Banks and Credit Unions

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Relaxed Regs Blur Distinction

By Randy Bechtel

Ask the difference between banks and credit unions, and many bankers respond it’s too little and too much. Too little because credit unions are competing increasingly with banks in marketing services and products to businesses and other deep-pocket borrowers. Too much because, unlike banks, credit unions are exempt from income tax and a federal law mandating banks to market services to borrowers in low- and middle-income neighborhoods.
     “The key differentiator between banks and credit unions used to be that credit unions provided consumer products, not business products,” says Anissa Yates, senior vice president of the California Bankers Association. “And they were limited in scope to offering products to a very specific, finite group of people, which is why the regulatory and tax structures are different between banks and credit unions.
     “However, in the last two decades, credit unions have been very successful in lobbying Congress to get these restrictions repealed. Today they offer all sorts of products and services that were traditionally offered by banks —and do it as tax-exempt organizations.”
     This criticism, voiced lately by a chorus in the banking industry, mystifies Mike Nutt, spokesman for the California Credit Union League. “If you look at the national picture, we’re a drop in the bucket,” says Nutt, whose organization represents credit unions in California and Nevada. “Credit unions account for only 7 percent of the financial assets in this country. That inched up from 6 percent 20 years ago. Banks account for the other 93 percent. If they were losing substantial market share, I could see it. But they have 93 percent. How much more do they want?”

Cooperative Confinement
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