Why would a depository institution help a CDCU to form?
The federal Community Reinvestment Act requires all FDIC-insured institutions (banks, savings banks, and savings and loan associations) to engage in lending, service and investment activities within the area where it has its offices (and therefore collects deposits). Such institutions will get CRA credit for assisting a CDCU, while assistance may take the form of pledging deposits for a period of time, making grants (commonly to cover the CDCU’s operating expenses), donating equipment (for example, furniture or older models of computers), or donating the services of personnel to provide guidance to the CDCU. Although there is some difference of opinion, most analysts agree that CDCU’s do not compete with other types of financial institutions because of the different lines of business which the respective institutions engage in. CDCU’s generally provide basic financial services and make small loans while large banks, for example, make large commercial loans and mortgage loans. • Are the
