Proposed Frontwave Credit Union-Community Valley Bank acquisition would eliminate federal lending obligations; the move highlights the urgent need for a California-specific Community Reinvestment Act.
Thirty-five California-based nonprofit organizations have formerly opposed the proposed acquisition of Community Valley Bank (CVB) by Frontwave Credit Union, warning that the deal would erase critical community reinvestments.
In a letter filed with the Federal Deposit Insurance Corporation (FDIC) this month, Rise Economy—a statewide coalition of over 300 organizations advocating to break down barriers to BIPOC wealth creation in California— and 34 partner groups urged regulators to block the takeover.
“This merger provides no public benefit, will harm communities by extinguishing CVB’s reinvestment obligation and exposing more Californians to Frontwave’s onerous overdraft fees, and sets a terrible precedent for California. This merger is exhibit A in the case for a state Community Reinvestment Act that will require credit unions to finally serve our communities, as banks do, and that will give the state greater authority to scrutinize and deny bad mergers, like this one,” said Kevin Stein, Chief of Legal and Strategy at Rise Economy.
The acquisition would mark a first-of-its-kind transaction in California, where a credit union acquires a federally regulated bank. Outside of California, this has become a growing trend, with at least 22 credit unions taking over banks in 2024.
If successful, the merger will extinguish CVB’s obligations to serve the community under the federal Community Reinvestment Act (CRA). The CRA creates an obligation on the part of banks to lend, invest and provide financial services in all of their communities, including low and moderate-income communities. Credit unions are not subject to the CRA —which Frontwave notes four times in its merger application, saying “Frontwave, the resultant institution, is not subject to the CRA.” Frontwave Credit Union has $1.4 billion in assets and operates 13 branches in San Diego, San Bernardino and Riverside counties. CVB is a $316 million asset bank and has five branches in Riverside, San Diego and Imperial counties.
An analysis from Rise Economy found that in 2023, Frontwave Credit Union relied on overdraft fees for a larger portion of its revenue than all but three financial institutions in California. Rise Economy analysis also has revealed that Frontwave’s record has worsened, according to newly released data from the state Department of Financial Protection and Innovation. Specifically, Frontwave charged its customers over $8 million in overdraft and non-sufficient fund (NSF) fees, which accounted for nearly 9 percent of its total income, placing it higher than all but three state-chartered financial institutions.
The acquisition not only represents a first-of-its-kind deal in California, it also signals the loss of a bank with a positive track record in California communities. CVB achieved a rare “Outstanding” rating for its CRA activities from the FDIC. Frontwave, meanwhile, was the subject of a KPBS exposé that revealed the credit union had charged millions of dollars in overdraft fees to its member customers who are Marines.
“As a Navy veteran, I’m deeply concerned by the idea of an institution with a track record like Frontwave’s taking over a bank that actually serves its community well. I remember when young Marines were getting hit with excessive overdraft fees from Frontwave—that kind of predatory behavior goes against the mission of supporting service members and working families,” said Ebony James, Chief Operating Officer, Logan Heights CDC. Losing Community Valley Bank—a rare institution with an Outstanding CRA rating—means fewer resources, fewer small business loans, and fewer homeownership opportunities for communities like ours. If you’re removing the rules that require you to invest in the community, what’s to stop you from turning your back on the people who need access most? This merger isn’t just a bad deal—it’s a step backward for equity and economic justice in our region.”
More safeguards like AB801, introduced by Asm. Mia Bonta (D-Oakland), are needed to shield California communities as federal regulations are being rolled back under the Trump Administration and as the credit union-bank merger trend becomes more commonplace. AB801, also known as the CA-CRA, would require credit unions, independent mortgage companies and fintech companies that offer bank-like products to serve their communities, as banks are required to do. The bill, a priority of the California Legislative Black Caucus, would generate billions of dollars in small business lending and community development investment in California communities.
The FDIC has denied Rise Economy’s request for an extension of the comment period and for public hearings. A decision on the merger is expected soon.
