Fighting the 50-Year Battle:
Banker-Led Attacks On Credit Unions

On one hand, many credit unions -- and members -- have business relationships with banks. On the other, credit unions have braved attacks from bankers and other competitors seeking to tax them out of existence, ban share draft accounts, and limit member access. Here's what credit unions are up against and how they've usually defeated blasts from the past:

2003-2004 --
Credit unions in more than a dozen states face the taxation issue. In some cases the fight involved legislation to tax credit unions; in others, legislation was introduced to study the issue. The initiatives are a new strategy of banking trade associations to attack credit unions at the state level.
Result: State legislators understand the important role credit unions play in the marketplace, especially in serving consumers of modest means and as a consumer-friendly alternative to for-profit banks. State legislators have to date rebuffed banker-led attacks, recognizing that any increase in the taxes paid by credit unions will only hurt credit union member-owners.

April-July 2003 --
The Virginia Bankers Association challenges a charter expansion for DuPont Community CU.
Result: The State Corporation Commission affirms the Bureau of Financial Institutions' authority to grant community charters and community charter expansions. In July, the bankers opted to appeal the decision to the Virginia Supreme Court. The Court will likely hear the case in January 2004.

March 9, 1999 --
Virginia Gov. Jim Gilmore signs parity legislation for state-chartered credit unions, enabling them to serve multiple common bond groups.

August 1998 --
Credit Union Membership Access Act is signed into law, allowing federally-chartered credit unions to choose to serve multiple common bond groups.

August 1997 --
The Virginia Bankers Association asked the State Corporation Commission to limit state-chartered credit unions to a single common bond and to ban community charters.
Result:The State Corporation Commission ruled in April 1998, that the state's credit union law did not permit select employee groups, which the state Bureau of Financial Institutions had been granting in following the lead of NCUA.  The Commission did, however, uphold the Bureau of Financial Institutions' authority to grant community charters. Virginia's state-chartered credit unions did, of course, achieve parity with federal CUs on the issue of multiple common bonds. With nearly-unanimous support, the Virginia General Assembly passed parity legislation during its 1999 session. Gov. Jim Gilmore signed the legislation into law on March 9, 1999.

1997 --
The Virginia Bureau of Financial Institutions instituted a similar ban on state-chartered credit unions, preventing them from adding new membership groups.

December 24, 1996 --
A U.S. Appeals Court suspends an injunction against the credit union regulator -- the National Credit Union Administration (NCUA) -- that barred federal credit unions from adding new members from existing membership groups and members from outside their original common bonds.
Result: At least temporarily, credit unions are, once again, able to serve new members from all existing membership group.

December 4, 1996 --
A U.S. District Court judge upholds an October injunction against NCUA -- blocking thousands of U.S. Businesses from joining federal credit unions unless they're related to the credit union's original sponsor or core membership group.
Result: The ruling denies credit union access to nearly 4,400 people each business day and 1.4 million people a year. Credit union trade groups and NCUA appeal the order.

July 1996 --
A U.S. Appeals Court rules in bankers' favor regarding a suit against AT&T Family Federal Credit Union in North Carolina, saying NCUA's multiple-group field-of-membership policy is illegal.
Result: Credit union trade groups and NCUA file a petition with the Supreme Court to review the case and restore consumer choice.

1989 --
Bankers and the American Bankers Association (ABA) suggest credit unions are the next savings and loan crisis and encourage deposit insurance reform legislation.
Result: Credit union delegates testify at congressional hearings about the fiscal health of credit unions. A year later, a government study shows the credit union insurance fund is healthier than its banking counterpart. Lawmakers leave credit unions alone.

1986 --
Bank recommendations to tax credit unions carry over from the year before as Treasury proposes to tax credit unions with $10 million or more in assets.
Result: Letters from credit union constituents and congressional friends defeat the proposal.

1985 --
The American Bankers Association president suggests lawmakers tax credit unions because they “offer the same services” as banks. Both the Treasury Secretary and House Ways and Means Committee propose taxing credit unions.
Result: Rep. Byron Dorgan, D-N.D., and other legislators defend credit unions. The measures die.

1983 --
Bankers say increased credit union powers and deterioration of the common bond no longer qualify credit unions for tax exemption.
Result: The Credit Union National Association (CUNA) and NCUA show lawmakers credit unions haven't departed from their original principles. Credit unions remain tax-exempt.

1979 --
After failed attempts by ABA to prohibit share drafts (credit union checking), a U.S. Appeals Court deems share drafts illegal. The ruling, however, gives NCUA until the following year to shut down the programs, and time for Congress to consider the issue.
Result: CUNA and the leagues launch a massive grassroots campaign generating 150,000 letters to Congress. Months later, President Carter signs a bill legalizing share drafts.

1978 --
Bankers and savings and loan representatives back the Carter administration's proposal to tax credit unions as part of its tax package.
Result: 20,000 letters from credit union supporters to Congress and the White House kill the proposal.

1960s --
The National Association of Manufacturers (NAM), ABA, and a bankers' committee join the National Tax Equality Association's (NTEA) “threat to business” attacks against credit unions.
Result: CUNA counters in Washington, saying credit unions threaten no one except loan sharks.

1950 --
NTEA labels credit unions “unfair competitors” because they're income tax-exempt.
Result: Credit unions--which are non-profit cooperatives--survive the attack.