Another National Defense Authorization Act, and Another Land Grab by Credit Unions

It’s that time of year again in Washington: The annual Congressional negotiation over the National Defense Authorization Act. And as sure as the sun rises in the east and sets in the west, tax exempt credit unions are yet again trying to limit the financial services options for our women and men in uniform.

We have written about this previously, but given the harm this causes servicemembers, now is the time for Congress to take a far harder look at why credit unions, which pay no rent to operate on military installations, are fighting so hard to keep this unfair and counterproductive advantage. Servicemembers deserve access to a wide range of regulated banking services, and it’s common sense that lawmakers should want our troops to have as many options as possible. This is easily achieved by making sure regulated banks and credit unions are on the same footing when it comes to serving military families on base.

Credit unions – including industry giants such as Navy Federal Credit Union ($112 billion in assets) and Pen Fed ($25 billion) – effectively argue that only credit unions can or should be able to provide financial services on military bases. Or are they afraid of competition – and once again looking to the government to give them an unfair market advantage, this time at the expense of their customers?

Congress needs to prioritize the needs of servicemembers by ensuring they have a choice about where they bank. Banks have a long and proud history of serving our armed forces. Today banks of all sizes provide financial services to military families both on post and off. Unfortunately, because credit unions have a competitive advantage due to not being required to pay their fair share for rent on bases, the number of military installations with bank locations continues to fall, from 129 in 2004 to 67 today.

You read that right – banks that decide to operate on base effectively are taxed twice: once for rent, and once again by the IRS, while credit unions pay nothing. Who loses out when competition disappears? Servicemembers. Who fills the gap when banks are forced to leave bases? Look outside the gates and ask the payday lenders and pawn shops how their businesses are faring.

Competition and financial choice are essential for all Americans, and the women and men of our armed forces should be no exception. And yet, they pay the price when it comes to credit unions fighting to preserve their unlevel playing field.

It can be frustrating to bankers when credit unions claim the moral high ground over banks, invoking their original purpose dating to the Federal Credit Union Act of 1934 to serve people of modest means. But it is a moral outrage when large credit unions use this argument to reduce choice for servicemembers. Many of the larger credit unions are nothing more than banks operating under unfair regulatory advantages. Attempting to corner the military installation market has nothing to do with doing right by servicemembers; it is about credit unions yet again attempting to perpetuate an unlevel playing field and grow their business at the expense of taxpayers.

Congress must address this inequity by offering the same rent incentives to all regulated financial institutions. The NDAA provides an opportunity to do just that – which will ensure that our servicemembers will get to choose the financial products and services that best meet their needs. The NDAA is about ensuring a capable, equipped and prepared armed services, which begins with the physical and financial health of our women and men in uniform. Congress has the power to pick winners and losers: they should pick servicemembers.

See the impact on taxes in your state.

Tell Congress: It’s time to reform credit unions.