Credit union trades fire back against bank effort to repeal tax exemption
WASHINGTON — Credit unions fired back against state bank associations on Wednesday, defending the credit union charter and its exemption from federal taxes.
“We are disheartened that the banks continue to use misinformation in their rhetoric against non-for-profit member-owned credit unions,” the National Association of Federally-Insured Credit Unions and the Credit Union National Association said in a letter to Senate Finance Committee Chairman Orrin Hatch, R-Utah.
Fifty-two state bank associations sent a letter to Hatch on Tuesday, praising a January inquiry into the National Credit Union Administration about whether there has been mission creep by some credit unions and whether the credit union tax exemption was still warranted for larger credit unions.
However, the credit union associations said, “The fact is credit unions’ structure has not changed and they continue to fulfill their mission.”
While bankers are often critical of the credit union tax advantage, credit union executives point to their member business model that allows them to offer better rates. They also note the role that some of the larger banks played in perpetuating the 2008 financial crisis.
“The numbers speak for themselves when you look at big bank fines and various settlements and buy-backs stemming from the financial crisis that total over $135 billion in penalties paid by big banks,” said the letter. “The banks’ attack is the height of arrogance when you realize that a number of these settlements ended up being tax deductible for the banks!”
The credit unions also defended efforts to lobby the NCUA to allow them to expand their operations.
“Credit union [fields of membership] are anything but generous and expansive. NAFCU and CUNA continue to hear from our members that NCUA’s current FOM rules and regulations unnecessarily inhibit their ability to serve their communities,” said the letter, which requested an opportunity to speak with Hatch.
The seven-term Utah Republican announced earlier this year that he intends to retire at the end of his term.