Abandoned Mission

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. 

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Expert Views

Erica York, Tax Foundation
“Given the change in the financial sector over the last several decades, it would be useful for lawmakers to reexamine the extent to which credit unions currently fulfill their original purpose. If they have strayed from their intended function and now resemble other taxed financial institutions, their exemption would represent a disparity across similar economic activities.” 
— Tax Foundation, 2018
Karen Shaw Petrou, Federal Financial Analytics, Inc.
“About half of all credit unions are allowed to use ‘secondary’ capital instruments generally barred for banks. Credit unions that issue this capital fail at a rate that is 362 percent greater than conservative institutions. Proposals to expand the use of these instruments thus may increase overall solvency risk in the credit-union sector, exposing members and the broader economy to risk.” 
— Federal Financial Analytics, 2019
Aaron Klein, The Brookings Institute
“But if your word is your bond, does everyone who speaks share a common bond? In that case, the concept of a common bond is meaningless. That is the direction that the nation’s credit union movement, including its federal regulator, appears to be moving — and that’s something the public and policymakers need to stop and think about.” 
— The Brookings Institution, 2017
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Large Credit Unions Have Abandoned Their Mission

Recent News and Insights


Wings Financial Credit Union – with nearly $7 billion in assets – planned to buy Neighborhood National Bank of Mora, Minn. The deal was announced in March 2020 for the credit union giant to buy the $200 million bank. But in early 2021 the deal fell apart, much to the surprise of Neighborhood National CEO Doyle Jelsing.


A move by the NCUA to allow large credit unions to issue subordinated debt for regulatory capital purposes from outside for-profit investors—such as corporate debt markets—while retaining their tax exemption, undermines the statutory principle that credit unions should serve consumers of small means, ABA President and CEO Rob Nichols wrote in an American Banker op-ed yesterday.


If it holds assets like a bank, loans money like a bank, and frequently calls itself a bank, is it a bank? Not if it’s a large credit union like Alliant. The Chicago-based financial services giant–which recently strayed far from its home base to announce $68 million in loans for apartment complexes in Columbia, S.C., Richmond, Va. and Portland, Ore.–has many of the familiar markings of a large, market-oriented credit union.


Cache Bank & Trust, with branches in Fort Collins, Greeley and Denver, had agreed to sell its $121.7 million in assets to Elevations Credit Union, a $2 billion credit union based out of Boulder (formerly the University of Colorado Credit Union), but it was denied by state regulators.


Tysons, Va.-based PenFed rolled out a splashy $50 million ad campaign in five states, Puerto Rico and the District of Columbia touting its “great rates for everyone.” Old restrictions for membership no longer apply at PenFed and other large credit unions that do not pay federal income taxes. Membership, PenFed proudly points out, is literally open to all. – Reform Credit Unions, January 2020


President & CEO Bob McKay said Together Credit Union wanted to spread the word that “we serve everybody,” he told the St. Louis Business Journal.


In a recent podcast, American Banker’s John Heltman explored the lax rules governing credit unions that are aggressively growing, increasingly involved in riskier lending, and lacking in transparency expected of all non-profit organizations.

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