Op-ed: Banks Strive to Void Credit Union Exemptions
12/27/2013 03:09 pm
Below is an excerpt from John Rehill's op-ed "Banks Strive to Void Credit Union Exemptions" from Wednesday's edition of The Bradenton Times.
Banks Strive to Void Credit Union Exemptions By John Rehill
The friction between credit unions and banks has set-off a firestorm. Banks claim credit unions have gotten too big and no longer only serve the poor. Credit unions say they are non-profit, a partnership with the community, and deserve the tax-exemption status their industry was built on.
It has been almost 80 years since Congress granted credit unions their federal income-tax exemption by enacting the Federal Credit Union Act (FCUA). The government's intent was to stimulate post-depression investment by offering credit to those with little means.
In a letter to President Barack Obama last June, The American Bankers Association (ABA) characterized credit unions as a trillion dollar industry that is not worthy of what is projected to soon become a $2 billion annual subsidy.
In recent years, credit unions have been growing by 2-3 percent, creating a membership that now exceeds 95 million. Big bankers see these members as 95 million wallets, and right now they aren't getting a piece of that action.
It is fair to say, big banks are not fighting for the opportunity to provide free-checking -- and few-to-no fees for other services -- to the 95 million customers they hope to jingle from CU memberships.
Just weeks after the ABA letter to President Obama, Bank of America (BOA) posted a net quarterly income increase of 63 percent, or 32 cents a share; compared to the same period a year prior.
Wells Fargo's most recent third-quarter earnings were reported to be up 99 cents a share; Citigroup's third quarter earnings were $1.00 per share, or 30 percent from the period of the previous year.
This week, The New York Times reported that money market rates are continuing to rise, and Forbes reported those rising interest rates could wreak havoc on banks.
It is difficult to see how banks will convince the public -- and politicians running for a 2014 ticket -- to break free from zero banking fees, when the typical American family's income has fallen every year since 2007.
The rising trend of new customers migrating to CU's from big banks, very much mirrors the loss of household income and the number of those falling in or near the poverty line; so some see the increase in CU members, not as a emerging market of new dollars, but moreover, representing the exodus from big bank service fees.
Click here to view the complete op-ed at The Bradenton Times.