New op-ed: Credit unions shouldn’t qualify as CDFIs

A new op-ed says credit unions should not be designated as community development financial institutions due to their tax exemption.

New Op-ed: In American Banker (subscription required), Center for a Free Economy President Ryan Ellis writes that because credit unions’ tax exemption qualifies them as instrumentalities of the federal government, they conflict with federal standards barring CDFIs from being an agency or instrumentality of federal or state governments.

Call for Congressional Review: “Congress should hold hearings to investigate whether credit unions should still benefit from subsidies even while they continue to operate outside the bounds of their original mission to provide loans to people of modest means,” writes Ellis, echoing ICBA’s long-standing calls for policymakers to reexamine the credit union tax exemption.

Growing Media Scrutiny: In a recent RealClear Markets op-ed, Consumer Action for a Strong Economy Chairman and General Counsel Gerard Scimeca said credit unions are using their nonprofit status to expand beyond their original mandate of serving low- and moderate-income communities. Previously, an article in The Banker—an imprint of the Financial Times—reported that some credit unions may be abandoning their mission with “Wall Street-style” behavior.

What It Means for Community Banks: The rising media attention to the credit union tax exemption comes as ICBA continues calling on policymakers to end the tax exemption for credit unions over $1 billion in assets. Recent ICBA polling conducted by Morning Consult shows 62% of U.S. adults say credit unions that operate like banks should have to pay taxes like banks.