Primary Financial Institutions for Retail Customers and Small Businesses

Below is a chart from Raddon that looks at which institutions are the primary financial institutions for retail customers and small businesses.

According to Raddon, 19 percent of retail customers identify credit unions as their primary financial institution; but only 4 percent of small businesses state that credit unions are their primary financial institution.

Nine Virginia CUs Sued over ADA Website Violations

The Credit Union Times is reporting that nine Virginia credit unions are being sued for violating the Americans with Disability Act (ADA) by failing to make their websites accessible to the visually impaired.

The lawsuits allege the credit unions' websites were not embedded with the code that would allow screen readers to describe graphics, or contained links with no readable text, or had redundant links.

The lawsuits also claim the credit unions were informed about the problems and failed to fix the problems on their websites.

The nine credit unions are Cadmus Credit Union Inc. (Richmond, VA), Virginia Credit Union Inc. (Richmond, VA), ABNB FCU (Chesapeake, VA), Blue Eagle CU (Roanoke, VA), Member One FCU (Roanoke, VA), NRL FCU (Alexandria, VA), Arlington Community FCU (Falls Church, VA), Henrico FCU (Henrico, VA), and Pentagon FCU (Tyson, VA).

According to the story, NRF FCU has reported that the issue has been resolved.

These lawsuits have some credit union bloggers warning that credit unions need to start making their websites ADA compliant.

Read the Credit Union Times story.

Bad Taxi Medallion Loans and New York Credit Union Merger

Credit Union Times is reporting that potential losses from taxi medallion loans played a role in the merger of Northwell Health Federal Credit Union (Jericho, NY) with Bethpage Federal Credit Union (Bethpage, NY).

The Northwell Health Federal Credit Union reported a loss of $2.1 million for 2016, as the credit union increased loan loss provisions for anticipated losses associated with taxi medallion participation loans.

At the end of the first quarter of 2017, Northwell Health had approximately $10.6 million in business participation loans, presumably most of the loans, if not all, were taxi medallion loans. Almost one-third (32.5 percent) of participation loans were 60 days or more past due.

Last year, Bethpage acquired troubled taxi medallion lender Montauk Credit Union.

I suspect that this latest merger will not be the last credit union merger due to taxi medallion loan losses.

Read the Credit Union Times article.

Are Credit Unions Achieving Their Mission?

Bill Brooks with CU Prosper wrote a column in Credit Union Times challenging the credit union industry for not achieving its mission of serving people of modest means.

Brooks wrote:

Are credit unions really successful at achieving their mission? Do credit unions have an objective system to assess how successful they are reaching out to people of modest means? Are credit unions just wearing white hats of virtue, but do they have no cattle? If Diogenes shined his lamp on your credit union, would he find an honest operation?

With more people on the fringe turning to usurious solutions to their financial needs, the answer seems to be no. Yet, credit unions market the legend, not the reality.

Read the column.

Canadian CU Execs Share Views on CU Tax Exemption

Credit Union Times has posted a video from the 4th Annual CU Water Cooler Symposium where two Canadian credit union executives share their thoughts about the U.S. credit union tax exemption.

As background, Canadian credit unions lost their tax exemption in the 1970s.

Gene Blishen, general manager at Mount Lehman Credit Union, commented that paying taxes allow Canadian credit unions to sit at the table. He believes that not paying taxes closes doors for credit unions.

William Azaroff, director of business and community development at Vancity, stated that credit union tax exemption is hindering the ability of credit unions to serve their members.

Click on this link to go to the article and video.

Round Up the Usual Suspects

Like Captain Renault in Casablanca the credit union industry’s first response to proposals to eliminate their tax exempt status is to “round up the usual suspects” and the usual suspects are bankers or their trade association. They cannot believe that policymakers can independently arrive at a conclusion that banks and credit unions with similar characteristics should be treated equally for tax purposes.

The President’s Economic Recovery Advisory Board (PERAB) listed eliminating the credit union tax exemption as one of the many tax-reform options.

“Unlike other financial institutions like banks and thrifts, credit unions do not pay corporate taxes on their income. This puts them at a competitive advantage relative to other financial institutions for tax reasons,” the report said. “Eliminating this exemption would raise revenue and level the playing field, but would clearly raise taxes on credit unions.”

This reform would ensure that businesses with similar characteristics are treated equally.

However, the editor of Credit Union Times weighed in saying that “[i]t was highly disappointing–and frankly disrespectful–to see the bankers’ shtick that taxing credit unions would "level the playing field" in the report. Not only is it obvious the bankers likely weighed in on this report, but it also shows a complete lack of understanding of the other restrictions credit unions operate under.”

There was a similar response from the credit union industry when in 2008 Treasury released its Blueprint for a Modernized Financial Regulatory Structure.

Treasury wrote: "Some credit unions have arguably moved away from their original mission of making credit available to people of small means, and in many cases they provide services which are difficult to distinguish from other depository institutions. While credit union size is not a perfect proxy for this trend, the increasing share of credit union assets held by larger credit unions indicates movement toward a broader focus."

Believing that the Blueprint was part of a nefarious plot by the banking industry to bring about the demise of the credit union industry, CUNA filed a request under the Freedom of Information Act (FOIA) for all material from the banking industry associated with the Blueprint.

In filing the FOIA request, CUNA wrote: “The general public and nearly 90 million credit union members have a right to know if special interests have attempted to influence Treasury policy, as expressed in the Blueprint, in order to eliminate not-for-profit cooperative financial institutions.”

However, more than two years later, I have not heard a peep from CUNA about its FOIA request and what they found.