By James Chessen, ABA Chief Economist

The credit union charter is grounded in the mission of serving the underserved, and in exchange for that worthy undertaking, Congress granted credit unions a federal income tax exemption.Unfortunately, the biggest credit unions aren’t holding up their end of the bargain. Instead, they are abusing their tax advantage to serve higher income communities and are often shunning low- and moderate-income consumers—and the numbers spell that out.

There are 21,200 credit union branches in the U.S., but just under 14,500 of them are located in middle- and upper-income census tracts according to data from S&P Global’s Market Intelligence. That means less than one third of credit union branches are actually located in the low and moderate income communities they were created to serve.More disturbing is that fewer than 6 percent of the branches of large credit unions (those with over $500 million in assets) are in low-income communities. These largest credit unions receive the highest dollar benefit from the tax exemption, yet they have chosen to focus their resources on the well-to-do rather than using their tax advantage to help expand cheaper credit to those who need it most. Simply put, they are using their tax-exempt status to make profitable consumer and business loans to people who do not need taxpayer-subsidized financial services and can afford to shop around for financial products elsewhere.

This is why it’s important to distinguish the large, profit-driven credit unions from those smaller credit unions that are mission-focused and serving consumers in low-income communities. A deeper dive into the data shows that of all the credit union branches in low-income neighborhoods, two out of three are from small credit unions (under $500 million in assets).

Congress has the tools to make sure large credit unions do a better job of meeting their 1934 statutory requirement to serve people of modest means, and that starts with the Community Reinvestment Act.

For more than 40 years, CRA has required banks to demonstrate that they are meeting the credit needs of low- and moderate-income neighborhoods. However, the law never applied to credit unions because their charter already called for them to serve consumers in those communities. But the credit union industry is much different than it was in 1970s, and large credit unions have increasingly forgotten why they received their tax exemption in the first place. Congress should help them remember.

There are 594 credit unions with $500 million or more in assets—holding about $1.27 trillion of the industry’s $1.6 trillion assets—that could be doing a better job of meeting the needs of low- and moderate-income communities. If these credit unions are in fact meeting the needs of low- and moderate-income people, they should have no fear of demonstrating that explicitly as banks must do. Quite simply, lawmakers should make large credit unions meet the same CRA requirements as the banks they compete with every day.

It’s a change every taxpayer should welcome. The nation will forgo $22 billion in federal income tax revenue over the next 10 years to pay for the current credit union tax exemption, according to the latest figures from the Office of Management and Budget, and $18.4 billion of that—84 percent—will be forked over to the large credit unions with more than $500 million in assets. Given that extraordinary and unnecessary benefit, large credit unions should at least be held accountable for meeting the needs of the very communities they were created to serve in the first place. If the smallest credit unions can meet that mission, certainly their largest peers with the greatest resources can do the same.