Recently, a person with more than 35 years in the credit union business commented to my posting on nonmember business loans that I'm unaware of a "mission statement" appearing within the Federal Credit Union Act.
While there is not a mission statement in the Federal Credit Union Act, I would suggest looking at the findings or preambles of various credit union acts to understand the intent of Congress. These preambles and findings make it abundantly clear that credit unions have a mission and that mission is to focus on consumers, especially those of modest means.
Let me be very clear; I’m not the only person to point to these findings to make a policy case as to what Congress intended. The Credit Union National Association has a history of citing these congressional findings to justify various policy stances the association has taken over the years.
For example, the preamble to the Federal Credit Union Act of 1934 states that credit unions are intended “… to make more available to people of small means credit for provident purposes through a national system of cooperative credit, thereby helping to stabilize the credit structure of the United States.”
The Credit Union Membership Access Act (CUMAA) of 1998 (Public Law 105 - 219) in its findings states that Congress found that “(1) The American credit union movement began as a cooperative effort to serve the productive and provident credit needs of individuals of modest means.” (emphasis added)
Congress reaffirms the continuation of this mission of serving individuals of modest means in Finding 4 of CUMAA, which states that “Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most State taxes because they are member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means.” (emphasis added)
Finding 4 makes it abundantly clear that the credit union Federal tax exemption is tied to the mission of meeting the needs of consumers, especially persons of modest means.
While some credit unions may believe they don't have a specific public policy mission, I believe these congressional findings would suggest they do.
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Mr. Leggett insinuates that there are rogues in our industry. By extension, he implies that our regulatory agency is negligent in its compliance oversight.
ReplyDeleteLet's suppose for a moment that he is right. The fact remains that we in credit unions don't answer to Mr. Leggett and the American Bankers Association. Please consider this when you engage him in debates on this blog. There is no upside.
I strongly suggest that my credit union colleagues give him the attention he deserves, i.e. simply ignore him.
I would disagree. Without seeing opposing points of view, credit unions cannot defend themselves against it. While there is not direct line of authority from the ABA to credit unions, there is the matter of perception on Capitol Hill and with regulators where the ABA does have sway.
ReplyDeleteThanks for digging up these quotes, worth reviewing and helps advance the discussion. Couple thoughts:
ReplyDeleteFirst, the FCU Act and CUMAA are referencing the purpose behind the creation of credit unions, meeting a unique set of needs during a unique time. Since then, needs have changed, and appropriately the credit union mission has evolved. Serving those specifically of modest means is now part of a diverse set of benefits that credit unions now provide.
Second, the mission discussion emerged relating to the federal income tax exemption. Looking at the Finding 4 excerpt, take notice that the specified mission is listed after discussion of the more tangible distinctions of the credit union model. This is why the exemption is tied to the structure of the institution, hence the credit union charter.
Third, I think we would remiss to discuss mission without discussing field of membership. A community development credit union and a SEG-based credit union with an affluent membership could certainly have distinct missions, yet both mssions could be justified based on the members they serve. I would not criticize the second for its failure to serve "those with modest means."
Manny: I understand your frustrations with Dr. Leggett and the ABA, I share many of them as well, but I would encourage you to stay engaged with critics of the industry rather than ignore them.
Elliott:
ReplyDeleteThe November 2005 House Ways and Means Committee hearing made it painfully obvious that it is not just the structure of credit unions that exempts them from taxation. It also has to do with credit unions having a specific mission.
For those who believe that tax exemption is solely due the structure of credit unions, I would like to point out that there are other cooperatives that are subject to taxation. There is a whole section of the tax code (SubChapter T), which deals with the taxation of cooperative institutions.
"Credit unions, unlike many other participants in the financial services market, are exempt from Federal and most State taxes because they are member-owned, democratically operated, not-for-profit organizations generally managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of consumers, especially persons of modest means."
ReplyDeleteI'm pretty convinced that the word "especially" does not mean "exclusively." I'm further sure that the data continues to support that credit unions, collectively, have stuck to this mission.