The most critical issue facing credit unions today is not a specific piece of legislation, but rather an attack on the reputation of credit unions by the banking industry.
Banking’s Big Lie: Operation Credit Unions
In an MSN Money article that appeared in August 2007, financial writer Liz Pulliam Weston wrote, "President Franklin D. Roosevelt signed the Federal Credit Union Act into law in 1934 to 'promote thrift and thwart usury,' and banks have pretty much been gunning for them ever since."
"Gunning for them" accurately describes the intent of "Operation Credit Unions", a well-funded campaign developed and distributed by the American Bankers Association.
The American Bankers Association (ABA) created this campaign to use three seemingly simple ideas to spread misleading statements about credit unions throughout the banking industry, among the public, and most importantly, to legislators. The purpose of the campaign is to provide an easily-repeated message that will position credit unions as competitors who have been granted unfair privileges that provide the credit unions with an unfair advantage, causing the banks to suffer.
Operation Credit Unions has also introduced a term – "new breed" – that is applied to larger credit unions such as Space Coast Credit Union. Supposedly, we "new breed" credit unions are "just like banks," but are operating with unfair regulatory advantages.
Bankers realize that they cannot successfully take action against credit unions as long as credit unions have the reputation as the protector of the consumer. "Operation Credit Unions" has been created to position credit unions as the free-roaming bullies of the financial world, setting the stage for legislation that will be requested by banks to "balance" the unfair advantages that credit unions supposedly possess. It contains elements intended to infiltrate all levels of our society. On their web site, the ABA states that "This is a long-term commitment that will mean educating your employees, your directors, your shareholders and your policymakers about the characteristics and behaviors of aggressive credit unions in your region and nationwide." 1
The ultimate intention of Operation Credit Unions is to entice legislators to pass restrictions on credit unions that would cripple the ability of credit unions to grow and to serve their members. Such limits would result in the elimination of credit unions altogether, eliminating a consumer choice and, of course, eliminating a source of competition.
Make no mistake; the elimination of credit union members is the real purpose of this campaign. The ABA’s campaign is a lie; a lie being perpetrated to injure credit unions' members.
More information on Operation Credit Unions
The elements of the Operation Credit Unions campaign are:
Credit unions do not pay taxes.
Credit unions do not have CRA requirements.
Credit unions do not have comparable regulatory burdens.
Each of these claims is either an outright untruth or is misleading.
Credit Unions do not pay taxes
The ABA’s campaign makes an untrue assertion that credit unions do not pay taxes. They have built grand accusations upon this foundation, including claims that credit unions drain resources from their communities, impede the education of children and are unfairly subsidized by the communities in which they operate.
The fact is that credit unions pay property taxes, payroll taxes, and other business taxes at the same rates as other businesses. The only tax from which credit unions are exempt is corporate income tax. This is due to the fact that credit unions are cooperatively owned, and the income taxes are paid by the individual members.
Credit unions do not have CRA requirements
This is a true statement – and there is a good reason for that truth. The Community Reinvestment Act was passed in 1977 by Congress in an attempt to force banks to stop the practice of siphoning profits from one community (usually of modest means) and sending the profits earned elsewhere. CRA requires reinvestment in the community where the profits were earned.
Since credit unions can only return money to their members, it is impossible for them to take from one community and give to another. There is no reason to use legislation to force credit unions to reinvest in their community, because they do it everyday, naturally, as a condition of their member-owned structure.
Credit unions exist only for the benefit of the community they serve: their members. This cooperative structure ensures that credit unions have no motivation to engage in predatory lending or excessive profit-taking. This was the reason that the Federal Credit Union Act was signed into existence in 1934.
Credit unions do not have comparable regulatory burdens
This statement is intended to create the impression that credit unions are regulatory free-for-alls, that represent a high risk to the American consumer. Bankers know that the total opposite is true.
This statement goes far beyond the bounds of fair competition and steps into the bounds of deliberate defamation and injury. It is as egregious as it would be for one airline to make false claims about the safety of another airline in order to scare regulators and passengers. Such shameful, outlandish claims are dangerous to the reputation of credit unions, and should not be tolerated by legislators, credit unions, the general public or even bankers themselves.
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1 American Bankers Association, Operation Credit Unions page, paragraph 3.
