Banks, credit unions should compete on level playing field


As a veteran of the U.S. Air Force from 1976-81, I look at all ads featuring military men and women with great interest, including the recent television campaign by the Navy Federal Credit Union. I do not question this credit union’s intentions or its mission statement to provide banking services to the Armed Forces. However, I am troubled every time I see the commercials with a message that it is all about serving and caring for the men and women in uniform.

If that is really the case, why doesn’t the Navy Federal Credit Union — with $60 billion in assets, 10,000 employees worldwide and 5 million members — pay state and federal corporate income taxes? Doing so would help to pay the salaries of the men and women who serve our country. It also would support the defense of the United States, the needs of children and seniors, and help pay down the $18 trillion national debt.

For almost a century credit unions have been allowed to parade themselves as banks, offering identical services. Unlike banks, they pay no federal or state corporate income taxes. This loophole should be closed.

Credit unions were created to serve a single purpose: servicing people of modest means who share a common bond. Yet as institutions such as Suncoast Credit Union, the largest credit union in Florida with nearly $6 billion in assets, continue to grow, the people of modest means these institutions were meant to serve are no longer the focus.

This is evident by their push to increase lending to businesses. Several studies in the past decade, such as the 2006 Government Accountability Office report, indicate that banks are doing a better job meeting the needs of low-income customers.

Today, there are more than 200 credit unions that have more than $1 billion in assets and are growing at twice the rate of America’s hometown banks. They pay no taxes and are also exempt from the Community Reinvestment Act, which requires that banks be evaluated for how they meet the needs of the areas they serve, including low- and moderate-income neighborhoods.

MidFlorida, the fifth-largest credit union in the state — with $2.1 billion in assets — paid an undisclosed amount for the naming rights to an amphitheater in Tampa while developing some of the most lavish office spaces and branches throughout the state. MidFlorida began in 1954 as a small credit union for teachers and today serves approximately 200,000 members who “live, work, worship or attend school” in its Central Florida service area.

Other credit unions have started marketing campaigns to further align themselves as banks by advertising themselves as “banking for good” or “what a bank should be.” America’s hometown banks — many of them small businesses of 10, 20, 30 or more employees — cannot afford to purchase the naming rights to amphitheaters or stadiums. Not when 40 cents of every dollar of their earnings go to taxes, and not when they must also comply with extensive and expensive regulations.

It has become exceedingly tough for America’s hometown banks to compete with credit unions because of the tax advantages that give them an unfair leg up in the marketplace. The biggest losers are American citizens and businesses that front the credit unions’ tax bill annually, and that includes the more than 250 members of my organization, the Florida Bankers Association.

At a time when the country needs to downsize its national debt and generate more revenue, I fail to understand how it can ignore a $1-trillion tax-exempt cash cow. There is room for both credit unions and banks to compete and thrive, but we should do so on a level and fair playing field. The tax code should never provide a competitive advantage to one segment of the financial industry over another, especially one that’s so blatantly outdated.

Alex Sanchez is president and CEO of the Florida Bankers Association.