Community Bankers Renew Request for Congressional Probe into Credit Union-Bank Deals

Bankers accuse credit unions of leveraging tax exemption to buy banks

Citing recent bank purchases by credit unions, the Independent Community Bankers of America trade group is renewing its call for congressional oversight of the purchases.

“As credit union banking acquisitions continue, policymakers are responsible for investigating whether federal policy should continue to support this alarming trend,” Rebeca Romero Rainey, the ICBA’s president and CEO said last week.

Few policymakers have expressed a willingness to wade into the longstanding battle between banks and credit unions. However, during a November hearing featuring bank regulators, Rep. French Hill, R-Ark. asked National Credit Union Administration Chairman Todd Harper about such purchases. Harper promised to provide Hill with more details on the issue.

Romero Rainey did not get specific about which bank purchases concerned her. In recent days, Global Federal Credit Union, an Alaska financial institution, announced it will purchase First Financial Northwest Bank of Renton, Washington. In addition, Hudson Valley Credit Union in New York announced it intends to merge with Catskill Hudson Bank.

Banking trade groups have long said that credit unions are able to use their tax- exempt status to make more attractive offers to banks than other banks are able to offer.

“The surge in credit unions leveraging their taxpayer subsidies to acquire local community banks has devastating implications for local communities that go well beyond the expansion of the federal tax exemption for more than $2 trillion in credit union assets,” Romero Rainey said.

She added that the nation’s community banks account for about 60% of small-business loans and 80% of agriculture loans.

“Each credit union acquisition displaces a critical and trusted provider of credit, further consolidates the banking industry, and increases the portion of the industry exempt from Community Reinvestment Act oversight,” she charged.

Credit unions are exempt from the Community Reinvestment Act, which requires banks to report on whether they are making adequate investments in their communities. Credit union trade groups contend that credit unions are defined as community-based institutions and that such reporting is not necessary.

Romero Rainey said that some states, such as Colorado, Minnesota, Mississippi, and Nebraska have “pushed back” on bank purchases by credit unions. She added, however, that the trend still should be investigated.

She renewed the ICBA’s call for hearings on the issue, a request she made in 2021. She also repeated her request that the Government Accountability Office study the National Credit Union Administration’s management of the credit union industry. She made that request in 2020, after the government watchdog agency reported that the Federal Deposit Insurance Corporation had been “captured” by the banking industry and was not acting independently. She also said that Congress should consider an exit fee on bank purchases to capture the tax revenue lost when the banks become part of a credit union.