For years the U.S. banking industry has been fighting the tax exemption enjoyed by credit unions. A recent report from the Treasury Department ($ sub required) suggests credit unions are avoiding paying some $19 billion in taxes each year.
Credit unions respond that if taxed they would have to decrease their savings and CD rates and increase their loan rates, both of which are generally more favorable than banks. This, they say, would negatively affect primarily the average Joe or Jane - the man or woman on the street. And credit unions argue that their presence in a community creates more competition for banks, forcing them to keep their loan rates and fees lower than they otherwise would.
Banks, in turn, argue that credit unions are exempt from the requirements of the Community Reinvestment Act (CRA) that requires banks to serve areas of the community that may not be fully profitable but do some societal good. Credit unions argue they work in the under-served marketplace on a daily basis.
Most credit unions are membership credit unions which are limited to serving individuals and their families who work for a particular company or institution. For their part, credit unions are lobbying for reduced membership requirements so they may serve anyone from a specific geographic area. And, not surprisingly, the banking industry is suing to prevent this liberalization of membership requirements.
Now the battle has gone to the Internet. Several sites have recently sprung up that show short videos showing the differences between banks and credit unions in a humorous fashion - naturally focusing on those areas credit union excel (low fees, etc) and emphasizing the perceived weaknesses of banks (greedy, corrupt, etc). The site www.bankerspank.com has several parody videos that take-off of the Mac/PC commercials. Here's one:
And the fight goes on. The Philadelphia area is indeed fortunate to have its share of credit unions that have done a wonderful job of helping the working person and his/her family. But $19 billion buys a lot of tanks and bullets. How will it all come out? It may take several decades. But at least we're getting some good video humor out of it along the way.
- Larry Jilk is a former Pennsylvania bank executive.
