PEWAUKEE, Wis., March 21 /PRNewswire/ — “Everyone loses,” said Brett A. Thompson, President & CEO of the Wisconsin Credit Union League, in response to a recommendation to tax large credit unions included in a self-funded study released by the Wisconsin Bankers Association.
“If credit unions were taxed, Wisconsin’s working families would lose because they would see their tax burden grow. Consumers would lose their option of choosing to do business with a not for profit financial cooperative that they own. And even the state would lose, because any potential tax collection would dwarf the massive benefits lost by consumers who choose to do business with credit unions.”
“It’s just the same old, same old — we’ve heard it all before,” said Thompson. “WBA consistently misrepresents credit unions in hopes of eliminating credit unions as a choice for Wisconsin consumers in hopes of further fueling banks’ record profit-making.”
The conclusion of the WBA-funded study could deny millions of Wisconsin consumers of the option of choosing a financial institution that puts people before profits. Furthermore, the study erroneously claims that the mission of credit unions is to serve only low income individuals.
“That’s like saying no one who does business with a credit union is allowed to make a decent living,” Thompson says. “Credit unions’ mission is to serve and enrich the lives of their members, and that means all members, regardless of income.
“The bank study flies in the face of a recent independent study performed by the top federal credit union regulatory agency, The National Credit Union Administration, which affirmed in late 2006 that credit unions are doing a good job of serving those they were formed to serve — working Americans.
Unlike for-profit Wisconsin banks, which returned a near-record $1.5 billion in profits to shareholders, all credit unions return earnings to members via higher interest rates on savings, lower rates on loans and smaller and fewer fees. The effect of that was $157 million in savings to Wisconsin’s two million credit union members in 2006. “Credit unions don’t pay shareholders; they pay members in the form of affordable services,” Thompson adds.
Thompson says the suggestions in WBA’s report — to end credit unions’ income tax exemption, require large credit unions to convert to bank charters or subject credit unions to bank-like regulations — undermine the motive for preserving a not-for-profit choice among financial services providers. “A tax on credit unions is a tax on consumers,” he says. “You can’t change what credit unions are and expect them to deliver the same benefits.”
Nationally, credit unions save their members $8.1 billion annually, but because credit unions are also estimated to save bank customers $4.3 billion by providing not-for-profit competition in the marketplace, the total savings to consumers annually is around $12.4 billion per year.
Thompson also adds that the WBA report, which in part cites credit unions’ mortgage lending data, omits comparisons of credit unions with other lenders.
“That’s because lower income and minority home loan applicants in Wisconsin are much more likely to be approved for home loans at credit unions than elsewhere,” Thompson explains. In 2005, for example, Home Mortgage Disclosure Act (HMDA) data show that Wisconsin credit unions approved 84.9 percent of loan applications from low- to moderate income consumers. Other lenders here approved just 50.6 percent of such applications.
WBA’s study refers to credit unions’ field of membership (FOM) restrictions, but only to suggest that a 1998 federal law — the Credit Union Membership Access Act — made credit unions “look more like banks” because more people could join.
“The federal FOM legislation cited in the study had little or no impact on Wisconsin credit unions who are guided by state FOM laws,” Thompson clarified. “But WBA also fails to mention that it supported more recent state FOM legislation — the 2003 Financial Modernization Act — that extended credit union service to more people. Why the banks would now attack the good public policy decision allowing more Wisconsin consumers to benefit from credit union membership is perplexing to say the least.”
Thompson also debunks the claim in WBA’s study that credit unions have a competitive advantage over banks, especially smaller community banks. He cites a recent study by the Congressional Research Service that noted the sixth consecutive year of banks’ record profits — a whopping $146 billion in earnings in 2006. The study revealed that the nation’s largest banks are taking market share away from their smaller brethren.
“The bankers own surveys show that community banks see large banks as their main competitor, not credit unions,” Thompson says. “If such a competitive advantage exists, you don’t see it borne out in the marketplace — large banks keep getting bigger to the detriment of community banks. In time, that could mean bank customers will face even higher costs for services.”