Choice is a core value of our society. It is how you, as a consumer, get the best deal.
And yet, bankers want to eliminate your choice (in response to John Sorensen's column in the Dec. 6 Globe Gazette), simply to remove their competition and line their own pockets with even higher profits. By insisting the tax code treat not-for-profit, cooperative credit unions the same way it treats for-profit banks, they are asking the government to kill the one true banking alternative we have.
Never before has a choice in financial institutions been more necessary than it is today. Without a banking alternative, there would be no guard against profit-driven, unscrupulous bank practices like greed-centered redlining and the creation of fake accounts to meet fat sales quotas.
Credit unions are growing because Iowans are voting with their feet (and their pocketbooks) to walk away from banks’ profit-driven schemes that put stockholder returns ahead of customers’ well-being.
Still, Iowa credit unions hold only 14 percent of the state’s deposits, while banks control more than 95 percent of the state’s business loans. Wells Fargo, by itself, is larger than all 5,800 credit unions in the United States combined. Meanwhile, Iowa banks realized more than $900 million in profits last year – their sixth straight year of record profits. Credit union competition isn’t hurting banks. But it is helping consumers.
The choice to be a credit union member and a financially-healthy citizen is also what makes it possible to cooperatively support each other in a very real way. Last year alone, Iowa’s 1.1 million credit union members saved more than $100 million in better rates and lower fees, compared to what they would have paid for similar services at a bank.
Credit unions also take chances every day on groups that banks won’t, namely the underserved, those on the financial fringe and small businesses that banks turn away. For example, Iowa bankers are nearly twice as likely to deny a mortgage to a low-income applicant.
The other less talked about fact is that banks have the choice to become credit unions. So why don’t they? In 2016, Iowa bank stockholders (local banks, not national banks like Wells Fargo) were paid $518 million in cash dividends. To become a credit union, those stockholders would have to return those dividends equally to all customers.
And banks might want to be careful how loudly they yell when demanding tax reform for credit unions. Today, more than 180 Iowa banks are organized as Subchapter S, avoiding more than $64 million in federal corporate income taxes. Over the last 10 years, on average, Iowa banks have also used state tax credits to mitigate nearly 50 percent of their state franchise tax liability.
Every year, we hear from the bank lobby that credit unions should be stopped from operating as the nonprofits they are. But it’s not hard to see the underlying motive for banker actions – raking in even greater profits, removal of competition and eliminating consumer choice.
Are credit unions good for Iowa? More than 1 million Iowans think so. Should banks dictate whether you have access to a credit union? That’s your choice.