branches in low-income, underserved areas, on their own accord, and offer financial education, too.

Amy Kramer, vice president of governmental affairs for the New York State Credit Union League, said that credit unions in New York are not eligible to participate in the state’s program that gives incentives to banks in underserved neighborhoods.

"[The program] began to correct bad behavior," she said. "Banks were pulling out of neighborhoods that were not profitable."

 "Credit unions would love to get incentives for serving the underserved. This is what we do every day."

Kramer said that the banks’ incentives include discounts on property taxes and municipal deposits at a favorable rate. She said that the reason credit unions do not receive these incentives in simple.

"Because of banker opposition," she said. "The banks say ‘This is our program.’ We don’t think it’s fair at all. We’re the experts at serving the underserved."

In New York, there is a bill sponsored by Assemblyman Ivan Lafayette (D-Metro) and Sen. Hugh Farley (R-Capital) that look to include New York’s credit unions in the State Banking Development Districts program. Lafeyette’s has passed the Assembly; the Senate bill has remained in committee.

The bill states: "Credit unions are New York’s ‘experts’ in serving low-income and underserved areas. Allow the ‘experts’ to bring more affordable for New York’s communities by granting credit unions access to the Banking Development District Program."

The Texas bill, which recently did not pass, would have allowed banks that open branches in those districts to be eligible to receive state and municipal deposits at or below market rates, in addition to receiving property tax breaks, according to the American Banker article. "Texas has very high property taxes, so if a bank were to get a tax break, it would be impetus" to open a branch in one of the designated districts, said John Heasley, executive vice president and general counsel for the Texas Bankers Association. But like New York, the bill in Texas, even if passed, would not have applied to credit unions, said Ricky Grady, vice president of marketing and public relations for the Texas Credit Union League.

California’s drafted bill, from Rep. Ted W. Lieu (D-El Segundo), if passed would offer incentives also to banks already serving such neighborhoods.

"If a bank is already in a neighborhood like that, then that’s a good thing," David Ford, chief of staff for Rep. Lieu, told the American Banker.

The California bill also does not include credit unions, said Tina Ramos-Ingold, public affairs coordinator for the California and Nevada Credit Union Leagues.