Controversial Credit Union Leverages Tax Exemption to Acquire Community Bank, Fueling Need for Policy Action

Washington, D.C. (Jan. 22, 2025) —Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey today issued the following statement after the latest announced acquisition of a tax-paying community bank by a tax-exempt credit union—the first of 2025 and the first ever in California. The acquisition by Frontwave Credit Union, which has faced scrutiny for its fee practices, continues 2024’s record-breaking trend of credit unions leveraging their tax-advantaged status to fuel industry consolidation.   

“The growing skepticism of credit unions’ tax and regulatory exemptions must evolve into policymaker action as another tax-paying community bank is acquired by a tax-exempt credit union, especially with Congress raising questions about Frontwave Credit Union’s treatment of military servicemembers.

“While growth-obsessed credit unions rush to leverage their tax exemption to make inflated offers for healthy community banks, each acquisition increases the federal tax exemption for nearly $2.2 trillion in credit union assets. As outlined in ICBA’s ‘Repair, Reform, and Thrive’ plan and our recent open letter to the 119th Congress, ICBA and the nation’s community banks urge Congress to use the current debate over tax reform to address credit unions’ tax and regulatory advantages.

 “Congress granted tax-exempt status to credit unions because they were intended to serve people of ‘modest means’ sharing a ‘common bond,’ but these justifications have been rendered meaningless as the National Credit Union Administration has for decades expanded the powers of the industry it is charged with regulating. With credit unions using their tax exemption to finance multimillion-dollar NFL stadium naming rights deals, now is the time for policymakers to investigate the dated policies driving acquisitions and whether taxpayers should continue subsidizing community banking consolidation.” 

About ICBA

The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.

As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.