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CUs not hurting banks says letter to the editor
BATON ROUGE, La. (5/19/08)--Credit unions are not hurting banks, according to a credit union CEO’s letter to the editor published in the Baton Rouge Advocate this month. A 2006 study by the Government Accountability Office (GAO) indicated that banks are not harmed by credit union competition, wrote Cary J. Anderson, president/CEO of LA DOTD FCU in Denham Springs, La. The study, which was conducted from 1996 to 2006, said banks had a net income growth rate of 7%, compared with credit unions’ net income growth rate of 3% (Baton Rouge Advocate May 5). Banks reported a net income of $146 billion in 2006, compared with credit unions’ net income of $6 billion, the letter said. The study also said that banks use tax deductions, and 31% of banks are Subchapter S corporations. Subchapter S corporations pay no tax by providing income to shareholders, who then are taxed individually. Some banks have used tax shelters and transactions the Internal Revenue Service deems abusive, Anderson wrote. Credit unions are chartered to serve people of modest means, and provide members with higher dividends, lower loan rates, lower fees and in the case of LA DOTD FCU, a cooperative network in 3,200 locations with thousands of surcharge-free ATMs, Anderson noted. Credit unions are tax-exempt because of their charter, and pass along savings to members. Credit unions also provide members with financial education. LA DOTD FCU sponsors three in-school credit union branches and provides a certified financial literacy teacher to schools for free, the letter said.
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