WASHINGTON (2/10/16)--Credit Union National Association (CUNA) President/CEO Jim Nussle wrote to national tax policy leaders Tuesday to refute bankers' "willful misunderstanding" of why and how credit unions exist and operate.

Nussle's letter to Senate Finance and House Ways and Means Committee leadership came as a response to a Feb. 5 letter from the American Bankers Association involving the National Credit Union Administration's (NCUA) field-of-membership (FOM) proposal.

"The NCUA proposal that the bankers are so concerned with would further facilitate the fulfillment of the credit union mission. It would update current rules that are outdated and filled with burdensome processes and requirements. The proposal is clearly within the scope of the Federal Credit Union Act, which gives the NCUA board authority to promulgate implementing regulations.

"In our view, the proposal is not only well within the scope of the law but it does not go nearly as far as regulations, which were on the books between 2003 and 2010, and as we outline in our comment letter on the proposal, we believe NCUA could go much further to facilitate consumer access to credit unions than they have," Nussle added.

The letter was sent to Sens. Orrin Hatch (R-Utah), Senate Finance Committee chair; Ron Wyden (D-Ore.), Senate Finance Committee ranking member; as well as Reps. Kevin Brady (R-Texas), House Ways and Means chair; and Sander Levin (D-Mich.), House Ways and Means ranking member.

In addition to inaccuracies about the FOM proposal, the bankers' letter attempts to tie it to the unrelated issue of the credit union tax status. Nussle said credit unions' tax status is "very good public policy" because credit union members and nonmembers alike see more than $10 billion each year in benefits as a result of how credit unions operate.

"The bankers’ true motivation is the elimination of credit unions in the marketplace. If the federal tax status were reversed conventional wisdom suggests that many credit unions would convert charters and operate as banks, unfettered by the many charter restrictions credit unions now face, and available to be acquired by larger banks," Nussle wrote.

"This would represent a failure of public policy because credit unions provide a market alternative that helps moderate increases in bank fees and charges for all consumers," he added. "Without credit unions, consumers would be greatly disadvantaged, and in some cases, be forced out of the financial mainstream."

Nussle also correctly pointed out the disconnect in the bankers' interest in "protecting" consumers.

"What makes this banker argument deeply disturbing, however, is that it seems to wholly ignore the damage to the economy and communities caused by some of the largest members of the associations represented on the letter," Nussle wrote. "The bankers’ opposition to the credit union tax status represents no more concern for teachers than the concern they had for the borrowers that received predatory mortgages in the lead up to the financial crisis."