GA CREDIT UNIONS

Legislative Context/Background

Credit unions are unique; they are a not-for-profit financial cooperative that help provide access to credit to their members. And as members of a credit union, they are all part-owners of the credit union...there are no stockholders. It's one of the things that make credit unions special...that as a not for profit, they are there to provide services to the members.

Because credit unions are different, they have a different history of their for-profit counterparts in the financial marketplace. While legislative issues may change year over year, below is history of some of the key issues to provide context:

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What GA Credit Unions Believe

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Credit Union Tax Status

Credit unions are exempt from Federal and State income tax due to their structure and mission as not-for-profit financial cooperatives. Congress has preserved the income tax exemption since it was first enacted in 1937.

Credit unions do pay taxes however … real property taxes, tangible personal property taxes, payroll taxes.  And all credit union members pay taxes on the interest that their accounts earn.

Credit unions are different … they are not-for-profit financial cooperatives owned by their members.  They provide a place to save and borrow money in a conservative, prudent manner without the motivation to pursue profits for stockholders … but rather serve their members.

The income tax exemption benefits US families and individuals:  if the income tax status went away, for every $1 in new credit union taxes, the government would erase  $10 in benefits to credit union members. That not only hurts the U.S. economy to the tune of $6 - $10 billion a year, it also ends up raising taxes on the working families and small businesses that rely on credit unions every day.  This credit union tax status is not just a benefit to over 115 million credit union members, but to all consumers regardless of their choice of financial service company.  Consumer choice is a good thing for the marketplace!

History is a great example of the benefits of credit unions:  During and following the financial crisis, Americans saw credit unions as a safe haven in the financial services sector. Credit unions continued to lend to consumers, homebuyers and small businesses when other lenders were unable or unwilling to do so … with this stemming from the typical conservative methods of these not-for-profit credit unions.

Regulatory Burdens

Credit unions accept they operate in a regulated environment. While regulations are necessary to protect consumers and businesses, the regulatory burden under which credit unions operate is staggering. Credit unions must comply with a number of new and revised requirements from not only NCUA and the Bureau, but also from the Federal Reserve Board, the Financial Accounting Standards Board, and others. Credit unions are rightly concerned about the range of rules they are facing.

When there are changes in regulations, or new regulations it prompts upfront costs including staff time and credit union resources that are applied in order to comply with the change; forms and disclosure changes; data processing systems reprogramming; and staff retraining.

• When regulations aimed at Wall Street banks and abusers of consumers restrict or eliminate credit unions from offering services, consumers lose. It costs consumers time and money and limits their choices.

• One-size-fits-all regulation does not work for Main Street - local credit unions, small banks and the consumers and small businesses they serve. The time spent on regulatory compliance is time away from member service...and the cost of compliance is second to that of staff.

• Over regulation has a system favoring the largest institutions who can afford to comply with the "solutions" dreamt up in Washington - the very institutions that caused the crisis that hurt so many.

Members of Congress should enact legislation that clearly directs regulators to take into consideration the size and complexity of institutions, and set up a structure at the CFPB that includes more voices in rulemaking.

Click here to access the latest list of top regulatory issues in 2018 impacting credit unions.

 

Member Business
Lending Constraints

Credit unions presently have a limit on the business loans they provide members (member business loans/MBLs).

Click here to access the US Treasury Letter as well as the National Small Business Association Report on this issue. 

Is lending to small businesses a new concept for credit unions?  No.  Credit unions have been making MBLs since their inception in the early 1900s, and in the first 90 years of their existence, there was no cap on business lending.

When was the limit set?  The first and only time this was capped is the current cap, which was instituted by Congress in the drafting of the Credit Union Membership Access Act of 1998 (CUMAA).  The cap limits most credit unions to lending no more than 12.25% of their assets to small businesses without any economic, safety and soundness or historical rationale.   

Does this matter?  Yes.  Approximately 500 plus credit unions are currently constrained by the cap.  This limits how many small businesses can get help from their credit unions. An SBA study found that 80% of additional lending from raising the cap would represent NEW lending. 

Credit unions would like that cap (that was set almost 20 years ago) raised.  Credit unions could lend an additional $15 billion to small businesses, helping them create nearly 150,000 new jobs in the first year after enactment if Congress increases the statutory cap on credit union business lending. This can be done without costing the taxpayers a dime and without increasing the size of government.

Capital Requirement and Adequacy

During the financial crisis everyone learned the importance of capital. However, credit unions have restrictions on sources of capital and can only count retained earnings towards mandated requirements.

The authority of credit unions to build additional capital, either from members or nonmembers, in a way that does not dilute the cooperative ownership and governance structure of credit unions is of importance to credit unions. Credit unions support, allowing sufficient flexibility such that any instrument or offering will be viable and cost-effective to encourage its use by credit unions.

While the credit union system is well capitalized, allowing credit unions to access supplemental capital would act as a safety and soundness tool to absorb operating losses and potential write-downs during an economic downturn and reduce risk to the National Credit Union Share Insurance Fund.

CONTACT US

  GCUA
6705 Sugarloaf Pkwy.
Suite 200
Duluth, GA 30097

  (770) 476-9625

  Mike Mercer
  mikem@gcua.org

  Cindy Connelly
  cindyc@gcua.org

  Diana Houston
  dianah@gcua.org

  Brandee Bickle
  brandeeb@gcua.org
TWEETS
CONTACT US

  GCUA
6705 Sugarloaf Pkwy.
Suite 200
Duluth, GA 30097

  (770) 476-9625

  Mike Mercer
  mikem@gcua.org

  Cindy Connelly
  cindyc@gcua.org

  Diana Houston
  dianah@gcua.org

  Brandee Bickle
  brandeeb@gcua.org