We read about corporations that pay no federal corporate income taxes and politicians who rail against greed and a flawed tax code that permits this. However, there is hardly a whisper from anyone about how credit unions pay $0 in federal corporate taxes, while the average Louisiana family pays over $2,700 in federal income taxes. Even the largest credit union at over $110 billion in size pays $0 in federal corporate income taxes.
Credit unions increasingly target the affluent, while fewer than 10% of credit unions are physically located in an economically distressed community. Only 13% are located in low and moderate income areas and a recent action by the regulator of credit unions allows them to exclude urban populations from their services. Credit unions are exempt from the Community Reinvestment Act, a federal law requiring banks to invest and serve the communities where they are located. Credit unions have no obligation to invest and serve the communities where they are located.
Today, credit unions have more than $1.1 trillion dollars in deposits, are major lenders in auto and home mortgages and are increasingly moving into commercial and small business lending. According to Home Mortgage Disclosure Act data collected by the federal government, only 4% of Louisiana mortgages originated by credit unions went to low-income borrowers, compared to 85% of mortgages that went to middle and upper income borrowers. According to this same data, 61 credit unions serving Louisiana did not make a single loan to low income individuals. So much for serving those with ‘small means’, as stated by federal law.
There has also arisen questions about the unduly close relationship of the credit union federal regulator and the industry they oversee. This observation is due to actions taken by the regulator to assist credit unions in an array of areas, some having been challenged in court. Examples include exempting appraisal requirements much further than banking regulators permit, raising safety and soundness concerns. The same credit union regulator has yet to implement strong capital requirements to enhance the safety of credit unions prompting U.S. Senate Banking Committee ranking member Sherrod Brown to say: “I am disturbed that 10 years after the financial crisis, the National Credit Union Administration is once again delaying important rules to increase capital at large credit unions… I commend NCUA Board Member Todd M. Harper for opposing this unnecessary extension and demanding that NCUA focus on strengthening supervision and identifying risks to credit unions.”
It is time for the public and policy makers to WAKE UP! Bring credit unions into the 21st century with fair taxation and regulation that protects the public and assures Washington, D.C., is not picking winners and losers.
Robert T. Taylor, CEO, Louisiana Bankers Association