Banking groups have suggested the credit unions are no different from mutual savings banks and that, since mutual savings banks pay federal taxes, credit unions should be taxed as well:

Although many savings banks and S&Ls are mutually owned, they are not the same as credit unions. There are key differences that continue to make credit unions unique:

• Not for Profit: Credit unions are not-for-profit financial cooperatives, Mutual savings banks operate for the mutual profit of their owners and lack true cooperative principles (see below).
• Ownership: Each credit union member has an equal ownership share, regardless of how much money is on deposit in the credit union. At a mutually owned thrift, ownership rights are skewed toward large deposit holders.
• Voting Rights: Every credit union depositor has one vote. Again, this is regardless of the amount of money on deposit. That's the credit union way and true democracy at work. Many mutual savings banks retain different voting rights than credit unions, such as encouraging depositors to sign away their voting rights to a proxy and/or basing votes on the amount on deposit in the bank, thus stacking the vote for the richest depositors.
• Volunteer Service: Most credit union boards of directors serve voluntarily and are unpaid. Board members are elected by and from the credit union's membership. Mutual savings banks have paid directors.
• Common Bonds: Credit unions are restricted by statute to a limited market (field of membership composed of a specific group or set of groups). Unlike mutual savings banks and thrifts, credit unions cannot serve the general public.
• People Helping People: This philosophy guides credit unions as not-for-profit cooperatives. That's why credit unions have such strong public support. Surveys have consistently shown that the public believes credit unions are much more likely than banks to put consumers before profits and human interest ahead of monetary gain.
• Taxation: The federal income tax exemption was reaffirmed for all credit unions in the Tax Equalization Act of 1951--the same year mutual S&Ls lost their tax exemption. Congress set forth the following reasons for continuing credit unions' tax exemption: "credit unions without capital stock organized and operated for mutual purposes and without profit will remain tax exempt." Credit unions’ tax status was reaffirmed again by Congress in 1998, and to this day, all credit unions are still without capital stockholders, are still organized and operated for mutual purposes, and are still not-for-profit. The reasons for granting credit unions their income tax exemption are just as valid today as when the exemption was first granted.

If banks believe credit unions have such an advantage, then why don't banks simply convert their charter and become a credit union? The fact is, banks are more profitable than ever. They could offer rates and fees comparable to credit unions, yet they haven't. The reason? Credit unions exist to help people. Banks are created to maximize profits. They have no desire to adopt the distinctive traits that set credit unions apart.

Copyright © 2008 - Credit Union National Association, Inc.