Opposing Credit Union Expansion through Supplemental Capital Raising Authorization
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Expanding the credit unions' statutory member business lending limits would be largely deterimental to not only our community bank but similar outfits nationwide. Credit unions already have an unfair competitive advantage in their tax exempt status and opening the floodgates to allow more commercial and business lending to flow into credit unions will more than likely result in the ultimate demise of many good community banking institutions. Allowing loans to non-members, which is really what the loophole is with credit unions (and then creating a share percentage to those loan only customers that have no "true" membership in the credit union, is an unfair business practice in the purest form, but to allow this model to become even more expansive will create more issues than solve.
High Ridge, MO
"I am a long time small community banker. We compete with 3 credit unions
in my small community of 12,000 people. Since they do not pay taxes, they are able to offer rates well below our minimums and as a result we do very little dealer or direct vehicle lending. Our base is primarily commercial and we serve our community well."
"We also compete with the Minneapolis metro credit unions which are 4 hours away. When my daughter was going to buy a vehicle the dealer asked her about financing it for her through a Minneapolis credit union, the rate was great. She asked how do I become a member there? The answer was, 'do you know anyone in the Minneapolis area?' Her answer was 'yes, but what if I don't?'. The dealer's answer was, 'well, I have a MPLS phone book, we just pick a name and put in on here.' What unbankable class does this support? This is just not an even playing field now, please don't make it worse?"
"In South Dakota, the credit union industry is a $2 billion dollar financial powerhouse that is growing by the day. They have enjoyed a 40% increase in their assets over the last 5 years and show no sign of slowing down. Black Hills Federal Credit Union, a billion dollar credit union, has just purchased land in Pierre, SD and is shooting right by a VERY underserved area to tap into a market rich in middle and upper class citizens. This only proves the point they have left their mission statement of "serving people of lesser means" and are going after the "people of means", people that dont need the help of a "not for profit" credit union. They have left their mission statement, field of membership and their common bond, and its time someone put their foot down on this out-of-control industry that enjoys something no other business on Main Street does.....a free ride of paying much needed taxes. Does it make sense that a single mother of 3 pays more in federal taxes than a billion dollar credit union?"
"Credit unions are not subject to the Community Reinvestment Act (CRA) or the Home Mortgage Disclosure Act (HMDA) on the theory that their structure is incompatible with CRA/HMDA since credit unions serve only their members, unlike community banks who serve their entire communities. Credit Unions may pick and choose their members (ie. borrowers) by how their membership base is defined, by union, by church or parish, by business, or in certain states by zip code or phone exchange thereby resulting in de facto discrimination. In Missouri we have very large credit unions that cover large geographic areas but are not subject to CRA/HMDA. This makes no sense. Unless credit unions are subject to the regulations and tax treatment of other finnancial institutions, they should not have the expanded lending privileges."
St. Louis, MO
"With most credit unions today no longer supporting select membership groups and the capabilites to qualify any person as a "member", they no longer operate as originally intended to continue Congress support of tax exempt status. Their sole ability for small businesses lending in itself defies the serving of select or small membership groups. They have an unfair lending advantage compared to tax paying financial institutions."
"Those credit unions operating with such liberal membership policies should no longer afford a tax exempt status, only the small credit unions still operating under the original guidelines of serving select membership groups should remain as tax exempt."
"My last FDIC examination has made me rethink almost all of my business lending decisions in Small Town, America. I have almost stopped making business loans due to the increased scrutiny."
"So now Congress is considering increasing the Credit Unions business lending cap. The credit unions' recent history indicates that they do not have the business lending experience needed to accept this responsibility, so why should they be entitled to the cap increase when banks that PAY TAXES are cutting back to please regulators!"
"This makes about as much sense as the Consumer Protection Bureau and other recent "innovative" ideas made by clueless legislators."
"The banking community is operating in a highly competitive environment where commercial loan demand remains week and loan procing is intense for quality credit. To consider allowing credit unions to increase their stake in the commercial sector with a competitive advantage of not being burdened with the tax structure of the commercial banks is just not equitable. In effect, the U. S. taxpayer will be sudsidizng the credit unions while weakening the tax paying banks. Please vote 'no' for HB 1418 and S. 509."
"The legislation to expand lending powers for credit unions will displace lending at ALL banks This decline in lending by taxpaying banks will further reduce tax revenue and will ultimately have a negative effect on BOTH business and individual taxpayers. Community banks are happy to compete with other taxpaying institutions, even the 'too big to fail'
institutions who turned 'bank' into a four letter word. But, credit unions no longer serve the purpose they were created for. This is just another example of the unfair advantage they have, and want to expand upon. If they want to be the same as banks, they should no longer receive their tax exemption. Credit unions should be held to the same honorable and ethical standards as the tax paying citizens they serve. They should stand up to their responsibility, instead of hiding behind an outdated image of their intended function. Their ongoing campaign to become 'banks'
while avoiding the tax liability is shameful."
"Within the last 6 months, as a community banker, I have lost at least two substantial commercial loans to a local credit union, based largely on the ability of the credit union to out price us. In both cases, we were bidding on price and the credit union rates were 1-2% lower than our rates. In the long run, community banks cannot effectively compete with these rates. I would be happy to compete with the credit unions given a fair playing field- where both industries pay taxes. I am angry that they have an unfair advantage in a way that hurts legitimate community banks and requires an ongoing subsidy by the American taxpayer."
"An increase in the Credit Union small business lending cap will directly impact Union Bank. We compete with four (4) credit unions in our markets, two of which are very aggressive in expanding their memberships and customer bases. They routinely target small business customers. These are not "large" credit unions, compared to some, but they have most definitely gone way beyond the "traditional" credit union model and thus are targeting many of the same customers Union Bank serves. We have a limited number of good loans in our market area, so increased competition for small business loans, from entities with a built-in cost advantage in the form of being tax-exempt; will certainly impact Union Bank's loan growth and interest margin."
"Credit Union lending to small businesses is not consistent with the original credit union mandate of "serving people of little means". Many small businesses are owned by people who would be considered affluent; and certainly not "people of little means". These customers do not need the option of dealing with a tax exempt credit union."
"Credit Unions can't have it both ways. They can't act like regional banks, but be regulated like some small obscure company sponsored payday lender from the 1950's and not pay income taxes. Mutual Savings Banks and Thrifts have been paying income taxes for decades--what are the practical differences between them? None. Actually there is one difference. The "common bond" has been stretched to the point of being non-existent for many large and growing credit unions; to the point that geography or a common employer no longer seems to matter. Credit union's risk management strategies are insufficient for the lending that they are already doing--let alone adding more complexity and risk. It seems as the federal government favors both Wall St. firms and credit unions over tax-paying, customer oriented community banks. It is time for this to stop."
"My fear is allowing this increase will have the same effect to my commercial portfolio as it has had on my auto portfolio. We are no longer a player in the auto industry because we can't compete with the credit union financing. If they come in and undercut my commercial rates, I stand to lose those loans. They keep eating away my business a little at at time."
"We need an even playing field to compete fairly! Either tax the credit unions or make banks tax exempt. We don't have a problem paying our share of taxes as long as our competition does the same."
"By increasing the business lending threshold for credit unions, our community bank suffers. Why? We cannot offer competitive rates when competing against a community based credit union if our bank has a tax bill to pay. Is this hard to understand? Level the playing field or reject the credit union proposal."
"As President of a 112 year-old independent community bank with 75 employees, we see the benefits that our lending activities bring to the communities that we serve. Business lending is the most important piece of our business, comprising over 60% of our loan portfolio."
"We are proud that our loan portfolio has grown each year during these tough economic times, as we maintain our focus on sensible lending to qualified customers. We never participated in the sub-prime mortgage market, and thus did not contribute to the housing debacle. Instead, we continued to serve our local communities."
"Community banks are the economic engine that powers Main Streets all across America. We serve our communities at a reasonable profit, and then we pay our fair share of income taxes, while generating a return for our share holders."
"Business lending for credit unions takes business away from community banks, steering those profits to non-tax-paying entities. This is poor public policy because it creates an unfair tax-subsidized advantage to the credit unions, and reduces tax revenues of state and federal treasuries."
"Business lending was never part of the intent of credit union legislation: it is a profit-generating bank function. If the credit unions want to lend to businesses, they should pay income tax on the revenue, and they should be subject to the Community Reinvestment Act."
E. Peter Forrestel II
"I am the president of a community bank in northeast Iowa. We strongly believe in the community banking model. We actively seek loans from credit worthy borrowers. We offer a full range of banking services at competitive prices. We give back to our community through volunteer efforts and financial contributions. We pay over $1,000,000 in income taxes."
"We compete with a credit union in our market which is eight times larger than we are. Our loan rates are lower. Our service charges are lower overall. Based on public information, our financial donations appear to be more. They pay no income taxes."
"I do not see how raising the statutory limit cap for credit unions will enhance the business environment. The increase will only benefit a few large credit unions. Furthermore, credit union regulators and credit union lending personnel are not equipped to monitor and make large, complex loans. The number of credit unions on the national list of troubled credit unions has recently increased."
"We will continue to do what community banks do. We will continue to compete against credit unions that look like us, want to be like us, but do not want the burden of taxation or Community Reinvestment Act scrutiny."
"Please do not make the challenges for the economy, our tax revenues, and our community any worse by raising the credit lending cap for credit unions."
"I am an Executive at a family owned community bank in Burlington, Iowa, a town of approximately 25,000 people. We compete with eight banks locally, as well as three credit unions. We offer the same services they offer, and compete for loans. The loan process is becoming more commoditized, which removes the relationship aspect, and focuses on pricing. The credit unions have a significant tax advantage, and by not having to pay income tax, are thus able to offer the same product, with the same after tax margin, at a much lower rate. These loans are outside of the credit union mission, to help underserved and low to moderate income families."
"I do not ask for the same tax advantage they enjoy, just a level playing field."
"In 99% of the country there is no need for an expansion of credit union authority. There are 7364 Community banks today. These are taxpaying entities fighting for their survival in a historically long low rate environment."
"Even if credit unions paid taxes I would reject the expansion."
Grand Rapids, MN
"Expanding tax exempt businesses over Tax Paying businesses? You're kidding, right? As a tax paying U.S. citizen I cannot believe that anyone in Washington D.C. is seriously considering this credit union expansion in commercial lending. It will do nothing but cut into the business of taxpaying banks and reduce the overall tax revenue of the federal and state governments. If you are going to cut taxes, why not cut mine or the business of someone who is actually hiring people. This just makes no sense to me, as a citizen, a business person or a banker."
"Please don't let the "hype" get to you. Please do what is right."
"Credit Unions are simply not prepared and do not have the experience to underwrite and administrate commercial loans. Some argue that this experience can be hired. Yes experienced Commercial Lenders can be hired however these experienced people still report to Sr. Managers, CEO's, Boards of Directors, and Examiner's that have no commercial lending experience. They are often compensated based on loan production. Credit Unions and in particular smaller Credit Union often rely on obtaining participation loans, originated through Credit Union Service Organizations (CUSO's) for this purpose, but they as well are compensated based upon their origination of loans. Without experience at the CEO and Board of Director levels there is too much risk. The failure of Huron River Credit Union is an excellent example of inexperienced management and Boards and the potential results. Have any doubts? Review the Inspector General's finding in their Material Loss Review, OIG-08-10."
"In 1934, during the Great Depression, the Federal Credit Union Act was passed to permit employees and other groups to pool their savings in credit unions so they could make unsecured loans at times of need because members had a "common bond" of occupation, acquaintance and trust. In return, Federal Credit Unions were accorded freedom from federal and state taxes, exemptions from bank regulation and free space and services in the buildings of government agencies and other sponsors."
"While a small minority of the approximately 7,500 credit unions’ 92,000,000 (yes, that's 92,000,000) members may adhere to their original mandate, many if not most have become ultra-modern, full service bank equivalents. As such, it is completely unfair to allow credit unions to seek customers among the general public - in daily competition with banks - and still retain all of their Depression-era privileges much less even consider given them increased lending authority."
Jeb H. Clarkson
Belle Fourche, SD
"My bank is a small community bank that strives to serve our community through consumer and commercial lending. We also are involved in a number of charitable community events. However, members of my community are always asking "why can't your bank provide services at the price of credit unions?" This is especially true when our credit unions run full-page newspaper and TV ads that state "We are just like a bank -- but better because we can deliver our services at less cost." The consumer doesn't know that bank's pay their fair share of taxes while credit unions have no obligation to financially support our nation and local communities through taxes -- thus they can afford to offer "cheaper" services. Please help level the playing field and either tax credit unions or refuse their demands for an ever increasing chunk of my bank's business."
"Credit unions seem to never cease trying to expand their powers to match those of tax-paying banks, but do not seem to think about equaling the playing field by contributing to our economy by paying taxes. They want it all....to remain subsidized but offer the same products of their competition."
"In my opinion, credit unions have been allowed to far exceed their original purpose, and have trampled the common bond requirement to gain their preferred tax status. CU's in my area regularly advertise for new members by stating that you basically need to only breathe the local air to qualify as a new member."
"Let's be clear, this move by the credit union industry to expand the business lending cap will only take market share from taxpaying community banks. This is not a move to stimulate small business lending. They are targeting our best business customers."
Sauk Centre, MN