SOMERSET, N.J. (8/13/15)--A look at credit unions’ tax status and banks’ inaccurate claims about it led to a thorough breakdown of the advantages of the not-for-profit cooperative financial system in NJBIZ this week.
“The banks portray us like we’re churches and we don’t pay any taxes,” Issa Stephan, president/CEO of First Financial CU,Wall, N.J., told NJBIZ. “The only tax we don’t pay is the federal income tax, which would be the tax paid on the profit distributed to shareholders. But, we don’t have shareholders. We pay every other tax--property tax, municipal tax, payroll tax, unemployment tax and everything else.”
Candice Nigro, vice president of marketing at First Atlantic CU, Eatontown, N.J., explained how credit unions pass along profits to members through lower rates on services and even dividends to members in “extremely good years.”
Recent years have been good for credit unions in New Jersey, Meoli reports, with a 37% increase in savings, 12% increase in loans and 30% increase in assets since 2008, despite a decrease of several thousand members.
Nationwide, credit union business lending has grown to $51 billion in 2015 from $4 billion in 2000. Much of this can be attributed to credit unions stepping up lending as banks were backing down during the financial crisis. Memberships nationwide are also up significantly.
“During the recession, many credit unions saw a growth in the business lending,” said Linda McFadden, CEO/president of XCEL FCU, Bloomfield, N.J. “The mom-and-pop businesses were struggling through the economy and the banks weren’t interested in making $50,000 to $25,000 loans, so those businesses came to us. There was a need in the market for people who didn’t have an alternative.”
There is still a demand for business lending from credit unions, and Greg Michlig, president/CEO of the New Jersey Credit Union League, said in the article that credit unions are hampered to meet that need by the 12.25% member business lending (MBL) cap.
Stephan added that First Financial CU, which has reached its cap, has been unable to help small businesses coming to it for capital.
The National Credit Union Administration’s proposed MBL rule would help credit unions somewhat with the rule, but the 12.25% cap is in the Federal Credit Union Act. This is why CUNA, the state leagues and credit unions around the country have supported legislation that would raise the cap to 27.5% of assets.