Don't Tax Yourself
NCUA Board Member Debbie Matz is urging credit unions to extend business development efforts to the underserved-if for no other reason than to help protect the CU tax exemption.
As the keynote speaker at The Credit Union Journal's SEG & Business Development Conference, Matz said there are a number of good reasons to ensure that credit unions are serving all of their members, not the least of which is giving the movement strong armor against the ongoing banker attempts to persuade lawmakers to rescind the CU tax exemption.
"I used to say that serving all of your members is not only the right thing to do, it's good business," Matz told attendees. "But now I'll say it's not only good business, it's the right thing to do and it will help you keep your tax exemption."
Matz noted that she had been called an alarmist for warning that the tax exemption could be in peril-right up until House Ways and Means Committee Chairman Thomas said he will hold hearings addressing whether certain tax-exempt organizations such as credit unions shouldn't be taxed.
The sole Democrat on the NCUA board outlined a number of ways credit unions can reach out to their members and prove themselves worthy of the tax exemption:
Consider offering member business loans. Matz explained that NCUA has made it easier for credit unions to get into member business services because it's a way for CUs to diversify their portfolios and help their members. But she also suggested that credit unions focus on the smaller commercial loans, because these are the loans that are most likely to fall through the cracks at other lending institutions. "Banks do a fine job of financing malls," she said. "Such loans can be very risky, and it needs to be done right. It's not for every credit union, but if it's right for your credit union, you need to look into it." Matz noted NCUA will be hosting a Partnering And Leadership Successes (PALS) workshop focusing on MBLs in San Francisco March 25.
Partner with community and government. Matz pointed to the partnership between Alternatives FCU, Ithaca, N.Y., and the IRS in which the CU has joined that agency's Voluntary Income Tax Assistance program to help people file their taxes as an example of how CUs can work with other organizations to provide community service.
Make more mortgages. "I was surprised to learn that 67% of credit unions make mortgages, but only 2% of mortgages are originated by credit unions," Matz told the audience. "Where are your members getting mortgages?"
Promote financial literacy. "If you're not offering financial literacy, you're missing a big opportunity," she advised.
Add an underserved area to the CU's FOM. "It doesn't have to be contiguous [to your existing FOM). In fact, it doesn't even have to be in the same state," Matz related. "Marketing to upper-income people is a challenge because they are already affiliated with a variety of financial services providers. Market to people who don't have an account at an insured financial institutions-renters, military, recent immigrants."
Make risk-based loans. "A lot of credit union people feel this isn't consistent with the credit union philosophy," Matz commented. "But I don't believe the credit union philosophy is all about everybody getting the same rate. It's about people helping people, and you will help more people if you make risk-based loans." She cited Shreveport CU, which was ranked 56th in the nation for ROA, yet the CU regularly makes loans to C-, D- and E-paper members.