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.
To grow and compete against even larger and more aggressive large credit unions, Gulf Coast Federal Credit Union announced that it would be converting from a community charter to a far broader multiple common bond charter.
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.
With apologies to Dickens, 2020 has been for credit unions both “the best of times and the worst of times,” with the largest credit unions – those with over $1 billion in assets – outgrowing, out-lending, and, in many cases, out-surviving their smaller counterparts.
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.
Large credit unions continue to unabashedly flout the rules for their “not-for-profit” industry, and they’re only getting more brazen by the day.
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