Banks Continue to Beat Their Tired Drums on Credit Unions and Taxes
You would think that the commercial, for-profit banking industry would tire of endlessly calling for not-for-profit, member-owned credit unions to have their Federal tax exempt status revoked. But, alas, they keep on beating that drum.
One recent example of this practice was strongly countered by John Fenton, who is CEO and president of New Jersey’s Affinity Federal Credit Union.
Fenton was responding to an Industry Insights blog by James A. Hughes, the president of Unity Bank, that appeared in New Jersey business publication NJBIZ.
Hughes, whose blog was entitled “It’s time for credit unions to pay their fair share,” claimed that credit unions have an unfair advantage in the marketplace, due to their tax-free status.
Fenton answered Hughes point for point. Here are some of the highlights:
“There is a simple reason why credit unions do not pay taxes — they are member-owned, not-for-profit financial cooperatives that have numerous restrictions placed on them that banks do not. “
Fenton pointed out that credit unions do not have access to capital in the marketplace, like banks do. This restricts their ability to grow.
“Credit unions have restrictions on how much they can lend to businesses, and what businesses they can lend to, while banks do not. And notably, credit unions are subject to strict regulations including stringent capital requirements and restrictions in where they can invest their members’ deposits.”
Fenton strongly rebutted a charge, made by Hughes and other bankers: that CUs make it hard for smaller banks to compete.
He did this by citing the strong competitive position of Hughes’ own bank, which has grown at an annual average rate of around 13.6% per year — from $79 million in assets to $1.03 billion in assets over 20 years.
New Jersey CUs only grew at an average of 3.43% per year over the same period.
Of course, New Jersey CUs – like CUs across the country – DO pay taxes, in the form of real estate and payroll taxes.
Also, the points Fenton makes to rebut Hughes could be made in any state, by any CU executive, against charges made by any banker. So, when will banks stop trying to deprive not-for-profit credit unions of the one big break they get? When will they finally admit that CUs have not hurt banks in the least?
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