Growth Of Credit Unions Raises Questions About Mission

January 16, 2013 by The Oregonian

By Marvin Umholtz

On Dec. 28, when most of us were enjoying time with family and friends, the federal government announced that southwest Oregon’s Chetco Federal Credit Union would be liquidated and its assets sold to two other credit unions. This would be a minor story about a small financial institution failure were it not for the underlying facts of the liquidation and the clear consolidation of the credit union industry into fewer, larger and more aggressive institutions that are often indistinguishable from commercial banks.

According to the Credit Union National Association, 40 years ago 265 credit unions in Oregon held $192 million in combined assets. By 2012, the number of credit unions had decreased to 73 while assets climbed to $15.5 billion. These are no longer institutions reflected in the “little guy” image. The top 14 percent of Oregon credit unions hold 69 percent of the industry’s combined assets and serve 64 percent of the state’s 1.4 million credit union members, according to the National Credit Union Administration. This consolidation of assets and members are both higher than the national average.

Credit unions are, of course, tax-exempt, not-for-profit institutions. An analysis of Oregon credit union 2012 net income shows that the 10 largest credit unions enjoy 82 percent of the overall value of the industry’s tax exemption. As the industry grows larger, the value of that tax exemption increases. So, it’s fair for critics to ask what public purpose they’re fulfilling in exchange for that tax exemption.

Credit unions are not required to demonstrate community investment the way other financial institutions are. So, while 25 Oregon credit unions have been allowed to expand beyond traditional services in areas with large low-income populations, there is no requirement that they actually invest in those communities. If credit unions are allowed to expand and grow with new services, policymakers may want to consider extending investment disclosure to credit unions to ensure that public benefit is being met.