I often include in my description of “what is a credit union” the comment that “credit unions focus on service to their members — not amassing profits.”
Just as often – particularly when I’m speaking to someone who knows little or nothing about credit unions – I might hear a chuckle and a comment on the other end of the phone line. They might say: “Oh, come on: You’re saying credit unions don’t make a profit?”
No, I’m not saying that at all. Credit unions do have net revenues – the amount left over after paying all of their expenses, including interest/dividends on savings paid to their members. Those net revenues are then placed into the reserves of the credit union – which the credit union relies on as a buffer against lean economic times, like right now.
That’s part of the fundamental difference between a credit union and other financial institutions. Credit unions are owned by their members – they are cooperatives – and use what they earn through interest on loans and investments and lower fees to pay for services to their members, including higher returns on savings. There are no stockholders, no investors demanding an ever-higher dividend on their stock holdings.
In short: The credit union exists to return services to its members, not to amass profits to split among investors.
And the word has gotten around: Nearly 93 million Americans – including 2.5 million right here in the Bay State – are now credit union members. They expect the credit unions they belong to to focus on service for them.
And credit unions are trying to find more ways to serve their members. For example, responding to member interest, they want to make more business loans to their members.
Helping Small Businesses
Credit unions have a long history of offering their members loans to help start small businesses. In fact, credit unions have been offering business loans to their members since their inception in the United States one hundred years ago, right here in New England.
The average credit union business loan is approximately $200,000; this means that credit union business loans are used not only to start new businesses, but also help business-owning credit union members make payroll, stay in business, expand their businesses and stimulate the economy.
An arbitrary cap imposed on credit unions more than 12 years ago, however, limits the amount of credit they can make available to members for small-business loans. There is no economic or safety-and-soundness rationale for this cap.
Legislation introduced in the last Congress would have raised the cap on credit union business lending. Although the legislation made great strides toward adoption, especially in the Senate, time just ran out.
The Credit Union National Association estimates that, had the legislation been adopted in the last Congress and credit unions were this year allowed to make more business loans, more than 100,000 new jobs would have been added, and $10 billion in capital injected into the economy.
Comparatively speaking, perhaps that’s not much. But, with unemployment still well above 9 percent so far this year, our struggling economy should have every opportunity it can get.
Perhaps even more importantly – giving credit unions this authority would cost taxpayers nothing.
Credit unions will be right back at it in this new Congress, trying to help the economy and their members obtain more business loans.
Increasing the authority of credit unions to make business loans remains a top priority of America’s credit unions. We came very close in the last Congress, and we made a number of good connections in the process.
And with more than 100 new members of Congress sworn into office on Jan. 5, we are ready to begin reaching out to them with what we believe is a very positive solution for them to consider in addressing job creation.
Everybody wants to help the nation get back on its economic feet, especially credit unions. After all: Service to our members – not amassing profits – is what we’re all about.
Bill Cheney is president and chief executive, Credit Union National Association, www.cuna.org/
