Wall Street Journal financial regulation reporter Ryan Tracy has a piece in today’s paper that exposes how large credit unions have turned their backs on the industry’s original mission to serve people of modest- to low- income who share a common bond.
The rapid expansion has gone largely unchecked by federal regulators and threatens to put smaller credit unions, who have stayed true to their mission, out of business.
It also raises questions about whether or not the credit union industry’s federal tax exemption has outlived its purpose.
These large credit unions seem to forget their mission and following basic limits, as they openly admit to Tracy of setting goals of “quadrupling assets”. While the article focuses on PenFed, which proudly exclaims in their multimillion dollar advertising campaign that they have “Great Rates for Everyone” and are guided by the internal mantra, “No Speed Limit”, they are far from the only offender.
Overall, just 5% of credit unions enjoy 75% of the tax exemption, and that small percentage of credit unions is financing their explosive growth with taxpayer dollars.
Small credit unions that have not yet been gobbled up by the large credit unions through M&As are bearing the brunt of their growth strategies. As they struggle to keep their heads above water, the actions of large credit unions make their own, noble missions way more difficult.
Robert Taylor, chief executive of $240 million-asset 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’?”
Congress needs to start paying attention to the ways large credit unions are taking advantage of their tax exemption and straying away from their original mission of supporting the little guy, before the problem gets completely out-of-hand for everyone. To summarize, we think a commenter on the article said it best: “A pig gets fat. A hog gets slaughtered.”