Business North Carolina has published an article related to the attempted re-engineering in the NC House of NC Senate Bill 595. The bill as modified included a massive expansion of credit union powers modeled on House Bill 187. You answered the NCBA’s action alert last week, making countless calls and sending emails to our elected legislators in the NC General Assembly. Thank you!

The NC Senate squarely rejected the proposed changes by an overwhelming vote of 41-1.

The Business North Carolina article includes a quote by Rep. Deb Butler (D-New Hanover), who voted against both S 595 and H 187:

“We love our credit unions, we want them to be successful and provide the services, but if they want to become banks, they need to start paying some taxes.”

As we have consistently maintained, there are roles for both banks and credit unions, but when credit unions seek to have all the powers of banks, then they should be taxed, supervised, and regulated like banks.

Speaking of Business North Carolina, we encourage you to take a look at an article it featured entitled “NC Financial: Tar Heel Banking.” Included in the article is a listing of the 50 largest banks and credit unions based in North Carolina. Out of the top 25 by assets, a total of 10 are credit unions. Out of the top 50, a total of 21 are credit unions.

We don’t question growth when there is fair competition, but you will note in the list a number of credit unions that are very active in business lending and which are aggressively stretching the bounds of what it means to adhere to their requirement of serving people of modest means who share a common bond. The Tax Foundation has criticized the most aggressive credit unions within the $2.3 trillion credit union industry, saying “Credit Unions now largely operate like tax-exempt banks, often competing unfairly for the same customers and providing many of the same services.”

Speaking of unfair competition, consider US News & World Report’s article on the “20 Largest Credit Unions in America.” Please look at number 4, PenFed Credit Union, which the publication notes  “Anyone can join by opening a savings account with a minimum deposit of $5.” In addition to PenFed, numerous multi-billion-dollar credit unions in the list allow anyone to be eligible by payment of a nominal fee. For example:

• Alliant Credit Union: $5 donation to the Alliant Credit Union Foundation,
• First Technology Federal Credit Union: $5 to become a member of the Computer History Museum,
• Lake Michigan Credit Union: $5 donation to the ALS West Michigan Chapter, and
• FourLeaf Federal Credit Union: anyone can join with a minimum deposit of $5.

This the kind of behavior that North Carolina bankers find unacceptable. We know that you firmly believe in open and fair competition on equal terms, and this is why we cannot be silent when large credit unions seek to abandon their mission and rather than covert to banks or accept taxation and bank-like supervision and regulation, seek to compete unfairly. Credit unions investing in multi-million-dollar headquarters buildings and in naming rights for stadiums are certainly business decisions they have the power to make, but these and other actions underscore the fact that the continued tax subsidy for large credit unions frees up millions of dollars every year for each of them to plow into these projects. If you have every paid a penny in income taxes, then you have paid more than the entire credit union industry throughout its history – going all the way back to 1934.  

If you are interested in getting additional perspectives on these and other issues, there are two thought-provoking blogs to consider. One is prepared by Chip Filson, a highly regarded consultant to credit unions, and, in particular, please see the post entitled “Transforming the Unicorn-Members Fight for a Say in the Future of SECU-NC.” Also, consider reading former SECU CEO Jim Blaine’s blog in which he reports on trending issues in North Carolina and questions the motivations behind bills like H 187.