Does Director Pay and Taxes Impact Rates and Fees?

At one time, NCUA required that any converting credit union include the following information in any disclosure to its members.

EXPENSES AND THEIR EFFECT ON RATES AND SERVICES. Most credit union directors and committee members serve on a volunteer basis. Directors of a mutual savings bank are compensated. Credit unions are exempt from federal tax and most state taxes. Mutual savings banks pay taxes, including federal income tax. If [insert name of credit union] converts to a mutual savings bank, these ADDITIONAL EXPENSES MAY CONTRIBUTE TO LOWER SAVINGS RATES, HIGHER LOAN RATES, OR ADDITIONAL FEES FOR SERVICES.

While it is true that federal credit union directors and committee members serve on a volunteer basis, it is not true for all state-chartered credit unions. Some states, including Pennsylvania, Rhode Island, Indiana, and Texas, currently allow their state-chartered credit unions the option to pay their board members.

In addition, some states tax their state-chartered credit unions. For example, Indiana and Oklahoma tax their state-chartered credit unions. In addition, state-chartered credit unions are subject to the unrelated business income tax.

If it is true that these additional expenses impact interest rates and fees, then there should be differences in the interest rates and fees between federal credit unions and state-chartered credit unions in states that allow for directors to be paid or where state chartered credit unions pay taxes.

NCUA's Chief Economist John Worth should conduct a statistical analysis comparing savings rates, loan rates, and fees between federal credit unions and state-chartered credit unions and publish the results.