FOR IMMEDIATE RELEASE
Credit Union Collapse a Wake-Up Call to Stop Controversial Business Lending Expansion
S. 2231 Threatens Entire Credit Union Sector
Washington, D.C. (March 26, 2012)— The Independent Community Bankers of America (ICBA) released the following statement as news surfaces that the Senate is using an expedited process to help credit unions pass a controversial bill to expand into prohibited member business lending.
“ICBA has said time and again that Congress enacted the tax-exempt credit unions member business lending caps for a good policy reason. Credit unions are tax-exempt so they can serve individuals of modest means and common bonds. Allowing credit unions to expand their member business lending parameters could put many smaller credit unions into precarious situations, which could lead to failure. We saw firsthand last Friday what can happen when credit unions try to navigate these uncharted waters when Telesis Credit Union, Chatsworth, Calif., failed. Telesis Credit Union was granted special permission to do member business lending beyond the 12.25 percent cap and was doing multimillion dollar commercial loans all around the country, including a failed Orlando, Fla. shopping center. Senators should ask if this sort of risky lending activity, which would increase if S. 2231 were to pass, is consistent with Congress’ intent of ensuring that tax subsidized credit unions serve people of modest means.
“As if Friday’s failure of Telesis Credit Union weren’t enough, Saguache County Credit Union, Colorado Springs, Colo., was liquidated on Friday by the National Credit Union Administration (NCUA) at the order of the Colorado Division Financial Services. Meanwhile, news broke that the CEO of Public Service Employees Credit Union in Denver received more than $11 million in compensation in 2010 and that the CEO of Telesis brought home $2.1 million—a hefty pay package for institutions originally designed to serve people of modest means.
“Yet, at exactly the time when Telesis Credit Union was being put into conservatorship and Saguache Credit Union was being liquidated, the Senate may consider a process so S.2231 would not have to go through the Senate Banking Committee.
“ICBA urges the Senate to examine these current events as they consider S. 2231. There is a litany of reasons why allowing credit unions further mission creep into the area of member business lending is a flawed and dangerous idea. S. 2231would lead to many more credit union failures—like Telesis Credit Union— that would ultimately weaken our still fragile economy. And because credit unions don’t pay taxes, S. 2231would widen budget deficits at the federal, state and local levels, adding to our country’s already massive debt load.
“The fact is simple: S. 2231 is counterproductive legislation that would do our economy more harm than good at this critical time. ICBA urges Congress to listen to the concerns of their more than 12,600 constituents nationwide who signed the petition to oppose dangerous credit union mission creep and urges the Senate to say no to S.2231.”