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Credit unions aren't serving low-income families as in intended in tax breaksBy Kurt R. Bauer
What people also don't realize is that despite the multibillion-dollar credit union tax subsidy, studies show that taxpaying banks do a better job of serving traditionally underserved populations than credit unions. In fact, credit union customers have a higher median income than bank customers and 49 percent of all credit union customers are considered upper income, according to a 2006 Government Accountability Office (GAO) report. GAO, the research arm of Congress, also found that the number of upper income credit union customers has increased since 2001, while the number of low- and moderate-income customers declined. In Wisconsin, a new study that used the same methodology as the GAO report found that the state's largest credit unions are also moving away from serving low- and moderate-income populations in favor of upper income customers. The WBA-commissioned report was conducted by two Ph.D.-level economists with Ivy League credentials and found that 15 of the largest 17 Wisconsin credit unions made at least 32 percent of their total home loans to upper income borrowers in 2005. Of all the institutions studied, Madison-based University of Wisconsin Credit Union (UWCU) made the fewest home loans to people with low- and moderate-incomes, while at the same time UWCU made 44.5 percent of its mortgages to upper income customers. UWCU, which is the second-largest Dane County-based financial institution, also recorded a 6 percent drop in the number of home loans it made to low- and moderate income borrowers between 2000 and 2005. Other large credit unions in Dane County didn't perform much better. For example, more than a third of Summit Credit Union's home loans went to higher income borrowers and Summit along with Great Wisconsin Credit Union added branch locations between 2002 and 2006 in neighborhoods with a disproportionately higher share of upper income households. Overall, the WBA study shows that a significant level of large Wisconsin credit union mortgage lending activity flows to higher income households meaning that taxpayers are subsidizing wealthy borrowers. The credit union industry counters the GAO, WBA and other similar studies by citing statistics from the National Credit Union Administration (NCUA), a federal agency that both promotes and regulates credit unions. But last year, NCUA reported that just 18.7 percent of credit union members are low- and moderate income, which reinforces rather than debunks the GAO and WBA findings. The credit unions also say that taxing them would, in effect, be a tax on their customers. But, with half their customer-base already considered upper income, the credit union tax subsidy is simply going to many who don't need it. A better tax and social policy would be to revoke the credit union tax exemption entirely in favor of direct deductions for the underserved population credit unions were supposed to help in the first place. Large credit unions should also have the same requirement banks have to document their efforts to serve people of all income levels within their market area. Kurt R. Bauer is president and CEO of the Wisconsin Bankers Association. madison.com ©2009 Capital Newspapers. All rights reserved. |
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