Under Attack from Banks, Credit Unions Fight Back
It’s no secret that credit unions are under attack from well-funded banks, and their lobbyists.
The nation’s for-profit banks – through their federal and state representatives – are trying to de-legitimize not-for-profit CUs and have their tax-exempt status taken away, among other things.
One of those “other things” is taking place in the Commonwealth of Massachusetts.
There, the Massachusetts Bankers Association is attacking credit union growth — specifically the increase in “low-income” designated credit unions.
The banks make bogus charges, citing a phony “independent study”
Credit unions that are designated as low-income CUs receive special benefits, such as access to secondary capital and relief from the cap on lending to member businesses.
Banks, citing an “independent study,” claim that many of these CUs are stretching the “low income loophole” and are receiving unfair advantages in the marketplace.
Basically, the banks argue that the benefits these CUs give to the communities they serve are not great enough to warrant any special regulatory breaks.
But the credit unions claim that the banks are playing games.
According to operative Credit Union Association President Paul Gentile, “It is not an independent study. It is commissioned and paid for by the bankers.”
Worse yet, Gentile said that same firm has done similar studies in New Hampshire and Vermont.
Gentile said the value credit unions provide to its members in the Commonwealth is significant and reflects credit unions’ dedication to their communities.
In fact, credit unions give back to their communities they serve
He stressed that in 2015 Massachusetts Credit Unions delivered $328 million in direct financial benefits to the Commonwealth’s 2.6 million members in the form of better rates and lower fees compared to other financial providers.
As an example, in 2015 the average late credit card fee was just $24 at a credit union compared to $34 at a bank; the average mortgage closing costs were $1,151 at a credit union compared to $1,361 at a bank, and the average rate on $1,000 savings account was .46 at a credit union compared to just .14 at a bank.
Gentile noted that consumers are joining credit unions because of the unique value proposition they offer. “Credit unions are not-for-profit, member owned cooperatives that exist solely to serve the financial needs of their members. We don’t exist to serve shareholders. There’s no small group of insiders getting rich of the backs’ of our members. We are a pure cooperative model, not driven by profit, but by improving the financial lives of our members. When you tell that story to consumers, they get it.”
Gentile said he was particularly concerned with the banker report’s claims that college students are not true “low-income” members. “I think the bankers need to check the state of the college debt in America. It is at an all-time high. Not only is student debt burdening our college students, but many are having difficulties finding well-paying jobs. To say college students are not low-income is out of touch with reality and represents an ivory tower approach.
Banks claim that college students aren’t “low income” customers. Really?
We are committed to all our members, young and old. If our college student members need us, we’ll be there,” said Gentile. “Banks may not like serving college students because they often are low wage earners and have debt. That can be a challenge, but it’s a challenge credit unions work hard to meet.”
As evidence of that, student loans among Massachusetts credit unions increased 11 percent in 2015 to a total portfolio of $451 million.
The Cooperative Credit Union Association, Gentile noted, does not believe in attacking the banking industry and believes in a strong banking and credit union system, and urged bankers to stop wasting resources fighting credit unions.
“Despite this most recent attack, we don’t attack the banking industry. We are focused on serving our member-owners and do not waste resources trying to eliminate the competition.”
This is not a fair fight: the bankers have more than 90% of the business in the state, yet they are spending resources to attack credit unions.
“Credit unions are not-for-profit member owned cooperatives that exist solely to serve the financial needs of their members. That’s where our focus will remain.” Gentile said.
The banks show no sign of letting up on their constant attacks on CUs. If this particular ploy works in New England, you can be sure it will be tried in other parts of the country.
Copyright Today’s Credit Unions