The credit union lobby missed a huge opportunity to satisfy congressional doubts and settle the argument over the credit union tax exemption-at least for the short-term.
While the bankers used the recent hearings before the tax-writing House Ways and Means Committee to raise questions about credit unions' commitment to serving the underserved, those questions could have been easily answered. All it would have taken was for one of the credit union lobby groups participating in the hearing, CUNA or NAFCU, to have brought along a pile of examples of the products and services credit unions offer every single day that either help the so-called underserved or are especially geared towards them.
California Congressman Bill Thomas, the chairman of the tax-writing panel, and several members, insisted that even though they have no plans to repeal the credit union exemption, serving the underserved is something they expected of credit unions in exchange for their status as 501 (C) 3 tax-exempt organizations.
Most people involved in the credit union movement relish that kind of scrutiny because they know that serving the underserved is something they do every day as an integral part of their operations.
Payday loan programs; low-cost checking; no-surcharge ATMs; affordable mortgages; local scholarship programs; financial literacy; feeding the hungry; assistance for wounded soldiers; funding of hospital wings, school programs and local charities; these are just some of the thousands of programs credit unions have undertaken without being forced to so. And they do so without being forced to or without the advantage of being able to deduct the costs from their taxes-as the banks are able to do.
Just three days before the hearing, CUNA introduced a new affordable housing program by which more than 60 credit unions have agreed to subsidize $1 billion worth of mortgages for first-time low- and moderate-income homebuyers.
A couple of days after that, State Employees CU of North Carolina made permanent a landmark plan by which its charitable foundation will award $4.5 million in annual scholarships, one to each public high school and community college in the state.
The Utah League of CUs has provided more than $3 million in grants to local school districts through its 100% for Kids Education Foundation over the last two years to help fund small projects and equipment purchases all around the state.
Both of the credit union CEOs who testified at the tax hearing, Harriet May, of Government Employees CU, El Paso, Texas, who was appearing on behalf of CUNA; and Cutler Dawson, head of Navy FCU, in Alexandria, Va., testifying for NAFCU, could have given the committee numerous examples of how their credit unions reach out every day to low- and moderate-income members.
What CUNA should have done was compile the reports it has been collecting under its Project Differentiation for the past 10 years detailing all of the wonderful programs credit unions are conducting in hundreds of communities around the country. They could have provided the reports to the committee en masse. Or they could have given each one of the committee members a pile of Project Differentiation reports from their home districts. What a powerful illustration that would have provided the congressional tax-committee.
From huge programs, like the SECU scholarship program, to small programs, like Show-Me CU's collection of 662 winter coats for needy kids, there is more than sufficient evidence that credit unions are not only adhering to their mission of serving the underserved, but are doing so more than ever before.
It is important to note that the large, diversified credit unions the banks would tax are the most generous when it comes to these kinds of programs. That is because they can more easily afford them than the small, traditional credit unions. It is also important to note that many credit unions would not be able to offer these kinds of programs without the tax exemption. Several credit union executives participating in CUNA's affordable housing program said they would not be able to do so without the added advantage of the tax exemption.
This would have laid bare the dubious claims made by former NCUA Chairman Norman D'Amours who continues to assert that credit unions have strayed from their original mission. The Congressional tax-writers, no doubt at the urging of the bankers, presented D'Amours as an expert on credit unions, despite the fact the former regulator has been uninvolved in the credit union movement since he left NCUA six years ago. As anyone who has been following credit unions knows, that period has been one of both unprecedented growth and development for credit unions, both in their size and their ability to create special programs.
It is true that many banks offer some of the same sort of special programs-all of them are compelled to do so under the Community Reinvestment Act. But the hearing was not about the banks. It was about whether credit unions continue to comply with their mandate to provide low-cost services to the underserved, something lawmakers consider the price for their tax exemption.
There's plenty of evidence to say that they do.
Contact Ed Roberts at eroberts
