By Peter A. Michelotti, CFP
President & CEO, Community Bank of Bergen County and an officer of The Community Bankers Association of New Jersey
Credit unions often attempt to justify their federal tax exemption, which costs Americans more than $3 billion annually, by saying those dollars get passed on to their members. However, the Center for Public Integrity notes that since 2008 credit unions have spent more than $600 million on trade groups, lobbyists, political donations, naming rights for sports arenas and other efforts to promote what they call "the credit union movement."
At the expense of all Americans, the credit unions are shamelessly spending untaxed revenues by putting their names on sports arenas all over the country. In the last year alone, credit unions have agreed to spend at least $23 million in so called naming rights deals, according to the independent Credit Union Times. From the Valor Credit Union of Scranton, Pa., agreeing to spend $500,000 for naming rights for a local sports venue to the $7 million being shelled out by the Island Federal Credit Union of Hauppauge, N.Y. to do the same, it would seem credit unions just can't spend taxpayer money fast enough.
Naming rights deals involving credit unions are being announced more aggressively by the $1 trillion industry. Buying naming rights often involves complex, lengthy negotiations with a variety of stakeholders, including local governments - negotiations that can cost millions of dollars on their own.
Credit unions like to portray themselves as mom and pop shops that exist to serve individuals, but its hard not to be amazed at their nerve when you take a look at some of the corporate headquarters being developed by these organizations: Oregon State Credit Union - $18 million; Mazuma Credit Union, Kansas City, Kan. - $15.9 million; Pennsylvania State Employees Credit Union, Harrisburg, Pa. - $4.1 million; and Navy Federal Credit Union, Vienna Va. - $115 million. The list of lavish facilities funded with untaxed income is endless and the loss of tax revenue to the federal government is staggering.
Just last week, the NCUA submitted a proposed rule change for commercial lending, which would mean credit unions could lend a larger portion of their assets to commercial and industrial enterprises, and will make it easier for them to expand their lending. The proposal eliminates a requirement for borrowers to personally guarantee loans, puts an 80 percent loan-to-value limit on collateral used in securing a loan, increases the amount of loans permitted for a sole borrower and raises the cap on aggregate construction and development lending.
The notion that credit unions exist so the individual has a voice is a farce. For years, credit unions have abandoned their original mission to serve low and moderate-income individuals. The wasteful spending of credit unions on lobbying, putting their names on sporting venues and indulging in excessive corporate headquarters only underscores this fact. And now credit unions want to increase their ability to compete with banks for business loans without paying taxes or complying with the same government regulations. If credit unions want to act like banks, they should be taxed and regulated like banks.
The Community Bankers Association of New Jersey is a non-profit organization comprised of New Jersey community banks, including: 1st Constitution Bank, Atlantic Stewardship Bank, Bank of New Jersey, Colonial American Bank, Community Bank of Bergen County, Community First Bank, Cross River Bank, Crown Bank, First Bank, First Choice Bank, First Commerce Bank, First Hope Bank, Fulton Bank of NJ, Harmony Bank, Heritage Community Bank, Highlands State Bank, Hopewell Valley Community Bank, Lakeland Bank, Magyar Bank, Mariner's Bank, Metuchen Savings Bank, Millington Savings Bank, New Jersey Community Bank, Pascack Community Bank, Regal Bank, Roselle Savings Bank, Roselle Savings Bank, Somerset Hills Bank, Sussex Bank, Two River Community Bank and Unity Bank.