I am writing in response to your Feb. 22 article (“Bye-bye Banks? Credit Unions Are the Hot Thing”) that contends that credit unions offer consumers a distinct advantage over banks. This article does not contain any comment from the banking industry. I write on behalf of Mississippi’s banks to provide important facts (not included in your article) that should be considered in comparing banks and credit unions.
First of all, credit unions are not fully regulated. Traditional banks, like those in Mississippi, must comply with many regulations that don’t apply to credit unions. Banks must pay for the cost of this compliance.
Secondly, credit unions do not pay taxes. None. Anyone who paid a penny in income tax last year paid more than all credit unions combined. Thirdly, banks, unlike credit unions, are fully invested in the economic well being of their communities. A bank advertisement in your Feb. 22 issue said it best: “When our communities succeed, we succeed.” (Every bank is subject to federal regulation under the Community Reinvestment Act (CRA), which monitors lending in a bank’s market area. Credit unions are not subject to CRA.)
Credit unions’ regulatory advantages and tax exemption can be traced to 1934, when Congress created them to serve persons of modest means. Credit unions were set up to use pooled resources of members (a limited group of individuals with a “common bond”) to provide financial services to those members. Over the years, the credit union industry has pushed for, and received, authority to offer more products and services to a wider and wider membership. At the same time, they have fought to keep their tax and regulatory advantages. Today, many credit unions promote themselves to the general public, in direct competition with fully taxed and regulated banks. Ironically, some of their “selling points” are based on lower costs derived from their government-provided advantages.
Nationwide, credit unions are an $802-billion industry. A recent American Bankers Association study estimated that, over the next 10 years, the credit union tax exemption will cost the federal government nearly $19 billion. (This does not consider lost state revenues.) And a 2006 report by the federal Government Accountability Office (GAO) stated that “credit unions lagged behind banks in serving low- and moderate-income households.”
The record of Mississippi banks, in complying with regulations designed to protect their customers, in paying taxes to support local, state and federal government, and in promoting economic development in their communities, should be considered in any fair comparison of banks and credit unions.
McKinley W. Deaver
Mississippi Bankers Association
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