To the Editor:

In the October 12 issue of Banker & Tradesman your publication took a troubling editorial position promoting the credit union industry’s recent branding campaigns in New England. The campaigns present misleading and inaccurate information, including one in Connecticut with the ironic tagline, “Credit Unions … There’s one for you.” It is ironic because credit unions were created to serve individuals with a specific common bond of membership. If there’s a credit union for everyone, where is the common bond?

In fact, most of the large credit unions in New England have expanded their common bond over the years to include anyone who lives or works in their geographic area – just like a community bank. These tax-free, bank-like credit unions are larger than most community banks and are far from the small, fraternal or community-based institutions that the founders of credit unions originally constructed. They are sophisticated financial institutions that have methodically taken advantage of their tax subsidy to capture significant shares of their financial market.

In Massachusetts, the Cooperative Credit Union League’s “Better Values, Better Banking” campaign’s 15 reasons to join a credit union omits a number of key facts about the credit union industry. In addition to not mentioning that credit unions receive a subsidy that hurts every taxpayer, the campaign fails to note their different regulatory treatment. Unlike Massachusetts community banks, credit unions are not required to provide free savings and checking accounts to those 18 and younger and 65 and older. Moreover, credit unions fall short in their historic mission to serve those of “modest means”: Massachusetts banks consistently outperform their credit union competitors in attaining Outstanding or High Satisfactory Community Reinvestment Act (CRA) ratings from the Division of Banks. Taxpaying banks have a better record of serving low-to moderate-income borrowers, almost 50 percent higher than state credit unions.

The most dismaying assertion in the credit union campaigns is this: “Unlike banks, no credit union has ever needed a government bailout.” Clearly we’ve been through challenging times, however, this assertion ignores three key facts: The recent TARP bank program, assisting even healthy banks, actually generated a $19 billion profit for U.S. taxpayers; dozens of Rhode island credit unions received assistance during the fiscal crisis of 1989-1991; and then there was the failure of five Corporate Credit Unions during the recent crisis with the National Credit Union Administration (NCUA) providing assistance to prevent further failures.

Consumers have many choices for financial services and Massachusetts banks welcome competition – on a fair and level playing field. Unfortunately, that’s hard for consumers to discern when the credit union industry isn’t telling the whole story.

Sincerely,
Daniel J. Forte, President & CEO
Massachusetts Bankers Association