ICBA - Publications - Tell Congress "Enough is Enough" on Credit Union Expansion

Tell Congress "Enough is Enough" on Credit Union Expansion

APRIL 23, 2004


Over the years, Congress has been very generous to credit unions. In 1999, Congress authorized credit unions to make commercial loans ("member business loans") and all but eliminated their original "common bond" requirement-the justification for their tax exemption. This has led to virtually unbridled credit union growth. The House last month passed legislation that further expands their burgeoning powers. And now the credit union lobby is pushing another bill, the Credit Union Regulatory Improvements Act (H.R. 3579), that would allow them to nearly double their commercial credit lines and weaken their capital requirements.

It is time to put an end to the credit unions' relentless quest for more powers. Large, multi-group and geographic-based credit unions are already the functional equivalent of banks-except they don't pay taxes and are not subject to CRA! This unfair competition must end. Until these credit unions are willing to relinquish their tax-exemption, which OMB says is now approaching $1.5 billion a year, Congress should slam the door on more powers.

ICBA urges all taxpaying community bankers to contact your representative and senators and say, "Enough is enough." Call or visit them in their district offices. Or visit www.icba.org for a sample letter you can e-mail to Congress. You also can customize the letter to make it more personal.

The credit unions are not shy about marching on Washington and beseeching Congress for more and more powers. Community bankers must be equally bold in urging Congress to say NO. Tell Congress "enough is enough," that "we're mad as hell and we're not going to take it anymore!"

Billion Dollar Credit Unions No Longer Rare. Large multi-billion dollar credit unions continue to grow at a record-setting pace, leading the way in a period of exponential growth in the credit union industry as a whole. Total assets in federally insured credit unions grew from $258 billion in 1992 to $557 billion in 2002, an increase of 116%. At the same time, the number of federally insured credit unions fell from 12,595 to 9,688, suggesting a growing concentration in assets among the largest credit unions.

Indeed, at the end of 2003, 83 credit unions had more than $1 billion in assets, with the largest, Navy FCU in Virginia, holding more than $20 billion in assets. The combined assets of billion-dollar-plus credit unions were nearly 30% of the total assets in the credit union industry. Eleven credit unions crossed the billion-dollar threshold in 2003.

The disparity has created two distinct entities-larger credit unions, few in number but providing a wider range of services that more closely resemble those offered by banks-and smaller credit unions, which are greater in number and provide more basic financial services. Both groups unfortunately continue to enjoy a broad exemption from federal and state taxes and immunity from CRA.

It is doubtful that the framers of the Federal Credit Union Act of 1934, which created credit unions to serve people of modest means through a system of cooperative credit, ever envisioned tax-exempt billion dollar credit unions serving the general public and unfairly competing with tax-paying community banks. Enough is enough! Let your representatives and senators know how you feel today.