The old dispute about credit unions’ non-profit status reared its ugly head again following a recent report furnished by Umholtz Strategic Planning & Consulting.
Cloaked under the guise that the researcher was a credit union leader, Marvin Umholtz asserted that credit unions in Oregon have grown too large and should reconsider whether it is fair to remain tax exempt.
Umholtz, who regards himself as a “37-year credit union industry veteran who has held numerous leadership positions with credit union organizations” said that lawmakers should re-examine how credit unions are considered.
“Oregon credit unions will inevitably grow larger and fewer in number,” he said. “At what point does the industry’s tax exemption, which is mostly enjoyed by a handful of the largest institutions, continue to make sense in the absence of a clear public purpose? This is a real issue for policymakers.”
When asked about Umholtz’s standing in the credit union industry, Lynn Heider, VP/Public Relations and Communications at Northwest Credit Union Association contends that Umholtz is not a credit union contemporary. “Perhaps many years ago Mr. Umholtz held a leadership position within the credit union industry, but today he is a proponent for banks and is not hired as a consultant to any credit unions I know.”
Umholtz based his claim that Oregon credit unions have grown too large because 40 years ago 265 credit unions in Oregon held $192 million in combined assets. Today only 73 credit unions were based in Oregon with the combined assets of $15.5 billion with over 1.4 million members and 291 branches.
“The old image of the credit union as ‘the little guy’ is simply outdated,” Umholtz said in a release. “Oregon’s credit union industry today is dominated by a handful of larger institutions that control the overwhelming majority of assets and members.”
Should Larger Credit Unions Be Taxed?
In a tough economic climate, making sure certain organizations contribute their fair share, especially when so many are sacrificing, should be examined. Is Umholtz right and should these larger credit unions pay taxes?
Heider says this argument has been played over and over again with the same result--credit union not-for-profit status is good for both the economy and consumers.
“We know the bankers are concerned about credit union popularity and growth so they are attacking our tax model,” she says. “If you think about it, every president and Congress in history has been faced with the model being questioned and end up upholding it every time.”
“We believe the not-for-profit structure provides consumers with more benefits than if taxes were collected,” Heider adds.
The National Association of Federal Credit Unions (NAFCU) conducted its own study and found that if the federal credit union tax exemption was eliminated it would result in 150,000 lost jobs per year and a reduction of U.S. GDP by $148 billion over the next decade.
Furthermore, the benefit of credit union tax exemption has resulted in consumer savings well into the billions. NAFCU estimates that consumers have saved nearly $43 billion from 2005 through 2011.
Unless the millions of members throughout the country are interested in paying more and getting less for their banking dollar, credit union taxation doesn’t seem to make sense.
Credit Unions Sound Off
For Laurie Kresl, VP/Planning and Business Development at Unitus Community Credit Union ($804.8 million, Portland, OR), the comparison Umholtz makes is off.
“We thought this was quite the story here in Oregon and most definitely we believe that there is a vast difference between credit unions in Oregon and the banks - particularly the big banks.”
Kresl said that she can’t speak for all Oregon credit unions, but says that Unitus makes every member a VIP.
“Not only do we have competitive rates (and in better rate environments, we beat the banks rates by large margins) and we keep our fees lower, but we also offer services at no charge to our members that banks do not.”
Employees and members at Rivermark Community Credit Union ($550 million, Beaverton, OR) also responded to the Umholtz study. David Noble, Marketing Leader says, “Our staff were also encouraged to send a letter to the editor. Here is one:”
Letter to Editor: I'm puzzled as to why anyone would want to further tax credit unions because they are growing. I've been a credit union member for more than 20-years and have quite literally saved thousands of dollars in loan interest paid that I would have otherwise paid at a bank. That's money saved, spent and taxed in the local community. If my credit union (Rivermark) continues to grow because more of my family members decide they too want to save money; what's that got to do with taxation? Not to mention my credit union pays a lot more on checking; interest that I pay the taxes. What I do know is that my credit union is and offers a choice over too-big-to-fail banks. I suspect this is more about banks wanting to profit even more from unsuspecting consumers.
Kresl adds that all the special products and educational services offered at Unitus are geared to one thing only--helping the member. From MoneyQuest financial fitness challenge to the credit union’s financial education program, Savvy Money, Kresl says there are many aspects that set credit unions apart from banks.
“If all of that doesn't set us apart as truly providing great service to our members, I don't know what does! We believe that if our members are smarter about their money and if we provide the tools to help them get there, we are better off!”