Credit Unions vs Banks

[RoadDawg]

First off I just want to say that I work for a Credit Union and I understand the role a credit union plays in our financial world.

Now I want to ask you and all those that support major bank corporations stance on taxing CU's. Why? CU's are not for profit, and are basically a "check and balance" to major banks keeping the banks from charging higher rates. It is known that you can combine all the US CU's and it would only equal a little more then half of Citi Group's total assets.

SO I ask this... why?

Anyways... I'm just interested in hearing the other side. Plus I want to try and educate those that might not know or correct those false assumptions (if any). So shoot away please.

[1stdeadeye]

Well first off, credit unions are allowed to do many things bank's can not. You may choose who your members are and who may not be a member. Banks can not. Credit Unions are not subject to the same level of regulatory oversight banks face. Credit unions may be not for profit, but they are certainly not charities. Why should they recieve those benefits a charity recieves? What bank can discriminate against the general public without repercussion? None, but a credit union can! Why are banks credit loss reserves much higher then Credit Unions? Regulations!!! We can't pick and choose which populations to serve. Credit Unions are conveniences and should be taxed as such.



There has to be some equalization of the playing field.

[Vex]

There has to be some equalization of the playing field.

If you want equalization of the playing fields, then play on similar ones.

It's unfair to really compare the two. Sure, they serve similar functions, but they are completely different institutions. The benefit to being non-profit is that the "profits" go back to the members, versus lining the pockets of the company. Thus, they can afford the lower rates and higher interest yields.
There are many different types of credit unions, so it shouldn't be difficult to find one that you can become a member of.

BTW, knock-over a Federal credit union, you've just bought yourself a instant ticket to the Federal Penitentary.

[kosmo]

BTW, knock-over a Federal credit union, you've just bought yourself a instant ticket to the Federal Penitentary.

Thats if youre dumb enough to get caught

[Crighton]

Banks want credit unions taxed because credit unions have continued to lobby for expansion beyond there original intended role. Some what successfully, as tax free organizations they have a unfair advantage in the market place.

[RoadDawg]

Deadeye I take it you work for a bank. Anyways... in my CU's case we are a community charter. Meaning we can't expand outside of our area (unless we aquire or become aquired by another institution). By doing so our members choices are limited to our area. We have to turn outsiders away (even though it'd bring money in) due to our regulations we face(NCUA). That is one regulation banks don't have to worry about (at least to my knowledge). BofA for example can go anywhere they see fit (as long as it brings profit in). My CU is limited to where our charter will allow us.

CU's are totally not for profit... our BOD, Supervisor and Loan committee's don't get paid to do what they do... they are members who volunteer for what they do. In fact our bosses are truely our members or customers. We give just about all that we can (without loosing buildings or sacrificing member service) back to the members, either through better loan rates or dividends.

Thing that upset me most about all this was a incident that happened in SLC, Utah. The local bankers turned the public against CU's saying they were "stealing from the schools and streets of the people because they weren't being taxed". CU's have not been stealing any money. They give virtually all money that comes in (from their members) back to their members (better rates that keep banks from charging whatever, higher returns on their savings accounts etc). .

In truth though both banks and CU's are struggling with one common factor. DMV loans. In fact I know Washington Mutual has stopped doing those loans all together. Quite simply with a 3% return isn't going to cut it when your paying out more then that to either fund it or keep it on file.

I still feel that the two are different sides of a broad spectrum. CU's are not taking away business from banks, but I'd say just the opposite. To me I think banks are just trying to get rid of the competition (makes sense from a business stand point). How do you do that, by taking away the only thing that would keep them a float. BTW... there used to be 1200+ credit unions in California, now we are around 500.

I should of checked this earlier... not I'm off to sleep until another day. Deadeye... thanks for sharing though. I appreciate hearing another side.

[1stdeadeye]

BTW, knock-over a Federal credit union, you've just bought yourself a instant ticket to the Federal Penitentary.

That goes for any federally insured institution. Can you say FDIC?

[1stdeadeye]

Deadeye I take it you work for a bank. Anyways... in my CU's case we are a community charter. Meaning we can't expand outside of our area (unless we aquire or become aquired by another institution). By doing so our members choices are limited to our area. We have to turn outsiders away (even though it'd bring money in) due to our regulations we face(NCUA). That is one regulation banks don't have to worry about (at least to my knowledge). BofA for example can go anywhere they see fit (as long as it brings profit in). My CU is limited to where our charter will allow us.

CU's are totally not for profit... our BOD, Supervisor and Loan committee's don't get paid to do what they do... they are members who volunteer for what they do. In fact our bosses are truely our members or customers. We give just about all that we can (without loosing buildings or sacrificing member service) back to the members, either through better loan rates or dividends.

Thing that upset me most about all this was a incident that happened in SLC, Utah. The local bankers turned the public against CU's saying they were "stealing from the schools and streets of the people because they weren't being taxed". CU's have not been stealing any money. They give virtually all money that comes in (from their members) back to their members (better rates that keep banks from charging whatever, higher returns on their savings accounts etc). .

In truth though both banks and CU's are struggling with one common factor. DMV loans. In fact I know Washington Mutual has stopped doing those loans all together. Quite simply with a 3% return isn't going to cut it when your paying out more then that to either fund it or keep it on file.

I still feel that the two are different sides of a broad spectrum. CU's are not taking away business from banks, but I'd say just the opposite. To me I think banks are just trying to get rid of the competition (makes sense from a business stand point). How do you do that, by taking away the only thing that would keep them a float. BTW... there used to be 1200+ credit unions in California, now we are around 500.

I should of checked this earlier... not I'm off to sleep until another day. Deadeye... thanks for sharing though. I appreciate hearing another side.

Some good points. The problem is not with small CUs like yours. The problem is with the CUs that are pushing the limits of where/who CUs can deal with. Unfortunatly, you can' pick and choose which ones to tax. Out here we have CUs advertising that you can join them if you live, work, or worship in their territory. That is directly competing with the banks, so they need to be taxed the same as well.

As for BofA expanding, you are right and wrong. They can expand as they wish up to the federal deposit limit. Right now BofA is not allowed to buy anymore banks as they hold over 10% of the nations deposits. They may open new offices, but can not buy. They are lobbying Congress to remove that cap now. Will that happan? Who knows....

As for the # of CUs, how many of the 1200 closed? I bet most of the shrinkage was due to CUs merging which seems to be a popular trend now a days.

[RoadDawg]

See I feel that if banks do get their ideals passed against CU's that all CU's will be affected in the long run. Large and small will both be targeted eventually.

All CU's have their rules for joining. Some like a "teachers" CU have to be through the schooling system. CU's like mine though, which is a county or community charter, can get members from anyone who works or lives in our direct area. Worship is an extremely grey area. More times then not we turn people away with the last one. Once again though we are limited to our county area, unless through a merger (which is regulated by the NCUA, a gov't group), can we expand outside of our area but only to those that we inherit. Even then we still have to charge people to be a member of our CU (monthly fee). So it's not like you join for free, you still have to pay to be apart of it.

Also earlier with your comparison to a charity. We definately do not get all the benefits a charity gets. We still have to pay sales tax, pay for our mail, etc. It's not like we are living scott free. We don't get taxed like a bank because we hardly keep anything, which classifies as NFP. We are also heavily audited to make sure we fit within our perimeters set by the NCUA.

1200 to 500 I'm sure there are a lot of mergers as that is common in the world today anyhow. I know we've taken in CU's that were on the verge of disappearing (all within our border). So it wouldn't suprise me if most of those were through mergers. I'm sure there are some that aren't though.

I do however think that CU's that violate the NCUA regulations or expand nationwide (especially if their charter is "local") they should be dealt with in another matter and loose the CU title. However how to decide what is to big won't be easy and from what I read some bankers are aiming for ALL CU's. (If I can find a way to scan in the letter I will) Which to me is big brother picking on little baby (CU's are way too small compared to most banks).