Testimony on Need for CIT Group and OneWest Bank to Develop Stronger CRA Plan

The testimony of Stephon Taylor, Director of Programs with California Resources and Training (CARAT), about the proposed OneWest and CIT Group merger, is featured in its entirety below. If you were unable to attend the hearing, CRC live-blogged it here and you may also find our CIT Group/OneWest Merger resource page help.  It outlines why 21,000 people are opposing this merger along with 100 California and national organizations. Pictures of the rally against the merger are available here.

February 26, 2015

Thank you for the opportunity to speak today.  I will keep my comments brief.

I am Stephon Taylor, Director of Programs with California Resources and Training (CARAT), a 19 year old economic development non-profit in California.  CARAT’s primary focus over the last 19 years has been research and development, and program design and implementation as it relates to Technical Assistance (TA) services for small businesses in underserved communities in California. CARAT provides technology solutions training to over 3,000 small businesses. The majority of the small businesses that we serve have less than $1 million in annual revenues and fewer than 10 employees.

California has a vast underserved population of small businesses needing access to capital as well as management and technical assistance (TA) support services to assist them in starting and sustaining their business operations.  They need affordable capital and appropriate financing vehicles.

The economic downturn in the country hit California as well and many of the existing businesses are still in need of restructuring and stabilization assistance. Additionally many people out of work turned to self employment as an option and need (TA) assistance to grow and expand their businesses.

My concerns around the proposed merger OneWest/CIT merger are as follows:

  1. Lack of banking access in LMI communities. Only two of the banks’ 73 branches are in low income census tracts, and one of those branches is slated to close post-merger. Our work with our small business constituency has shown that physical branch locations are a necessity. Mobile banking, while a great supplemental tool, is not a substitution for physical branches.
  2. The banks’ track record of performance related to community development. In the past, both OneWest and CIT have made minimal contributions to support technical assistance and economic development. Without a definitive and robust CRA plan to address those areas, I don’t see how the merger meets the “conveniences and needs” of the affected communities.
  3. The banks’ track record of performance related to small business lending. The majority of OneWest’s small business lending has been to businesses with over $1M in revenue, and they have not committed to serving smaller businesses. Their publicly stated goals to increase their lending to businesses with revenue under $1M have also fallen short of the mark.

In conclusion, my concern is that OneWest/CIT needs to bring products and services into California that fit the market needs of our small business owners, which aren’t adequately served by their current product mix.  My second concern is that there is a miniscule commitment, if any, to supporting, in a philanthropic way, economic development and business TA services that are needed.

California is always in need of more great corporate citizens. CARAT would welcome the opportunity to work with OneWest/CIT to meet the needs of the underserved small businesses within the state.

However, there is an immediate need for OneWest/CIT to develop a more robust, comprehensive and public CRA plan that details the commitments they will make to their California constituency.

I would urge that a philanthropic and community benefit commitment is made by OneWest/CIT to California that truly supports the needs of California Small Businesses.

Asian Inc Testimony at OneWest and CIT Group Merger Hearing in Los Angeles

The testimony of Michael Chan, president of Asian Inc, about the proposed OneWest and CIT Group merger is featured in its entirety below. If you were unable to attend the hearing, CRC live-blogged it here and you may also find our CIT Group/OneWest Merger resource page helpful as well. Pictures are available here.

Federal Reserve Hearing for CIT Group Acquisition of OneWest

Thursday, February 26,2015

Federal Reserve Bank, 950 South Grand Avenue,

Los Angeles, California 90015

Thank you for giving me this opportunity to provide my statement.  My name is Michael Chan and I am the President of ASIAN, Inc., a nonprofit tax exempt corporation that seeks to empower our disadvantaged Asian American Pacific Islander and other racial minority communities by removing obstacles to their socio-economic advancement in California.

Over our last 43 years, we have developed over 1,000 affordable housing units.  We assisted over 15,000 Low to Moderate (LMI) persons with Limited English Proficiencies secure homebuyer education, foreclosure counseling, and financial literacy training in Northern California.  We also operate 3 Minority Business Development Agency Business Centers in San Francisco, San Jose and Fresno, where we have assisted hundreds of minority businesses secure hundreds of millions of dollars in contracts and capital.  We have compiled a significant track record that illustrates our deep understanding of the broad community reinvestment issues that are being discussed here today.

Based on our humble experiences, ASIAN, Inc. is compelled to currently oppose the CIT Bank merger due to what we see are significant flaws and limitations in the CIT Bank CRA Benefits Plan which in our opinion can and should be remedied by CIT Bank.

We understand this this is a unique merger of a retail bank, OneWest Bank, based in Southern California, and an internet bank, CIT Bank, which can accept deposits from anywhere.  This poses some unique CRA challenges, particularly regarding the basic fundamental CRA tenet that deposits collected from a community need to be reasonably reinvested back into that community.

With significant deposits being made over the Internet to CIT Bank in conjunction with deposits received at OneWest Bank branches in Southern California, it is good to know that CIT Bank will recognize Internet deposits in Southern California for reasonable reinvestment in Southern California.  This is a good start.

This also says that CIT can track where Internet deposits are coming from not only in Southern California but anywhere else in and outside of California.  Given that there is a consensus within the community development leadership that where deposits are taken is where those deposits need to be reasonably reinvested.

The proof is on CIT Bank to show that their CRA Benefits Plan can address the reinvestment of deposits received outside of Southern California back into reinvestments that impact disadvantaged LMI communities from where these deposits came from.  The reinvestment needs are just as severe in Fresno, Stockton, Sacramento, Oakland, San Francisco, East Palo Alto, San Jose and other California localities as they are in Southern California.

Otherwise endorsement of the CIT CRA Benefits Plan as-is with its presumed flaws would send the wrongful message that de facto redlining via the Internet cannot be prevented.

This would be a tragic precedent for CRA rankings for internet banks.  Their CRA Plan needs to be revised to address this systemic imbalance between the location of deposits and where community reinvestments are made.  This is where the CRA regulations are maybe a step behind internet banking and need to protect the intent and integrity of the CRA Act.

We all want to avoid redlining as an unintended consequence. This is why it is so very important to require CIT Bank to develop a more transparent, realistic and comprehensive CRA Benefits Plan that will benefit all of California’s disadvantaged, culturally diverse, and Limited English proficient LMI communities that have deposits with CIT Bank.

Community leaders protest sale of 20 local Banco Popular Branches in Los Angeles

Banc of California Press Conference Picture

Editor’s note: On September 4, 2014, Banc of California announced a new, public Community Benefit Plan.  Read more details about the plan here: CRC Announces Support for Community Benefit Plan by Banc of California as Part of Banco Popular Branch Acquisition

Earlier this week, prominent local Los Angeles leaders gathered at a downtown Banco Popular and held a press conference, urging a bank regulator to postpone the sale of the 20 branches until more information is given to the community about the acquisition. Banc of California, headquartered in Irvine, is trying to buy 20 Banco Popular branches which are located in Los Angeles and Orange counties.

In its application to buy the branches, Banc of California said that it would eliminate three checking account features at Banco Popular, including cash incentives for opening new accounts, interest rate bonuses on savings when customers maintain their checking accounts, and a debit card reward program.  Community advocates criticized the proposed cuts, saying that these features help people to open and maintain checking accounts, which can be the first step in building a financial history.

Community leaders are deeply concerned that Banc of California has not provided much detail in its community reinvestment activities since its last CRA exam, which examined the bank’s activities from January 2010 to December 2011 and earned the bank a “satisfactory” rating.  Since that time, the bank has grown considerably, and given its larger size, the bank’s next Community Reinvestment Act will be more extensive. Despite the nearly 2 ½ years that have passed since that exam, the bank did not provide much information in its acquisition application.  The bank noted a recent investment in a Community Development Financial Institution as well as the fact that bank staff volunteer with local nonprofits.

The Office of the Comptroller of the Currency is the bank regulator that will decide whether or not to approve the bank’s acquisition application.

Paulina Gonzalez, executive director of the California Reinvestment Coalition, an umbrella organization with over 300 organizational members throughout the state, explains: “While other large banks develop their CRA plans with input from the community, Banc of California has not. While other large banks make their community reinvestment goals public, Banc of California has not. The FDIC and the Federal Reserve have both required this type of transparency in recent bank mergers and acquisitions, and we expect no less from the Office of the Comptroller of the Currency.”

The comment period for the public to weigh in on the bank’s acquisition was recently extended by the Office of the Comptroller of the Currency (bank regulator) to August 19th.  The comment period was extended because the bank originally published its announcement in the Orange County Register and New York Times.  The California Reinvestment Coalition pointed out to regulators that current Banco Popular customers may have missed the notice.  The new notice was published in La Opiniónand Los Angeles Times.

The California Reinvestment Coalition, an umbrella coalition of over 300 organizations throughout California, is urging the Office of the Comptroller of the Currency to postpone or deny Banc of California’s application until the Banc is more transparent with the community.

Picture from Press Conference: Banco Popular Protest

Picture of 20 branches to be acquired: 20 Branches.

Letter from California Reinvestment Coalition to Bank Regulator, opposing merger: CRC letter

The Banc of California Acquisition application can be downloaded here: Banc of California application

If you’re interested in learning more about the Community Reinvestment Act, read this article:

The Community Reinvestment Act: A Law That Works

If you’d like to learn more about this recent proposed acquisition, these articles give more context.  Please note, some of the American Banker articles require a subscription to view.

Communities Deserve Transparency in Bank M&A In this Op-Ed, Paulina Gonzalez, executive director of the California Reinvestment Coalition, explains why CRC is opposing Banc of California’s proposed acquisition of 20 Banco Popular branches. Gonzalez cites a lack of CRA transparency and questions how the  Office of the Comptroller of the Currency can review the proposed acquisition when Banc of California has provided few details on bank activities that would qualify for credit under the Community Reinvestment Act. BankThink.July 24, 2014.

East L.A.’s Pan American Bank gets $6-million bailout from other banks In this article about 16 community and regional banks investing in Pan American bank, opposition to Banc of California’s proposed acquisition of 20 Banco Popular branches is cited. E.Scott Reckard.Los Angeles Times. July 23, 2014.

Fusión bancaria podría eliminar programas para latinos Prominent Los Angeles community leaders gathered at a local Banco Popular branch to speak out about the lack of transparency in Banc of California’s community reinvestment plans. Araceli Martínez Ortega.La  La Opinión. July 22, 2014.

Banc of California expansion opposed by advocates for minorities, low-income CRC’s concerns about Banc of California’s lack of a public Community Reinvestment Act plan are cited in this article. Paulina Gonzalez, executive director at CRC, explains the importance of transparency in building trust with customers. Josie Huang. Southern California Public Radio. July 22, 2014.

Advocacy Group Secures Review of California Branch Deal When Banc of California announced its intention to acquire 20 Banco Popular branches, it published notice in theOrange County Register and the New York Times. In CRC’s letter to the OCC opposing the acquisition until Banc of California is more transparent in its plan for the branches and community, CRC members expressed concern that current Banco Popular customers may not have seen the notice. This article explains that the Office of the Comptroller of the Currency required Banc of California to re-publish the notice in local media, including the Los Angeles Times and La Opinión. The OCC also extended the comment period on the proposed acquisition 30 days, until August 19th. Chris Cumming. American Banker. July 18, 2014.

Banc of California, Advocacy Group Spar over CRA Plan CRC’s opposition to Banc of California purchasing 20 Banco Popular branchs is cited in this article. Paulina Gonzalez is quoted about the bank lacking a public community reinvestment plan. Chris Cumming.American Banker. July 17, 2014.

Banc of California Expects OK of Branch Purchases CRC’s support for Banc of California to release a public reinvestment plan prior to its acquisition of 20 Banco Popular branches is cited. Andrew Edwards. Los Angeles Business Journal. July 15, 2014.

Activists Oppose Banc of California Acquisitions CRC’s opposition to Banc of California’s acquisition of 20 Banco Popular branches is cited in this article. Andrew Edwards. Los Angeles Business Journal. July 14, 2014.