WASHINGTON–Recent headlines related to credit unions have renewed a call by the banking industry for Congress to take action.
In an op-ed published in the ABA Banking Journal, Robert Flock, VP in the ABA’s Office of Strategic Engagement, and Harris Simmons, chairman and CEO of Zions Bancorporation and past chairman of the ABA, argued the “unfair advantages” credit unions have over banks—including paying no federal taxes, facing much lighter regulatory oversight despite offering the same services, and not having to meet federal requirements to serve low-to-moderate-income communities – only continue to grow.
“Thanks to intense industry lobbying and an outdated view of small credit unions as quaint financial institutions serving teachers, factory workers and even church groups, few people in Washington have paid much attention to credit unions,” the duo opine. “That allowed them to grow into a $2.2 trillion industry with large credit unions now operating across multiple states, providing commercial loans and offering ‘great rates for everyone’.”
But in the last few weeks, the authors state, the world has “started to wake up to the reality of today’s credit unions.”
An ‘Alarming Rate’
After citing CNN’s report finding bias in mortgage lending at Navy Federal, the pair said increasing pace of credit union purchases of banks is “another major reason for Congress to scrutinize the industry. Credit unions are swallowing up tax-paying banks at an alarming rate, using the tax break lawmakers granted them to serve people of modest means.”
“With four deals already announced in 2024 – two of them especially significant – and policymakers asking tough questions about credit union activities, now is the time for Congress to carry out its oversight responsibilities and hold its first hearing on credit unions in nearly 20 years,” the authors stated. “Although it’s atypical for credit unions to disclose terms, press releases regarding a couple of this month’s proposed transactions included financials – and the numbers are staggering.”
Specific Examples Cited
As an example, the authors cited Global CU’s purchase of a bank for $231.2-million, and Hudson Valley CU’s purchase of Catskill Hudson Bank for $28.6 million. As CUToday.info has reported, two other bank purchases have been announced by credit unions to date in 2024.
“The press releases failed to mention what would end with these transactions: the banks’ federal tax payments and their obligation to comply with Community Reinvestment Act requirements to serve low- and moderate-income communities,” the piece states.
The authors called on other states to follow the lead of Mississippi, which has prohibited CU purchases of banks, and said similar legislation is being considered in Massachusetts, South Carolina, and West Virginia.
‘Beyond Original Mission’
“The much ballyhooed ‘credit union difference’ harkens back to the movement’s founding nearly a century ago when these not-for-profit financial cooperatives had a clearly defined role,” the authors wrote. “Bank acquisitions clearly demonstrate that the industry’s activities have expanded far beyond its original mission – and congressional intent.
Without regular oversight from Congress, the credit union industry has drifted from its roots, endangering its vaunted image in the process. Much has changed since the last credit union hearing in 2005, and lawmakers have an obligation to scrutinize this growing industry. It’s long past time to schedule a hearing and take a closer look at today’s credit unions.”
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