ARLINGTON, Va. -
The study, which mirrors one produced by NCUA for federal charters in 2006, was conducted to answer concerns in Congress about credit unions abandoning the underserved and was sent to key congressional committees, including the tax-writing House Ways and Means Committee.
But the NASCUS study fell short in a critical area it was meant to address, state credit unions’ payment of Unrelated Business Income Tax. Though NASCUS insisted there were no political motives considered in conducting the study, its top officials said because the Internal Revenue Service recently issued guidance on the decades-old fight over UBIT it was unable to gather any information on UBIT.
UBIT has been a major concern for state-chartered credit unions, which are required to pay federal income taxes on income derived from unrelated activities and credit unions have been careful not to divulge too much information, less the IRS use it in audits it conducts of state charters.
The NASCUS study, which reviewed more than 28 million account records for 14 million members at 502 state-chartered credit unions, came up with almost identical results as the NCUA study, released in November 2006.
The NCUA study was conducted in response to congressional inquiries–driven by the banking lobby–about whether CUs continue to serve the underserved, something many in Congress believe is critical to retention of the federal tax exemption. But Bruce Jolly, general counsel for NASCUS, noted that none of the state statutes actually specifies that credit unions should serve individuals of modest means, a clause that is included in the Federal CU Act.
85% Earn Less Than $100,000
Still, the NASCUS study shows that, in general, members in state-chartered credit unions are of modest means and not wealthy. It found that 85% of members in state credit unions earn less than $100,000 a year, which is the same as the overall U.S. population. The study also found that 89% of state charters allow members access to low-cost services, such as free checking or debit cards, while 66% have no minimal balance requirement for checking.
In comparison, NCUA found the vast majority of federal credit union members, or 96%, earned less than $100,000. NCUA also found that 60% of members at FCUs earned less than $60,000 a year, while 82% earned less than $75,000 a year, based on U.S. Census data for 2000.
As might be expected with studies that review such large population groups, both the NCUA and NASCUS data track the income distribution of the overall U.S. population very closely.
“We feel this is an accurate and objective report of the state credit union system,” said Mary Martha Fortney, chief executive director of NASCUS.
The report has already been presented to members of the Ways and Means Committee and will be provided for members of the House Financial Services Committee for their review, said Fortney.
Like the NCUA study, the NASCUS report found that credit unions are serving the markets they are chartered to serve, which are clearly delineated by association, employee, select or community groups. The NASCUS study was conducted by Professor Randall Olsen of Ohio State University.
NCUA, which oversees both federal and state charters that are insured by the National CU Insurance Fund, has been holding a series of regional meetings to discuss its own study and plans to issue a report some time in 2008.
