Credit union tax and regulatory exemptions have become increasingly vulnerable on Capitol Hill as lawmakers consider new tax legislation, former National Credit Union Administration chair Todd Harper said.
Declining Credit Union Support: At the Brookings Institution, Harper cited Washington State’s recent passage of legislation to tax credit union acquisitions of banks and the impact that recent reports on credit union redlining are having on support for the industry’s Community Reinvestment Act exemption. “I see that credit unions are in the most perilous place that they’ve been on the taxation issue in the 25-26 years that I’ve worked on credit union policy issues,” he said.
Acquisition Concerns: Addressing the “large number” of credit union acquisitions of community banks, Harper noted that customers lose consumer compliance exams and CRA oversight when their bank is bought by a credit union. He also reiterated his concerns that the NCUA lacks authority to examine credit union third-party service providers for cyber risk and expressed concern with interstate mergers of large credit unions.
Stadium Naming Rights: Harper also targeted credit union stadium naming rights deals. He raised questions about the return on average assets for these deals, said using complimentary seats for prospective mortgage borrowers could violate RESPA restrictions against lender kickbacks, and warned that naming-rights deals are hurting the credit union industry’s reputation.
Identity Crisis: “There’s an identity crisis out there with credit unions,” Harper said. “Big banks like to name stadiums. Do credit unions want to be banks? … If you’re going to be a bank, there should be other changes that happen along the way. There also needs to be greater regulation, oversight, practices, and watchfulness.”
Intensifying Debate: The growing debate over the credit union tax exemption and community bank acquisitions has continued to generate headlines, with CUToday reporting that more credit unions are considering converting to mutual banks, CU Daily writing that some in the credit union industry are concerned about larger mergers, Banking Dive spotlighting ICBA’s advocacy efforts, and ICBA’s Mickey Marshall telling American Banker that the growth of large credit unions is fueled by acquisitions of community banks.
ICBA’s Latest Response: In a national news release following the latest acquisition of a community bank by a credit union, ICBA President and CEO Rebeca Romero Rainey noted the latest deal follows last year’s record number of acquisitions.
ICBA View: ICBA’s “Repair, Reform, and Thrive” plan and open letter to the 119th Congress urge lawmakers to use the current debate over tax reform to address credit unions’ tax and regulatory advantages. ICBA earlier this year released a policy resolution that formally calls on policymakers to end the federal tax exemption for credit unions with $1 billion or more in assets or to establish tax parity between credit unions and tax-paying community banks.
