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#2210965 - 04/12/19 02:35 PM Why do banks seem to hate credit unions?
WillyWonka Offline
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Joined: Jun 2014
Posts: 35
Midwest USA
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
TMatt87 Offline
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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
rlcarey Offline
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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
RockChucker, CAMS Offline
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The Country
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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#2210986 - 04/12/19 04:28 PM Re: Why do banks seem to hate credit unions? WillyWonka
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Big yup to all of the above.

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#2211023 - 04/12/19 07:13 PM Re: Why do banks seem to hate credit unions? WillyWonka
RVFlyboy Offline
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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
Rocky P Offline
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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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#2211030 - 04/12/19 07:52 PM Re: Why do banks seem to hate credit unions? WillyWonka
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Mutual savings banks don't have stockholders either and the CU's around us advertise for commercial accounts and always apply to the DOB to expand their membership to all these other surrounding communities. They no longer operate like they originally intended and it does create a very unfair advantage.

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#2211047 - 04/12/19 10:28 PM Re: Why do banks seem to hate credit unions? WillyWonka
OldeTymeBanker Offline
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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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#2211074 - 04/15/19 03:25 PM Re: Why do banks seem to hate credit unions? WillyWonka
BotV#6 Offline
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Where I used to live, the NCUA approved an application for a credit union that basically encompasses the entire state. The average income of the location they were building their new branch is probably in the neighborhood of $300,000 plus per year. The reason for allowing it to be built was because the NCUA said the area was underserved. Forget, there was a bank on about every corner.

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#2211107 - 04/15/19 05:54 PM Re: Why do banks seem to hate credit unions? WillyWonka
rainman Offline
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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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#2211217 - 04/16/19 04:08 PM Re: Why do banks seem to hate credit unions? WillyWonka
BotV#6 Offline
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The designated area was a state. Had the NCUA properly done their job instead of being a cheerleader, they'd would have seen the branch was in not in a distressed area. Counties are not listed in the CFPB as underserved or rural. The census tracts for the area where the branch will be located is upper and middle income. Considering the home of the credit union in this scenario is over 300 miles away, the field of membership tests should have failed, but it's an example of the abuses that are allowed under the NCUA. The areas where the credit union should have gone, but didn't was less that 100 miles and would have fit the membership tests including being distressed.

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#2211229 - 04/16/19 04:54 PM Re: Why do banks seem to hate credit unions? WillyWonka
rainman Offline
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Quote:
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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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
Purple Pride Offline
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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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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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#2211740 - 04/22/19 04:33 PM Re: Why do banks seem to hate credit unions? WillyWonka
P*Q Offline

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When a CU is big enough to have their name splashed all over a concert/sporting event arena....it's time to pay taxes kiddos.....

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#2211751 - 04/22/19 04:55 PM Re: Why do banks seem to hate credit unions? WillyWonka
OldeTymeBanker Offline
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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
HappyGilmore Offline
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Pulling people out of the ditc...
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
RockChucker, CAMS Offline
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The Country
That is a good point Happy
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#2214911 - 06/04/19 05:53 PM Re: Why do banks seem to hate credit unions? WillyWonka
MScarn6942 Offline
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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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#2218015 - 07/19/19 11:23 AM Re: Why do banks seem to hate credit unions? WillyWonka
P*Q Offline

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Just sayin.....

CREDIT UNIONS
NCUA Quadruples Credit Union Appraisal Threshold
The National Credit Union Administration approved an ICBA-opposed final rule that quadruples the threshold at which credit union commercial real estate transactions are exempt from appraisals. The NCUA board vote increased the threshold from $250,000 to $1 million, double the banking industry’s $500,000 CRE appraisal threshold.

In a statement, ICBA said it strongly opposes the move, noting that the NCUA is once again pushing the envelope to benefit the industry it is charged with regulating. “Today’s 2-1 vote by the divided NCUA board is just the latest example of the NCUA acting as an advocate for tax-exempt credit unions,” ICBA President and CEO Rebeca Romero Rainey said.

Community bankers can continue using ICBA’s Be Heard grassroots action center to urge Congress to investigate the trend of large credit unions buying up community banks. ICBA is also encouraging community bankers to send in examples of egregious credit union actions to exposingcreditunions@icba.org and to use ICBA's customizable op-ed to raise awareness of the acquisition trend.

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#2218016 - 07/19/19 12:31 PM Re: Why do banks seem to hate credit unions? WillyWonka
Retired DQ Offline
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Turnpike Exit 10
LOL, saw that, Pam. Way to level the playing field even more. mad
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#2218049 - 07/19/19 04:05 PM Re: Why do banks seem to hate credit unions? WillyWonka
OldeTymeBanker Offline
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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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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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