Removing Barriers Blog

ABA Sends Misleading Letter to House and Senate
Posted February 09, 2016 by CUNA Advocacy

Today, we sent a letter to the Hill, responding to a letter sent last week by the American Bankers Association (ABA). Last Friday, the ABA sent a letter to Members of the Senate Committee on Finance, the House Committee on Ways and Means, the Senate Committee on Banking, Housing and Urban Affairs, and the House Committee on Financial Services.  The ABA's argument was not new as far as opposing the credit union federal income tax status.  However, the letter did attempt to tie the National Credit Union Administration's (NCUA) proposed Field-of-Membership rules as a reason to eliminate the credit union tax status.  

The letter was riddled with inaccuracies as well as distortions of the truth. The ABA again demonstrates a willful misunderstanding of how and why credit unions exist and operate.  

Our letter reiterated that the basis for the credit union tax status is the structure of credit unions as not-for-profit financial cooperatives and their mission to promote thrift and provide access to credit for provident purposes.  Even though the bankers would like you to believe otherwise, the tax status has never had anything to do with powers or restrictions of credit unions.  

The NCUA proposal that the bankers are so concerned with would further facilitate the fulfillment of the credit union mission.  It would update current rules that are outdated and filled with burdensome processes and requirements.  The bankers’ true motivation is the elimination of credit unions in the marketplace.

If the federal tax status were reversed conventional wisdom suggests that many credit unions would convert charters and operate as banks, unfettered by the many charter restrictions credit unions now face, and available to be acquired by larger banks.  This would represent a failure of public policy because credit unions provide a market alternative that helps moderate increases in bank fees and charges for all consumers.  Without credit unions, consumers would be greatly disadvantaged, and in some cases, be forced out of the financial mainstream.