The Independent Community Bankers of America are asking the Trump Administration to push for a review of the credit union tax exemption, contending that they have an unfair advantage over banks.
In a white paper sent last week to Treasury Secretary Mnuchin, the ICBA contends that the credit union model is outdated.
“The National Credit Union Administration (NCUA) has enabled many credit unions to grow their membership and their markets well beyond their statutory mission,” the ICBA stated.
President Trump earlier this year asked Mnuchin, in consultation with members of the Financial Stability Oversight Council, to develop recommendations on how to overhaul the regulatory regime governing financial institutions.
Separately, tax-writing committees on Capitol Hill are exploring ways to enact comprehensive tax reform.
In their white paper, the bankers cite many of the regulatory problems that credit unions face. They ask Treasury to push for changes in mortgage regulations, commercial lending and the work of the CFPB.
“As illustrated in this paper, community banks operate in a suffocating regulatory environment that prevents them from reaching their full potential as catalysts for local economic growth and job creation,” the ICBA contends.
In arguing that credit unions have an unfair advantage because of their tax exemption, the ICBA cites growth in the industry.
The bankers said that while the number of credit unions has decreased, in the past four years assets of federally insured credit unions have grown by nearly $70 billion and membership has grown by more than 10 million.
In just the past four years, the total assets of federally insured credit unions have grown by nearly $70 billion and membership has grown by more than 10 million, while the total number of credit unions has declined by more than 1,000, the ICBA said in the white paper.
The bankers said that credit unions also are increasing their business lending activities, adding that “This increase in lending comes at the direct expense of taxpaying community banks.”
The bankers ask the Treasury Department to push for a review of the credit union tax exemption—especially for the largest, multi-billion-dollar credit unions–in an effort to “rein in the rogue credit union sector.”
In addition, credit unions should not be granted any additional expansion powers as long as have the tax exemption and are exempt from the Community Reinvestment Act, they said.
The bankers also said that credit unions also must not be allowed to raise supplemental capital, and should be required to comply with the CRA.
Finally, Congress should ease the way for credit unions to convert to commercial banks, the ICBA said.
