Commentary - Credit unions support and strengthen communitiesI am writing in response to a letter you received from the Independent Community Bankers of America that questioned credit unions’ tax exempt status and support of their communities. This letter contained inaccurate and misleading assertions about Minnesota credit unions that deserve a response.
By Chuck Albrecht, president and CEO of Mid-Minnesota Federal Credit Union
I am writing in response to a letter you received from the Independent Community Bankers of America that questioned credit unions’ tax exempt status and support of their communities. This letter contained inaccurate and misleading assertions about Minnesota credit unions that deserve a response.
The letter asserts that through their tax exempt status, credit unions are withholding from communities the financial support they need. However, as local, hometown financial institutions, credit unions make their communities their number one priority; even above making a profit.
Credit unions are member-owned, not-for-profit financial cooperatives. Through this unique structure, they support and strengthen communities by paying payroll and property taxes. It is also worth noting that while bankers claim that tax status ought to prevent credit unions from obtaining more powers, they simultaneously lobby to achieve such expansions among tax-advantaged Subchapter S banking institutions.
As cooperatives, credit unions are set apart from other financial service providers. They generally operate in a more conservative manner, taking fewer risks with members’ money than banks may take with stockholders’ money. For credit unions, the goal is not to make a profit for shareholders but rather to provide affordable financial services to members. For everyday Minnesotans this means that they receive lower loans rates, higher savings rates and fewer fees.
According to studies from the Credit Union National Association, credit unions return $5 to their members in lower costs for every $1 realized in tax savings. That’s a one to five ratio that translates into more than $77 million in direct financial benefits for the state’s 1.5 million members.
Credit unions are avid supporters of the state’s small businesses. Throughout 2011, credit unions’ business lending activity increased more than 8 percent, which is a stark contrast to the nearly 2 percent decrease in bank business lending activity during that same time period. It is evident that credit unions are fulfilling a lending need that is prevalent throughout Minnesota communities. The push to increase credit unions business lending authority would add $166 million in new loans to Minnesota small businesses in the first year alone and help create an estimated 1,800 new jobs. When evaluating these numbers, it’s difficult to comprehend the logic behind the argument that credit unions don’t support communities.
Credit unions are local financial cooperatives with a stake in and commitment to the communities they serve. Each year they return millions of dollars in benefits to credit union members and their communities. It is through this service model that credit unions truly exemplify their model of putting people before profit.