There has been a great fallacy permeating popular media over the last few years about the credit union movement and its growth through the acquisition of banks. Bank associations have pushed heavily on an inaccuracy (falsehood?) that their own institutional members are being “bought up by” <insert GASP! here> member-owned credit unions.
Following a moment for our faithful readers to gather themselves and find their collective breath. The factual truth is credit unions do not, and cannot, “buy banks.” Such mischaracterizations are false. A bank exists by way of a charter, and since it’s illegal for a credit union to purchase a bank’s charter, no credit union has ever actually “bought a bank.” Again, that would be illegal.
Therefore, while a credit union cannot buy a bank, it just so happens a bank can in fact choose to sell some or all of its assets and deposits to another bank or, yes, a credit union! This process marks a not insignificant difference (one bank trade associations would never volunteer) that the first move in the sale of a bank’s assets or deposits to a credit union must come from the bank, NOT the credit union.
So was the clarification laid out in an eight-page letter by Credit Union National Association (CUNA) President and CEO Jim Nussle to members of the Senate Banking Committee earlier this month when he asked the committee to dismiss factually inaccurate objections created by banking groups to banks who decided to sell their financial institutions or branches to credit unions.
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