Remember This: A Long History of Credit Union Mission Creep

In case you’d forgotten, the nation’s credit unions have been making the rounds in Washington in recent weeks. There were about 5,000 credit union representatives on Capitol Hill just a couple weeks ago, and they all had the same demand. It goes something like this: (a) double our business-lending authority, and (b) pay no attention to our tax-exempt status.

As a community banker myself for 20 years, I know all too well the advantages that tax-exempt credit unions have over their taxpaying competitors and how we got where we are today. Credit unions weren’t always the full-service threat they are now. No, their history of mission creep is long.

The Federal Credit Union Act of 1934 authorized credit unions to serve people of modest means with a common bond. That was all well and good until Congress and the White House reinstated a 1982 regulation drastically expanding the credit union field of membership. This was after the NCUA rule had been overturned by the Supreme Court. Now, multi-billion-dollar credit unions are allowed to have virtually no common bond among members.

Many of us remember that ordeal. It got me thinking. Credit unions weren’t the first financial institutions to have their tax status reviewed. In 1951, Congress revoked the tax exemption for savings and loans and mutuals. Policymakers ruled that they operated much like commercial banks and should be taxed. The rest is history.

The same should go for credit unions. They operate like banks, so they should be subject to the same set of tax and regulatory responsibilities. Their tax-exempt status offers a clear competitive advantage, and they’re working to extend that advantage by taking even more community bank small-business customers.

I’ve said it before: if it looks like a duck and quacks like a duck, it’s a duck. If credit unions want to lend and invest like banks, they should have to meet the same set of standards. Let’s make sure Congress remembers that.

One thought on “Remember This: A Long History of Credit Union Mission Creep

  1. Cam,
    Your article mirrors my feelings exactly. This has gone on too long and we, as community bankers, are the only ones feeling the affect of credit unions unfair competitive status. Credit Unions are no longer subject to a common bond and therefore their so call “mission” no longer applies. In a recent television advertisement featurng a Credit Union in the Minneapols/St Paul area (how many community banks can afford television advertising?) the final comment of the ad stated, “. . .now open to all residents of Minnesota”. So much for the common bond . . .

    Why are we unable to affect Washington lawmakers to understand the logic of removing their unfair competitve advantage? The evidence is so clear to me and all other community Bankers. Not to mention the significant impact that taxing credit unions would have on the Federal budget.

    I recently read an article regarding two community banks that had changed their National charter to a Credit Union charter. With the way things are, I certainly understand their logic.

    Thanks for what you do in fighting this war, Cam.

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