The May 16 guest column by New Jersey Bankers Association President John McWeeney, "Tax breaks give credit unions unfair advantage over banks," reinforces the fact that banks are more concerned about record profits than they are about serving New Jersey consumers.
Credit unions are indeed tax-exempt, and we earn that tax-exemption every day. The tax-exemption we receive is given back to the membership in the form of better rates and lower fees.
The primary difference between a credit union and a bank is our structure. Credit unions are nonprofit financial cooperatives. As cooperatives, all account holders at credit unions are member-owners of the credit union. Credit unions do not exist to drive large profits for shareholders. We exist solely for the lending and savings needs of our member owners. Simply put, credit unions have no outside influences over their business.
The 1934 Federal Credit Union Act has stood the test of time because of the good deal credit unions offer consumers. Nationwide, the average rates on savings and loans at credit unions are better than banks and other providers. Consider that the average overdraft fee at a credit union is $20, while it's $39 at banks. The average one-year CD earns 0.36 percent more at a credit union than at a bank. On the loan side, a used-car loan at a credit union averages 5.4 percent, versus 6.95 percent at a bank. In any category you look, credit-union members benefit from better rates and lower fees.
Should New Jerseyans feel sorry for bankers? Hardly. Banks continue to earn record profits. New Jersey banks had profits of $860 million in 2010, a 5 percent increase over 2009. Can you imagine that in these tough times, when consumers are struggling, the banking industry managed to increase profits while it cut back on lending? Consider this hard fact: During the recessionary period from December 2007 to September 2010, lending at credit unions was up 7.6 percent, while it was down 6.5 percent at banks.
While McWeeney likes to talk about our tax-exemption, he fails to mention that banks have time and time again cost taxpayers money through federal subsidies, the most recent being bank bailouts, including the Troubled Assets Relief Program, and a $30 billion fund available for banks to tap to lend to businesses.
McWeeney also quotes statistics on credit unions trying to expand too quickly, but he sorely needs a reality check. The entire credit-union industry is smaller than the nation's top three banks - Chase, Bank of America and Citigroup. All of the nation's 7,000 credit unions combined aren't as large as any one of these banks. New Jersey's credit unions have only 4.5 percent of the New Jersey banking market. New Jerseyans should welcome credit-union growth to avoid the growing bank monopoly in the state.
McWeeney criticizes credit unions for pursuing legislation to accept municipal deposits here in New Jersey, a power that already exists in nearly half the states in the country. But if credit unions are permitted to compete for municipal deposits, the additional competition will result in better rates on deposits for public entities, which could ultimately lead to lower taxes for property owners.
Consider that 28 percent of New Jersey's municipal deposits are held by a bank not even based in New Jersey - TD Bank, based in Toronto. Consumers should question why the bankers are protecting the municipal deposit domination of an out-of-state megabank, while New Jersey credit unions are frozen out.
Bankers must recognize that credit unions play an important role in helping our economy move forward and that consumers deserve choice. Atlantic City is a good example of an underserved area being served by credit unions. ABCO Federal Credit Union has a bilingual branch located in the heart of Atlantic City to provide the underserved Spanish-speaking population a place to do their banking.
New Jersey credit unions are truly providing consumers with "Banking You Can Trust." We are member-owned, have no outside shareholders to please with profits, and offer a better deal. That's our story.
Paul Gentile is president of the New Jersey Credit Union League.