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


NCUA raised the population threshold for a rural district from 250,000 to 1 million under its new field of membership rule. This makes the entire state of Wyoming a rural district even though Wyoming has a population of 585,501 and more than half of its residents reside in urban areas. – Credit Union Watch, January 2018


In 2017, through strategic gerrymandering, Black Hills Federal Credit Union used the district loophole to connect South Dakota’s two largest distinct metropolitan areas by population size. The credit union has used the rural district geographic common-bond to expand its footprint across the state on three different occasions.


In a 2016 study, Massachusetts low-income credit unions with assets of more than $1 billion were more likely than banks to make mortgage loans to high-income borrowers,  and less likely than banks to serve low-income mortgage customers.


NASA Federal Credit Union (NFCU) of Upper Marlboro, Maryland is being sued over its overdraft fee program. – Credit Union Watch, March 2016


U.S. Eagle Federal Credit Union lists among its common bond provisions “people who are 50 years of age or better and residents of New Mexico”. When credit unions were granted tax exemption, age was not listed as a form of commonality.


In 2015, the NCUA board proposed a new ruling enabling the entire state of North Dakota to be designated as a rural district for common bond purposes, even though more than half of residents live in urban areas.

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