One More Way CUs Could Help Local Communities

March 10, 2017 at 10:00 am Leave a comment


Yesterday Governor Cuomo proposed a $1.4 billion investment as part of a plan to revitalize Central Brooklyn. Just as Municipal Deposits go hand and hand with efforts to make local governments more efficient, credit unions have an off-the-shelf tool that could help further the governor’s goals, not only in Brooklyn, but across the state.

What I am talking about are Banking Development Districts. They have been around since 1997. The basic idea is that banks that agree to open branches in financially underserved areas receive a series of incentives, including the authority to accept low interest deposits from the state comptroller and tax breaks. That’s right, banks benefit from various tax breaks but that is a blog for another day.

Unfortunately, the program has not been as successful as hoped. In a 2010 report, the DFS commented that “Despite its successes, the BDD program could be dramatically improved by mandating that BDD branches provide financial education, encouraging the development of more affordable products and services and encouraging more collaboration between the BDD branches and local community groups.”

One of the most basic things the state could do is to allow credit unions to participate in the program. In fact, the Assembly has repeatedly passed legislation going back almost as long as the program has been in existence to do just that. Assembly bill A5776 has been introduced by Assembly Banks Chair Kenneth Zebrowski. With the governor’s commitment to underserved areas, maybe now is the time to let common sense prevail and let credit unions participate in BDDs. After all, many of the pavlovian banker arguments against credit union involvement in anything, even if it might help people, are even more spurious when it comes to BDDs.

This program was designed to provide tax incentives to financial institutions in return for providing expanded financial opportunities to communities in New York City and around the state. It is kind of hard for a banking industry that needs tax breaks in order to go into financially underserved areas to argue with a straight face that the tax status of credit unions should exclude them from participating in this program. This is particularly true since banker involvement in the BDD program has been less than stellar.

The continued difficulty of getting credit unions seeking to participate with banking development districts demonstrates how pernicious it is to continue to view every effort by credit unions to expand services from the perspective of the banking industry. As inequality grows in the country and in the state, people need as much access to financial services as they can get their hands on. Allowing credit unions to compete for their business can play a role in much needed economic development. In the end, the question should not be, “What is best for the banks?” But rather, “What is best for New York State consumers?”

Entry filed under: General.

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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