Attacks on credit unions ignore the sector's important public purpose

MAYA BARKAI

Without fail, bank lobbyists recycle their old, tired attacks against the credit union industry year after year. Sure, it's flattering they spend so much money lobbying against us. But they really should be spending less time thinking about us, and more time thinking about the 43 million Americans who are currently considered financially vulnerable and in need of safe financial services.

That's what credit unions do — and the data backs it up. As not-for-profit, member-owned cooperatives, credit unions embody the democratic principles of this country and epitomize relationship banking. Many bankers and tax "experts" love to attack the industry's federal tax exemption. It's a copy-and-paste that misses a key point: The exemption is not a handout, it's a responsibility. A responsibility to put consumers over the bottom line and one America's Credit Unions and our membership take seriously.

Banks don't want that responsibility. They were a key reason the global economy crashed in 2008. Had they put consumers over dollars, it would've been a different story. Their irresponsible lending led to even more discoveries of bad practices taking advantage of people. That's why their industry has paid more than $250 billion in fines since the Great Recession.

You can also look at the difference in response to support families facing hardships amid the coronavirus pandemic: Since before the pandemic, call report data shows credit unions have experienced 30% loan growth, compared to just 15% growth at banks.

While banks face the consequences of their actions — from lower trust among consumers to record-breaking fines — they've turned to other practices to limit the hit to their bottom line: abandoning communities that need them.

Credit unions for decades have sought reforms to allow them to reach more underserved areas, but bankers push back and cry wolf. They take aim at credit unions' commitment to serving these low- and moderate-income communities. Ironically, as American Banker reported earlier this month, banking groups sued the Federal Reserve, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency over changes to the Community Reinvestment Act. The changes introduce new tests based on loan activity rather than branch location and incentivize banks to do more for community development.

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In their lawsuit, the banking groups said that the rule would undermine efforts to help communities by forcing them to close branches. Yet, between 2012 and 2023, banks closed 19,301 net branches. Credit unions opened 1,373 net branches during the same time frame. These same banking groups attack credit unions that are buying community banks but fail to disclose that 2,572 banks have sold to other banks while a mere 78 banks have sold their assets to credit unions since 2012. 

Credit union members saw more than $21.5 billion in economic benefits for the 12 months ending September 2023, and nonmembers received billions more in benefits due to credit unions' presence in the marketplace, according to America's Credit Unions' analysis of NCUA and DataTrac data. And call report data shows low-income designated credit unions have $96.8 billion in outstanding small-business loans and 45.9 million outstanding loans to members.

If you need more convincing, credit unions are paramount in mortgage and auto lending, even with field of membership restrictions. America's Credit Unions' analysis of Equifax data shows credit unions save consumers with lower credit scores up to $10,000 over the life of a car loan and as much as $50,000 over the life of a home loan. The Consumer Financial Protection Bureau's recent insights into the credit card market further highlight that credit unions are a better financial partner for consumers — offering lower fees and interest rates, regardless of credit score.

With a better financial partner in their corner, credit union members are more financially resilient: Equifax data reflect far lower delinquency rates at credit unions — especially among consumers with lower credit scores.

These attacks from bankers and their allies are attempts to crush competition, not to achieve fairness. But the data speaks for itself, and the credit union difference is real. We see it, the American people see it and we will fight to ensure more families and small-business owners can choose to partner with credit unions to achieve their best lives.