Did you know that just 5 percent of the ENTIRE credit union industry enjoys 75 percent of the tax exemption benefits? And it’s not the little guys who play by the rules and adhere to their original mission of serving those of modest means with a common bond. No sir, it’s the large, billion-dollar credit unions who are increasingly targeting wealthy customers, giving loans for private planes and mansions and shelling out tens of millions of tax-exempt dollars to sponsor stadiums and sports teams.
While these 300 bad actors barrel further and further off the rails, the other 95 percent of the industry – 5,600 small credit unions – face an existential crisis. Do they remain true to their original mission and continue to serve average, every day consumers – and likely end up out of business or gobbled up by a large credit union – or do they follow the lead of the aforementioned large credit unions by opening up their membership to anyone and everyone who comes their way?
It’s a blatant Catch-22.
But don’t just take our word for it. Even small credit union executives are expressing their frustration. Robert Taylor, chief executive of Idaho State University Federal Credit Union, says credit unions that engage in “expansionism for the sake of expansionism” risk the industry’s reputation. With an “anything goes” approach to credit union membership, “How can we possibly go to Washington and say ‘We are the small credit union serving the small guy’?”
A recent op-ed in BankThink also exposed the large credit unions’ devastating effects on small, community banks.
“[M]embers of Congress aren’t going to get a straight answer from credit unions about how their industry is pushing the envelope with their tax exemption, and they aren’t going to hear it from Wall Street either. All they need to do is observe in their communities the kinds of services and infrastructure that local community banks help fund through their taxes — a responsibility that credit unions continue to dodge.”
So why is our tax system rewarding the bad actors while simultaneously punishing the good guys? Why aren’t credit union regulators cracking down and holding this small group accountable?
Good questions that no one seems to be able to answer.
While the overwhelming majority of credit unions hold true to the original credit union mission, the minority threaten the entire industry by using the money they pocket by not paying federal income taxes to buy up unrelated, tax paying, businesses. The first thing they do is take them off the tax rolls so they can line their pockets and expand their tax-exempt empires.
Congress needs to level the playing field and ensure these massive credit unions don’t make small credit unions and community banks extinct.
If they don’t, average American taxpayers will be left high and dry by the very system that is supposed to help them.