Wednesday, April 1, 2015

Losing Their Mutuality

Some credit unions are losing their mutuality.

Several weeks ago I wrote about a bill (SB 582) in Oregon that would remove the requirement that an individual open a share account as a condition of credit union membership.

The justification for this provision is that it is costly for a credit union to maintain share accounts and the share account serves no purpose for the member.

Washington-state also does not require a person open a share account for credit union membership.

But allowing a person to join a credit union through solely a credit relationship undermines the concept of mutuality -- that borrowers and depositors are the same individual.

Moreover, I have seen some federal credit unions' credit solicitations that stated that the institutions would pay to open the share account for membership.

Once again, this appears to violate the principle of mutuality.

It seems that credit unions are following the same slippery path as the thrift industry.

One of the reasons cited by Congress in 1951 for removing the thrift tax exemption was that these institutions had had lost their “mutuality,” in the sense that the institutions’ borrowers and depositors were not necessarily the same individuals.


  1. And that's not all!!
    We were discussing at our recent board planning session that credit unions have lost their way over the years but have lost the tax exemption.
    Risk based lending.
    Indirect lending.
    Courtesy pay, love that name!
    Community and seg charters.
    200 are in our category over $1B!!
    Business lending.
    Maybe what that fellow Marcus Schaefer meant to say was, "when I grow up, I WANT to be a bank, but NOT pay taxes"!!!

  2. All that change towards a bank but STILL not taxed!!!

  3. FYI - for decades membership in a California state-licensed credit union can be done by paying a membership fee. No share purchase is required.

    2FYI - nothing in the FCU Act or Bylaws mandates the person pay for the one share.

  4. FYI we lied about bank transfer day.
    FYI. We lie about the number of members in the US.
    FYI. We cheat on FOM everyday by the hundreds.
    FYI. We want everything a bank has but don't want to pay federal taxes.
    FYI. We allow abuse of the Bill of Rights if someone presents a different point of view.
    FYI. We lie and cheat so we don't have to pay taxes.

    1. There is no way to know the true number of CU members because of federal/state privacy laws (imposed because of bad actions of bankers). Yes, there are people like me who are members of multiple CUs.

      Yet in the same way that sports franchises overstate the number of fans attending events. One person may attend 10 games but is part of the count contributing "10 fans."

      Likewise, there is no way to determine the number of customers for banks.

      And please don't think that bankers' CPAs do not use every legal opportunity to reduce tax liability and payments. Like deducting the expense of advertising to become the name on a building (arts center, basketball arena, college building, etc).

    2. I give you credit for admitting you're lying, I guess.
      Yes, banks like most of us take advantage of legal deductions.

  5. Convert to a credit union charter if it is so great :)



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