Some credit unions are taking advantage of their industry’s tax and regulatory exemptions to stray from their roots and acquire tax-paying competition, according to a new article in The American Prospect.
Latest Bad Press for Credit Unions: Continuing a series of media scrutiny of credit union policies, the new article says:
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Credit union exemptions from federal taxation and the Community Reinvestment Act are a vestige of their formation in the 1930s.
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While credit unions impose overdraft fees with far greater frequency than banks, some revel in their wealth with private jets and stadium naming-rights deals.
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ICBA has pointed out that credit union acquisitions of community banks are evidence that larger credit unions are operating as banks and should be regulated and taxed as such.
Taxpayer-Subsidized Acquisitions: In the article, ICBA Senior Vice President and Regulatory Counsel Michael Emancipator notes that nearly 90% of community banks acquired by credit unions are highly profitable and have chosen to sell because credit unions can use their tax exemption to make outsized bids. “I’m not looking to sell my house right now … but if someone were to offer me tomorrow twice what this house is worth, I would be a fool not to sell it,” he said.
ICBA View: ICBA has for years raised the red flag on the negative impact of the credit union industry’s tax and regulatory exemptions, particularly as acquisitions of tax-paying community banks ramped up to a record high last year. Most recently:
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ICBA earlier this year issued an analysis of publicly available data showing how these acquisitions are harming local communities while community banks outperform credit unions in high-poverty areas.
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ICBA issued a policy resolution this year formally calling on policymakers to end the federal tax exemption for credit unions with $1 billion or more in assets.
More Media Scrutiny:
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A Tyfone op-ed from ICBA Past Chairman Brad Bolton and ICBA leadership community banker Ken Hale spotlights why policymakers should examine credit union acquisitions of community banks.
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In previous op-eds in the Natchitoches Parish Journal and the Shreveport Bossier Journal, Hale details how credit union acquisitions of community banks harm local communities.
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Recent op-eds in American Banker and RealClear Markets target the credit union tax exemption following ongoing ICBA advocacy.
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A previous article in The Banker—an imprint of the Financial Times—says some credit unions may be abandoning their mission with “Wall Street-style” behavior and no longer serving their core members.
