Eliminating field of membership enables credit unions' money grab
As CEO of a bank that formerly operated as a credit union, I know well the importance of last week’s Supreme Court ruling on the field of membership requirements for credit unions. Having seen the credit union “movement” evolve from its origins, I am deeply concerned.
The court’s decision is another unfortunate step toward America’s credit unions becoming nothing more than banks that refuse to pay federal income taxes, that operate under a regulator who seems more like a best friend, and that hide their true intention — attempting to steal market share from banks under the guise of being the only organizations able or willing to serve the financially underserved.
Bankers believe in a level playing field, and if past is precedent the credit union lobby will exploit this ruling to try and convince Congress to eliminate any and all restrictions on who can join a credit union — all while not paying a dime in federal income taxes. My concern is well founded because one of its top lobbyists, Credit Union National Association Chief Executive Jim Nussle, demand exactly that in a recent opinion for Credit Union Journal.
It seems like children at a picnic: “Thank you for the piece of the pie … now gimme all of it.”
Unfortunately, this is the latest page in the credit union playbook: Credit unions behave more like untaxed, underregulated banks that have strayed far away from their original mission of helping people of “small means” who share a “common bond.” Clearly, those concepts mean nothing to them any longer.
Eliminating the field of membership requirement is a gross perversion of the mission and purpose of credit unions as conceived by Congress in 1934 and a brazen money grab by America’s largest credit unions to gather more members, make more loans and drive small banks out of business through unfair, taxpayer-subsidized competition.
If credit unions want to act like banks, all we ask is that they play by the same rules.
Credit unions should pay federal taxes like banks do. They should pay rent for facilities on military bases like banks do. They should live up to their obligations to our most vulnerable communities like banks do. And they should agree to operate under the same rules, regulations and regulators as banks do.
And yet, and as ever, credit unions want to play both sides of the field. In one breath, they are selfless providers of financial services for the financially underserved. In the next breath, they’re all about sponsoring professional sports teams. As the industry balloons past $1.6 trillion in assets — the third largest credit union, PenFed, recently bragged in a press release about surging past $26 billion in assets, growing by $1 billion in assets in May and June alone.
It’s important to note that this aggressive expansion by credit unions isn’t coming through the construction of bricks-and-mortar branches in the hinterlands, as Nussle suggests. PenFed crowed in a press release last week that 80% of its growth is coming through electronic banking; a mere 5% is transacted through branches.
Please remind me why these businesses need government goodies to fund these expansions. It can’t be because they serve households of “small means.” (Just 31% of households using credit unions had low or moderate incomes, compared with 41% for banks, according to the GAO.)
It can’t be because they strictly limit their lending to individuals. (Credit unions are increasingly expanding their business lending, using funds from hedge funds and other investors seeking tax shelters thanks to their so-called regulator.) It can’t be because they invest so much in their communities. (Since they are not subject to Community Reinvestment Act reporting, there’s no transparency on what they do — and don’t do.)
My bottom line on their bottom line? Enough with the special privileges to support a mission that was long ago forgotten by the big credit unions. Enough with not paying their fair share and sticking taxpayers with the bill. Enough with exploiting their poorest members to enrich the very largest and richest credit unions in our land.
At Sound Community Bank, we pay our full share of federal income taxes, we adhere to strict regulatory oversight and we believe strongly in a level playing field in financial services.
I was a credit union leader and believer, and I still believe in the mission and purpose of the vast majority of America’s small credit unions. But, knowing that the largest credit unions and their lobbyists will seemingly stop at nothing in their endless money grab makes me question the industry’s purpose. I hope more of my former credit union colleagues will do the same.