Letter to members of the House regarding banker calls for taxing credit unions

Letters to Congress

Letter to members of the House regarding banker calls for taxing credit unions

March 25, 2004

Dear Representative:

Renewed efforts and vigorous initiatives by the banking industry to impose a tax on credit unions compel me to write to you and your colleagues today. These developments are troubling and of concern to credit unions and their 85 million members nationwide, who strenuously oppose efforts to change the tax status of credit unions. There are two simple reasons why:

1. A tax on credit unions is a new tax on 85 million Americans. Credit unions are tax-exempt because they are not-for-profit, democratically controlled cooperatives that are generally directed by volunteers and return earnings to the members. Consumers reap a "better deal" on loans and savings because of the not-for- profit, cooperative structure of credit unions, which allows them to focus on service to members, rather than squeezing the last dime from each and every transaction. Changing the tax status would eliminate credit unions' incentive to maintain this structure--and focus on service.

2. A tax on credit unions frees banks to be more anti-consumer. All taxpayers, whether members or not, benefit from the presence of credit unions in the marketplace, which helps to keep bank and savings and loan prices lower. For example, credit unions on average offer lower interest than do banks on credit cards, and new and used auto loans. Imagine how expensive other lenders would make credit cards, or auto loans, if they did not have to face lower credit union rates in juxtaposition to their own.

As a former Member of Congress, I fully understand the negative atmosphere that can be created by a major political clash during an election year, and I have so advised the Board of Directors of the Credit Union National Association. All of us are hopeful just such a confrontation can be avoided.

However, the banking industry has chosen to create just this atmosphere. This is not a fight we have chosen, yet we are determined to defend ourselves. In fact, my board has directed me to match any efforts the bankers may put forward -- with maximum constituency involvement.

These latest attacks by the banks are in keeping with the their long-term behavior, which stretches back well before 1934, the year CUNA was founded. For these past 70-plus years, the banking industry has been pestering, hounding and assaulting the credit union movement. While every few years they may change their rhetoric, as well as the issues on which they choose to focus, the bankers have consistently aimed at eliminating choice in financial services, increasing costs to consumers and ultimately establishing a monopoly for themselves.

Now, it is clear they have focused their efforts on a nationally coordinated, full-fledged assault by multiple bank trade associations. Among their projects:

  • "Operation Credit Union," specifically designed to inform you of the "competitive threat" credit unions pose to the banking industry, and to persuade you to tax credit unions.
  • Manufactured "grassroots" support for banks, featuring website tools so banks and their employees can cobble together letters that let you know "the credit union industry has crossed the line," and it is time for you to impose taxes.
  • A series of e-mail and website pleas to bank CEOs and employees imploring you to "urge the Ways & Means Committee to hold a hearing on the tax-exempt status of credit unions that compete unfairly with community banks."

These activities are designed neither in an effort to promote "fairness" in the tax code, or to raise revenue in the national interest. No, these actions are merely part of another gambit to eliminate the "competitive threat" brought by credit unions (which account for less than 2 percent of total household financial assets), and ultimately the complete destruction of the credit union movement.

The tactics, rhetoric and posturing of the banking industry have led many in the credit union movement to sense that a serious assault is on the horizon for their cooperative financial institutions. I am confident that you will be hearing more from your constituents about the credit union difference, and the importance of spurning the bankers' power-grab. Until then, let me suggest to you some actions you may consider taking to help reassure credit unions and their members:

  • Draft a letter that is supportive of the current tax status of credit unions and send it either to myself or the president of the credit union league/association in your state (our addresses are enclosed).
  • Make a public comment, issue a statement or insert remarks for the record supporting credit unions and their current tax status.
  • Use any opportunity to urge bankers to focus on positive legislation for their industry--to tell you what they need--and to get off the backs of credit unions.

Attached is a letter recently published in the American Banker newspaper (by CUNA Chairman Dick Ensweiler) which I believe concisely and appropriately outlines the facts of this issue.

In the coming weeks, as we begin our national mobilization to defend ourselves, I am certain that questions may arise for you and your staff, either here in Washington or at home in the district. We stand ready to help answer those questions--with all of the facts--in an immediate and complete manner.


Daniel A. Mica
President and CEO
Credit Union National Association
Washington, DC

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