During the Great Depression, the federal government incentivized credit unions to provide consumer-focused financial services to people of modest means by granting them a tax exemption. Given the severity of that economic crisis, the policy was crafted to help at-risk communities weather difficult times by expanding access to credit. However, the industry has evolved over the last 100 years — calling into question their preferential tax and regulatory treatment.
The credit union lobby’s newly minted leader recently unveiled his strategy to defend the industry’s federal tax exemption: tout their 144 million members to every member of Congress, each of whom has credit union constituents. Historically, this well-worn path has served credit unions well.
As lawmakers consider a host of provisions to reduce government spending and raise revenue, credit union lobbyists are scrambling to protect their $30 billion income tax exemption.
A recent analysis found that mega-marketing campaigns and watered down membership rules have boosted credit union growth throughout the last two decades. Ninety years after the Federal Credit Union Act became law, the $2.3 trillion industry has expanded far beyond congressional intent.
America’s $2.2 trillion credit union industry, which enjoys a free federal tax ride and minimal oversight, is busy this fall in a coordinated lobbying blitz in Washington and across state capitals to further dilute its already dubious membership requirements.
This week, the U.S. House of Representatives Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs will hold oversight hearings with prudential regulators. In addition to other financial services regulators, National Credit Union Administration Chairman Todd Harper will testify.
The problem isn’t that credit unions are offering more services to more customers. Rather, the problem is that American taxpayers are the ones propping up a multi-trillion-dollar credit union industry with a tax-free ride and little accountability.
American taxpayers have once again completed their civic duty of meeting the IRS filing deadline, but for a $2.17 trillion portion of our economy – the industry comprising America’s 4,760 credit unions – April 18 was just another Tuesday.
In December 2022, over 200 credit union lobbyists descended on Charleston, South Carolina, to plot their advocacy strategy for the year ahead. Participants made clear that the credit union industry plans to continue paying lip service to serving low- and moderate-income (LMI) communities, while directing its efforts toward expanding into new affluent markets.
As the regulatory regime for credit unions becomes more relaxed, complex credit unions have become indistinguishable from community banks. Their ability to raise investor capital with 30-year horizons facilitates growth that goes well beyond credit unions’ original purpose.
Copyright © 2021 American Bankers Association | About this Campaign
