A Compelling Need Is Missing: Credit unions are doing fine without regulatory relief.

By Bill Poquette

During September, according to CUNA Mutual Group, credit unions gained 447,000 in new memberships. Loan balances grew at a 10.5 percent annualized pace. For the past 12 months, memberships are up 3.9 percent and loan balances are up 11 percent, according to the Madison, Wis.-based financial services and insurance provider for credit unions and their members.

It is ironic then, even hypocritical, that on Nov. 19 the National Credit Union Administration board approved a proposal for what the agency termed in a news release, “sweeping field-of-membership reform” to serve millions of Americans who need affordable financial services.

“There is nothing more vital to the future of a credit union than the ability to attract new members,” said NCUA Board Chairman Debbie Matz.

The proposal would make it easier to add new groups to a credit union charter, expand the areas that may be served by a community charter, update the definition of “underserved area,” revise the “rural district” definition to include populations of up to 1 million, and expand the definition of a “trade, industry or profession” as a single common bond.

The robust membership and loan growth reported by CUNA Mutual do not suggest the industry is hurting or will shrivel up and go away. Quite the contrary, in fact.

There was an ironic prelude to this latest effort by the NCUA to free credit unions from the bonds allegedly barring them from accommodating underserved consumers and businesses clamoring for loan and deposit services. Earlier this year, proclaiming 2015 to be “The Year of Regulatory Relief,” Matz unveiled a proposal to expand credit unions’ business lending.

Commentary on the business lending proposal in the August issue of BankNews provoked a rebuttal letter to the editor from B. Dan Berger, president and CEO of the National Association of Federal Credit Unions. The letter, published in the October issue of BankNews, argued for the more lenient rules, but also noted that small business lending at federally insured credit unions is growing nicely.

It would seem the demand for traditional financial services is being well met. And the competition for market share is intense, not just between banks and credit unions, but all sorts of other intermediaries as well – from the Farm Credit System and manufacturers’ financial arms to technology companies, alternative payment systems and online lenders, to name a few.

According to the FDIC, for the 12 months ended Sept. 30, loans and leases increased 5.9 percent for insured commercial banks – less than gains claimed by CUNA Mutual and the NAFCU for credit unions.

The American Bankers Association and the Independent Community Bankers of America voiced strong opposition to the NCUA’s expansion proposals. However, since these actions don’t require congressional approval, the banking industry will continue prodding lawmakers to act on the tax-exemption issue.

The NAFCU’s Berger dubiously claimed in his letter to the editor that eliminating credit unions’ tax exemption would result in the loss of 150,000 jobs per year. That gave a skeptical BankNews reader an idea:

“If that is truly the case,” responded Ross S. Maynard, executive vice president and chief financial officer of Mountain Pacific Bank in Everett, Wash., “then it would imply elimination of the ‘tax burden’ that banks incur would result in hundreds of thousands of jobs created each year by the banks. Guess we should just all stop paying taxes?”
Bill Poquette is editor-in-chief of BankNews.

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