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#2210965 - 04/12/19 02:35 PM
Why do banks seem to hate credit unions?
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Junior Member
Joined: Jun 2014
Posts: 35
Midwest USA
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I'm still relatively new to banking, but it seems like there is a genuine hatred for credit unions around here from the management - apparently there's an unfair playing ground with advantages that credit unions get. I even see that the Iowa Bankers e-newsletter today has "The IBA is calling on all Iowa bank executives, directors and staff to counteract the credit unions’ advocacy efforts".
Anyone willing to break it down for me?
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#2210966 - 04/12/19 02:48 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Diamond Poster
Joined: May 2011
Posts: 1,984
Idaho
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Just some of the reasons I've heard:
1. Credit unions pay no income tax, so they get an automatic 21% leg up (even higher before the recent tax cuts). 2. The NCUA is largely seen as the most lax regulator. 3. Credit unions have exceeded their original purpose of servicing those individuals or areas not served by traditional banking (poor, rural areas) 4. Credit union field of membership criteria has expanded to the point of "if you have a pulse, you can be a member"
And the most obvious reason, as you alluded to, credit unions take business away from banks in a non-competitive environment (in the bank's view).
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#2210972 - 04/12/19 03:19 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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10K Club
Joined: Jul 2001
Posts: 83,226
Galveston, TX
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They are also not subject to the Community Reinvestment Act.
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#2210979 - 04/12/19 03:51 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Diamond Poster
Joined: Jul 2013
Posts: 1,700
The Country
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I think TMatt and Randy summed it up very nicely. You will notice banks "play nice" with other banks although they are in direct competition. It is the unfair advantage that CUs have and use to cut into the market that makes them the target of such disdain. I believe it is in our nature to want to compete on a balanced playing field.
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A successful man is one who can lay a firm foundation with the bricks others have thrown at him. -David Brinkley
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#2211023 - 04/12/19 07:13 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Power Poster
Joined: Oct 2000
Posts: 5,991
Soaring over Georgia
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Many of those advantages that were available to credit unions were put in place when their qualifications for membership were fairly homogenous - everyone worked for the same company or was part of the same union. They weren't trying to compete for all the same customers in a given market that the banks were competing for. That was reasonable. Now with expanded membership where pretty much you can join any credit union without regard to any qualification criteria, those advantages that had been given (no income tax, no CRA) are not only no longer fair, they actually give the CUs an unfair competitive advantage.
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#2211026 - 04/12/19 07:22 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Power Poster
Joined: Jun 2003
Posts: 7,650
Florida
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Credit unions are owned by the members, no external stockholders. Profits are usually used to increase deposit rates, or lower loan interest, both hurting banks. Other comments apply.
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#2211047 - 04/12/19 10:28 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Member
Joined: Mar 2016
Posts: 55
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We now have CUs from out of state operating in our market. I feel sure this is not in any way shape or form fulfilling their original mission.
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#2211107 - 04/15/19 05:54 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Power Poster
Joined: Nov 2004
Posts: 3,237
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* If your complaint is about field of membership, the income of the area around the branch is not the issue; the issue is income in the designated field of membership.
* The question of whether an area is underserved is not subjective - it's a formula spelled out in the NCUA's regulation: "This statutory criterion is met when the concentration of depository institution facilities among the population of the proposed area's non-“distressed†tracts—which sets a benchmark level of adequate service—is greater than the concentration of facilities among the population of all of the proposed area's census tracts combined." Alternatively, an area is also "underserved" if it is on the CFPB's list of rural and underserved counties." Again, this is an issue related to the credit union's field of membership, not where it locates a branch within that area.
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#2211229 - 04/16/19 04:54 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Power Poster
Joined: Nov 2004
Posts: 3,237
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Counties are not listed in the CFPB as underserved or rural. You can access the CFPB's current list of underserved or rural counties here: CFPB List of Underserved or Rural Counties
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#2211570 - 04/18/19 08:00 PM
Re: Why do banks seem to hate credit unions?
rainman
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Platinum Poster
Joined: Jul 2001
Posts: 708
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I have worked at credit unions early in my career and then banking for the last 29 years. CU's fritter away their tax advantage due to misguided senior management and inexperienced board of directors, at least in my experience. They were doing nothing more than trying to be like a bank, expanding field of membership any way they could back in the day. The NCUA exam was a joke 29 years ago, not sure how it is now.
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#2211582 - 04/18/19 09:15 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Member
Joined: Jan 2006
Posts: 78
Where I am supposed to be
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Seeing as how the NCUA is allowed to consult for the CUs they regulate, I would guess that not much has changed from an exam perspective.
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#2211591 - 04/18/19 10:47 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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100 Club
Joined: Jan 2017
Posts: 214
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As state-chartered CU, the NCUA exams us only for safety and soundness, and defers to the state for the rest. The state does a so-so job with our reviews, they are here usually a month, and require enough documents that would kill two redwood trees if printed. But I think the external auditors we hire put the NCUA and state to shame.
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#2211751 - 04/22/19 04:55 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Member
Joined: Mar 2016
Posts: 55
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Exactly. Our sports stadium here is now titled (paraphrasing) Great Big Credit Union Field.
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#2214832 - 06/04/19 12:25 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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10K Club
Joined: Jun 2004
Posts: 19,844
Pulling people out of the ditc...
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this was a major topic at banking school this year, and my take was that banks should not be mad at credit unions, but mad at legislators that won't pass laws to address this. Just as any bank would take advantage of laws and regulations that allow them to enhance earnings, credit unions are doing the same. so, direct your ire to the right place and maybe laws will be changed.
anyone work for a bank that says "hey, i know my tax rate is X but i'm going to pay more because i should, for the good of the industry?" yeah, didn't think so.
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#2214904 - 06/04/19 05:26 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Diamond Poster
Joined: Jul 2013
Posts: 1,700
The Country
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That is a good point Happy
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A successful man is one who can lay a firm foundation with the bricks others have thrown at him. -David Brinkley
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#2214911 - 06/04/19 05:53 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Platinum Poster
Joined: Aug 2015
Posts: 756
Land Lacking in Lakes, IL
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100% agree, Happy. Seems like a case where we (myself included) get mad at someone for following the rules laid out before them to their advantage, rather than being mad at the people who put those rules in place.
That said, I still don't like the CU in my area. $6B and did a wonderful job branding the area banks as "evil".
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#2218049 - 07/19/19 04:05 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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Member
Joined: Mar 2016
Posts: 55
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"You win some, you lose some, you wreck some." -- Dale Earnhardt
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#2218051 - 07/19/19 04:26 PM
Re: Why do banks seem to hate credit unions?
WillyWonka
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100 Club
Joined: Jan 2017
Posts: 214
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I'm a credit union gal, but I don't agree with the new commercial appraisal rule. Our commercial lending department will follow the more conservative appraisal approach of the other agencies.
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