New ECONorthwest Analysis Debunks Bank Claims about Credit Unions

FEDERAL WAY, Wash., June 17, 2013 /PRNewswire/ -- A first-of-its-kind economic analysis finds no evidence that state and federal tax policies offer credit unions unfair competitive advantages over banks. In fact, the data analysis found credit unions are not unfairly taking market share from banks, credit unions still serve people with modest savings and they do not unfairly benefit from not-for-profit tax status, all contrary to commercial bank lobbyists' claims.

Cooperative, not-for-profit credit unions have a corporate income tax exemption because they return benefits to members in the form of lower fees and better interest rates. The American Bankers Association is attacking credit unions' tax exemption in Congress. And in Oregon, the bank lobby tried to pass three anti-credit union bills this year.

ECONorthwest economists Dr. Randall Pozdena and Dr. Michael Wilkerson were commissioned this spring by the Northwest Credit Union Association (NWCUA) to evaluate national commercial bank and credit union data from 1948 through 2012 and Oregon and Washington data from 1995 through last year.

Their report, titled "Credit Unions vs. Banks: The Myth of the Uneven Playing Field," debunks several arguments banks have employed over the years in their attempts to persuade Congress to pass additional taxes and regulation on not-for-profit, member-driven credit unions. Pozdena and Wilkerson put the dataset through rigorous statistical analysis to conclude:

• State and federal policies do not offer credit unions unfair competitive advantages over banks. There is no causal relationship between the tax status of credit unions and their share of either deposits or assets.
• Trend analysis shows credit unions are not poised to dominate commercial banks in either share of deposits and assets or in the number of institutions.
• Consolidation of smaller credit unions seen during the 1970s and 1980s, was a response to the risk and inefficiencies of small-scale operations and not driven by tax policy.
• Credit unions continue to serve consumers with modest savings accounts under $1,000, while commercial banks' share of accounts over $100,000 is 240% higher than credit unions'.
• Credit unions employ more labor per dollar of deposit than commercial banks, though they pay less in salary and bonuses than commercial banks.
• Credit unions continue to provide superior deposit and loan rates and greater protection from risk relative to investor-owned banks.
• Credit unions' cooperative financial services model is a consumer-friendly choice. As member-driven cooperatives, efficient decisions are made in the members' best interests.

"Numerous articles and studies have argued that credit unions have become de facto commercial banks and therefore should be subject to corporate income tax," said Pozdena, a senior ECONorthwest economist and former Federal Reserve Bank economist. "None of the studies have employed rigorous statistical analysis attempting to identify correlated variables or causal factors."

Troy Stang, president and CEO of the Northwest Credit Union Association, said, "The ECONorthwest study finally brings new, data-driven evidence to counter the bogus arguments the banking industry repeatedly asserts in an attempt to undermine credit unions. I hope the Wall Street bank lobby will now focus more on improving their own services to consumers, rather than on trying to harm credit unions and their members. Credit unions have always been and remain focused on one thing: helping their members."

A copy of the economic report is available here [http://www.nwcua.org/system/media/1518/original/ECONW-NWCUA-Economic-Report.pdf]

The Northwest Credit Union Association is the not-for-profit trade association serving 164 of Oregon and Washington's credit unions and their 4.4 million members. The NWCUA is the voice of the Northwest credit union movement, providing legislative, regulatory and public advocacy in addition to education, compliance, networking support and business solutions to its members. For information on how to join a credit union, please visit http://www.asmarterchoice.org

SOURCE Northwest Credit Union Association