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NAFCU President and CEO Dan Berger and CUNA President and CEO Jim Nussle set the record straight on the credit union industry’s tax-exempt status and difference, combatting a recently published Wall Street Journal op-ed by Tax Foundation President Emeritus and Senior Policy Adviser Scott Hodge that had several inaccuracies and misleading claims.

In their Letter to the Editor response, the two industry leaders stressed “[c]redit unions will never apologize for living their mission by putting people and communities first.”

“While banks leave communities behind, credit unions step in to fill those voids. Is that a bad thing? Unlike banks, credit unions share their members-owners’ goals of financial security and empowerment, and work to help all Americans.”

Berger and Nussle highlighted the economic impact of the credit union tax status to consumers. The Joint Committee on Taxation estimates the benefits totaling $13.9 billion in 2022, with direct results assisting credit union members. They also touted credit unions’ commitment to serving members and communities in need, citing Home Mortgage Disclosure Act (HMDA) data and other polling.

Hodge also specifically called out the Congressional Federal Credit Union, so Berger and Nussle took the opportunity to clarify that “in 2022 Congressional FCU ‘stretched’ its charter to encompass additional underserved neighborhoods in Washington – an extension of its philosophy to increase service to its community.”

The LTE is available online; the full response hitting back at Hodge’s claims is below.

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Credit Unions won’t apologize for living their mission

Jim Nussle, President and CEO, Credit Union National Association

Dan Berger, President and CEO, National Association of Federally Insured Credit Unions

Credit unions serve people of all means at every step of their financial journey. 

In a recent Wall Street Journal opinion piece attacking these not-for-profit, member-owned cooperatives, Tax Foundation President Emeritus and Senior Policy Adviser Scott Hodge demonstrates his lack of knowledge of the credit union difference and the fundamentals of how and why they operate.

His assertion about the credit union common bond is factually incorrect. The credit union tax status exists due to their not-for-profit cooperative structure. Credit unions uphold the responsibility that comes with it by investing in their members and communities. They share their member-owners’ goals of financial security and empowerment, and work to help all Americans reach those ideals.

Another misconception of Mr. Hodge is that credit unions abuse their tax status by giving more people access to the benefits of membership. While banks leave communities behind, credit unions step in to fill those voids to give people more financial options – which in no way is a bad thing. 

Policymakers maintain our tax status – and have done so for decades – because it is one of the best investments they provide to average consumers. 

The credit union tax status – estimated by the Joint Committee on Taxation to be $2.5 billion in 2022 – delivers nine times that amount in benefits historically, with direct benefits for credit union members (compared to for-profit banks) totaling $13.9 billion in 2022 alone. 

These benefits occur because credit unions deliver profits to members in the form of comparatively lower loan interest rates, higher savings yields, and fewer or no fees. 

Importantly, the credit union presence in the marketplace also results in substantial non-member benefits – banks respond to credit union competition by more consumer-friendly pricing. 

Mr. Hodge is also concerned with banks selling their assets to credit unions. These are not forced sales – community bankers strategically make these decisions and communities reap the benefits because credit unions keep their focus on the people and businesses of Main Street.  

In a survey conducted by Frederick Polling of banks selling to credit unions, 50% cited both keeping local branches open and preserving community service as reasons for the sale. Another 89% said it would mean more local employees keeping their jobs. 

Despite Mr. Hodge’s claims, credit unions have an enviable record of lending to those of modest means. Even amid significant field of membership restrictions, 2022 Home Mortgage Disclosure Act Data shows credit unions made a larger share of their mortgage loans than banks did to Black, Hispanic, and low-to-moderate income borrowers.  

Credit unions also step in during difficult economic times.

Credit unions made Paycheck Protection Program (PPP) loans during the pandemic in amounts much lower than the national average. The average credit union PPP loan was around $50,000, and 70% of credit union PPP loans were made to businesses with fewer than five employees. 

More than simply dollars and cents, credit union members feel like their institution is a partner.  

A recent voter survey shows credit union members view them much more favorably than nonmembers view their banks and other service providers across 10 dimensions related to financial well-being, including those related to borrowing, service provision and community focus.

The results are consistent across all demographic groups – including women, people of color, lower-income consumers and people who live in urban and rural areas. 

And since Mr. Hodges named Congressional Federal Credit Union specifically, he should know in 2022 Congressional FCU “stretched” its charter to encompass additional underserved neighborhoods in Washington, D.C. – an extension of its overall philosophy to increase service to its community.  

Credit unions will never apologize for living their mission by putting people and communities first.