WASHINGTON (3/9/16)--Credit Union National Association (CUNA) Chief Advocacy Officer Ryan Donovan took to Credit Union Journal Tuesday to dispel the latest falsehoods from bankers regarding the credit union tax status and proposed field-of-membership (FOM) modernizations.
The American Bankers Association (ABA) attempted to counter the power of credit union Capitol Hill visits during CUNA’s 2016 Governmental Affairs Conference just weeks ago, when thousands of credit union activists discussed top issues with policymakers. The ABA, for instance, ran an advertisement and posed a list of questions about credit unions sent to legislators.
“Banker complaints about the credit union tax status are as frequent and regular as days that end in 'y'. They want Congress to think that they truly believe the tax status creates an unlevel playing field,” Donovan wrote. “But we all know that if the playing field was truly unlevel, banks would be converting to credit union charters in large numbers… It's not happening because banks exist to make money for said shareholders, and credit unions exist to promote thrift and provide access to credit for provident purposes.
“The structure and mission of credit unions is not only the driver of the tax status but it's what concerns bankers the most,” he added. “They're scared to death of how credit unions might use their structure and mission to serve consumers and small businesses if fully enabled to do so because they cannot understand that the motivation behind the credit union difference is the people, not the money.”
Donovan counters bankers’ inaccurate arguments with information about the true benefits credit unions give their members, and the financial services marketplace as a whole. This includes refuting the notion of any “cost” of the credit union tax status.
“The tax status is an example of tax policy that helps keep money moving through the economy,” Donovan wrote. “To the extent that the field of membership proposal and the member business lending rule results in credit unions lending more and offering more services to their members, then yes the ‘cost’ will increase but so will the benefit because credit unions will be doing precisely what they've been designed to do.”
Donovan went on to set the record straight regarding the proposed FOM modernizations from the National Credit Union Administration (NCUA). After explaining that the proposal merely removes regulation requirements not required by law, Donovan digs a little deeper.
“The concept of field of member and common bond was originally a tool to determine credit worthiness, developed a time when credit scores and other more sophisticated credit worthiness tools did not exist,” Donovan said.
“Contrary to ABA's suggestion, field of membership has never been ‘the purpose of the credit union tax exemption.’ As we all know, the credit union tax status is based on credit unions' structure as not for profit financial cooperatives and their mission to promote thrift an provide access to credit for provident purposes.”