CU urges specific bank commitments at Federal Reserve hearing on BofA
June 8, 1998
Consumers Union West Coast Office
San Francisco, CA — At a Federal Reserve Board public hearing today, Consumers Union Staff Attorney Earl Lui urged the Board to condition its approval of the proposed Bank of America/NationsBank merger upon the new bank’s commitments to meet the needs of low- and moderate-income consumers. This hearing is the sole public hearing that the Federal Reserve has allowed on the nation’s largest proposed bank merger.
Under the federal Community Reinvestment Act (CRA), banks must serve the needs of the entire communities in which they operate. Low- and moderate-income consumers, however, often do not have meaningful access to banking services. Lui’s testimony urged the Fed to seek the following commitments:
· No higher fees: The bank should commit not to increase current fee levels and minimum balance requirements for a reasonable period of time.
· Pass cost savings to consumers: The bank should commit to passing a significant portion of the cost savings from the merger to increasing access to banking services for low- and moderate-income consumers.
· Specific CRA goals: The bank should reach a specific CRA commitment with community groups in affected states before approval of the merger. The merger application is vague about how the new bank will meet its CRA obligations. Although NationsBank made a $350 billion pledge on May 20, 1998, that figure is not enforceable and has insufficient sub-targets to allow for meaningful oversight and accountability. For example, there are no state-specific dollar goals, nor is there any targeting to assure that low- and moderate-income consumers actually benefit from these programs.
· Branch closures and low cost accounts: The May 20 announcement does not discuss branch closures, future branch openings, or plans for offering low-cost accounts. The Federal Reserve should require the new bank to offer low-cost savings and checking accounts in order to allow low-income consumers to enter the banking mainstream, rather than rely on check cashers and other “fringe” bankers.
· Preserve Bank of America Community Development Bank: This is a model program for a bank’s CRA activities, developing innovative products and supporting nonprofit community development groups in the state. NationsBank has not agreed to preserve the Community Development Bank.