RANCHO CUCAMONGA, Calif.-David Chatfield might be heading towards retirement, but that does not mean he has lost any of his fire when it comes to the continuing battle between banks and credit unions.
Chatfield, a CU movement legend who will be retiring from his post as president of the California and Nevada Credit Union Leagues April 1, has long been an outspoken critic of the tactics used by banking associations against credit unions-especially concerning the tax exemption.
Before he and his wife hit the Alaskan Highway in their motorhome, The Credit Union Journal gave Chatfield one more chance to sound off on the CU taxation issue. Chatfield noted that as recently as the passage of the CU Membership Access Act, Congress reaffirmed the tax exemption.
CUJ: During the hearings by Rep. Bill Thomas in November, he essentially challenged CUs to prove the exemption still is deserved-what do you say in response?
Chatfield: Congressman Thomas has a particular point of view not shared by many others, but his questions certainly are something we need to pay attention to. There were questions by other committee members related to how credit unions serve their fields of membership. Credit unions that are new to community charters have a different opportunity to serve their community than one that has been a community charter for some time; and very different from single-sponsor or occupational credit unions.
Credit unions have not done as good a job as they could to document how they serve their communities-something we are working on.
CUJ: How do you respond to the last question when asked by media unfamiliar with CUs?
Chatfield: To folks who are not familiar with credit unions, I point out the historical perspective. Banks want to say credit unions always were occupational credit unions and only now are becoming community credit unions. That is not accurate. Many early CUs served communities. Many changed to occupational credit unions because that made it easier to charter a new one.
In the 1920s, there were few occupational credit unions; they were mostly community credit unions. Now, we are coming back full circle.
CUJ: How do you answer the banker accusation the tax exemption was deserved in the 1930s, but no longer?
Chatfield: The exemption is every bit as deserved today as any year. It is their cooperative nature that is the basis for their tax exemption. If the bankers feel being a credit union is an advantage, then we invite them to convert.
CUJ: What data do you feel CUs must do a better job of capturing?
Chatfield: Credit unions have been relying on anecdotal information: here is what we are doing with charities or community organizations. But, we must document what we do to serve the full spectrum of membership. NCUA and others are looking for ways to provide that information without being a big administrative burden. We have to be able to electronically plot where members are located and what services they are using. Just knowing where members are does not give an accurate picture.
Nothing against the Community Reinvestment Act, it just doesn't fit credit unions. It made sense 25 years ago when banks were taking money out of the communities and sending it out of the country. Using CRA to measure credit unions is not productive, because it doesn't measure what credit unions do.
CUJ: What is the value of credit unions to a community and the nation?
Chatfield: There are a number of ways to look at it. There are figures from CUNA and other organizations showing the value of credit unions-money that goes back into the pockets of members and non-members from lower fees and better rates. It is about $3 billion to $4 billion per year to credit union members, and another $6 billion to non-members; who save just by credit unions being in the marketplace. Ten-billion dollars far exceeds the value of taxation of credit unions, which has been estimated at $1.5 billion. The value to consumers far exceeds the value to the government.
CUJ: Are you surprised this issue never dies?
Chatfield: We have been under attacks by banks for all 40 years I have been in credit unions. But, they are more vicious now. The attacks won't ever go away, but I think banks would serve their customers better by using the resources they are spending on attacking CUs to serve them.
Will they ever stop? Hopefully, but maybe not. There might always be people in the banking industry who have greed and want to put money in their pockets. Banks continue to make record profits. They are not bothered by little credit unions. The hypocrisy is rampant. They continue to clamor for tax loopholes for themselves, while demanding credit unions be taxed.
CUJ: Do you feel credit union successes in some ways work against perceptions of CUs?
Chatfield: In a strange, perverse way, it is true. Credit unions that have helped their members be successful-suddenly-bankers want to penalize us for that. It is almost as if credit unions are not allowed to serve people who are not underserved. A credit union needs a mix: of middle class and upper middle class members, and also serve the underserved. Which we do. That is the part the bankers miss-credit unions help people be successful.
The taxation issue is really important. Bankers have been after us for a long time. They are a greedy bunch of folks, and that is the reason they are doing this.
- Michael Bartlett
PHOENIX-In his 40 years in the credit union movement, Gary Plank has witnessed banks questioning CUs' tax exemption during every one of those years. Despite bankers' complaints, he says credit unions remain deserving of their tax status because they are doing the same things they did 70 years ago.
For the last six months, Plank has been wearing two hats: in addition to his duties as CEO of the Arizona Credit Union System, since July he has served as board chairman for the World Council of Credit Unions (WOCCU). He is a veteran of three other CU leagues, having been CEO of the Minnesota League of Credit Unions from 1983-96, and he has held several positions at the Iowa and South Dakota leagues.
CUJ: During the hearings by Rep. Bill Thomas in November, he essentially challenged credit unions to prove the exemption still is deserved: What do you say in response?
Plank: I think Chairman Thomas, for whatever reason, would like to tax credit unions. He did not find any support on his committee or in Congress, so that is why he said at the end he didn't want to tax credit unions. Instead, he said he wants us to be more transparent and to define "modest." I don't know the chairman and can't speak for him, but why else would he call the hearing if he did not want to tax credit unions? It was a fishing expedition, I guess.
The second thing that becomes a problem in an exercise like this is he does not seem to understand how credit unions work. For closed membership credit unions, it is very difficult to get to people of modest means-if, by that, they define "modest means" as poor.
CUJ: How do you respond to the last question when asked by outside media unfamiliar with credit unions?
Plank: It is difficult, because if people are not familiar with credit unions, they look at a big building and say: "There's another financial institution." I tell them credit unions are doing the same things they did when first organized in Germany more than 150 years ago -they serve members, not shareholders. For those who bring up the size of a credit union, no one suggests that if the congregation of a church, synagogue or mosque reaches a certain size, it should lose its tax exemption. Size is not a criterion for a tax exemption.
CUJ: How do you answer the banker accusation the tax exemption was deserved in the 1930s, but credit unions long since have moved on from serving only low-income individuals?
Plank: The problem is, bankers have tried to define our service areas and what we were designed to do; and that's their problem. I consider myself an expert on what credit unions are designed to do, having organized 70 or 80. Employer group credit unions are not designed to serve low-income people. Low-income people generally are not employed on a full-time basis. Tell me how a group of the lowest-income people in the U.S. could establish a credit union in today's economic environment? You need a mix of people who have money to save so others can borrow.
CUJ: What data do you feel CUs must do a better job of capturing?
Plank: That is a tough question to answer, because every credit union is unique. It makes it difficult to measure things. What one credit union thinks is a very cogent example might mean nothing to another.
The more information we dig out, the more information people will want. I am not suggesting we shouldn't look for more information; we need to make sure we aren't getting information just for busywork. Let's find out what is important.
CUJ: What is the value of credit unions to a community and the nation? Can CUs prove they earn the tax exemption by giving back more to their communities and the country than would be obtained through taxation?
Plank: Credit unions prove they put in more than would be taken by taxes. We put that money back in the hands of our members. According to CUNA's numbers, it is roughly $6 billion. That money goes back into the economy and provides taxes in other areas. And, bank customers save money because credit unions provide competition.
CUJ: Are you surprised this issue seemingly not only never dies, but grows stronger? Will it ever go away?
Plank: It ebbs and flows. I've been doing this for a long time-40 years-and it has been going on almost all of that time. I suspect this will continue. Some financial institutions do not like competition, and we are a fairly easy target for them. The reason it ebbs and flows is because they get tired of getting their heads slapped. It has been going strong now for three years, and their victories seem minute. I would hope someone soon will say "enough." Our share of market has not changed dramatically in the last 10 years, so why is there this loud screaming?
CUJ: Do you feel credit union successes in some ways work against perceptions of CUs?
Plank: Only if the other institutions are successful in redefining what we do. The most recent Gallup Poll shows our members still love us. I would not have believed we would see billion-dollar credit unions when I first started-they were smaller. But, when you get used, you grow. Many things have evolved over the years-credit unions didn't use to offer checking, credit cards or insurance, but now they do. We have changed to fit the environment. I think that will continue.
- Micheal Bartlett
