Allowing credit unions to accept public deposits increases choice in the marketplace, provides greater competition, and in many cases, provides better convenience for trustees of the public’s money, according to a new report from the Filene Research Institute.

“Credit Unions and the People’s Money: Estimating the Benefits of Allowing Credit Unions to Accept Public Deposits,” explains why credit unions should be allowed to accept public deposits. With many differences in state laws, the report takes a national look at the consequences.

Among the report’s findings:

• Credit unions routinely provide depositors and borrowers with substantially and sustainably more attractive interest rates than commercial banks.

• If the fraction of total public deposits in credit unions increased from its current low level (0.4%) to the fraction of total domestic deposits in credit unions (10%) over a 10-year period, public entities would receive an additional $1.8 billion in interest. Borrowers in local communities would pay $2.3 billion less in interest.

• There are many small communities in the U.S. that don’t have commercial bank but but do have a credit union. For public entities in these communities, the ability to deposit funds in the local credit union is of significant value. Many communities are also low-income areas with economic challenges. Restricting credit unions from participating in the public deposit market puts the cost on those least able to afford it.

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