Credit Union Historical Information
Updated: May 28, 2005

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Background

Credit unions today provide diversified financial services to a wide array of customers. Once, members of a credit union knew each other, and pooled their resources to provide credit for their co-workers and/or neighbors. This "common bond," the hallmark of the credit union industry, has been stretched beyond recognition. Today, many credit unions consist of hundreds of unrelated groups, and geographically-based credit unions can serve an entire state. These credit unions look just like other depository institutions -- they are federally insured, and they offer a full line of deposit and credit services to virtually anyone. Despite this departure from their original mission, these credit unions continue to be afforded special treatment -- including exemption from federal taxation and from the regulatory responsibilities that apply to banks, such as the Community Reinvestment Act.

Recent Developments

On July 15, 2003, the ABA and Utah Bankers Association along with 4 banks filed suit against the NCUA regarding the community charter expansion of Tooele FCU. The complaint also challenges NCUA's approval of America First and Goldenwest FCUs' application for the same community. ABA believes NCUA unlawfully expanded the field of membership for Tooele FCU in violation of the Federal Credit Union Act.

On December 8, 2004, a Federal district court judge ruled in favor of the ABA and remanded the case back to NCUA. The NCUA has decided not to appeal the decision.

On January 5, 2005, Rep. Royce (R-CA) and Rep. Kanjorski (D-PA) reintroduced a Faith-Based Lending Protection Act (H.R. 191). This bill will exclude faith-based business loans from the business lending limits in the Federal Credit Union Act.

On February 10, 2005 Representatives Gerlach (R-PA) and Sherman (D-CA) introduced H.R. 749 (the Expanded Access to Financial Services Act of 2005) that would allow credit unions to offer money order, check cashing and money transfer services to all persons in a Federal credit unions field of membership, just not members. The bill passed the House of Representatives on April 26, 2005.

At the 2004 ABA National Conference for Community Bankers, ABA unveiled Operation Credit Unions--a long-term plan to generate banker grassroots commitment to equal taxation and regulation for morphed credit unions.

On May 12, 2005, the Credit Union Regulatory Improvements Act (H.R. 2317) was introduced into the 109th Congress. This bill would have weakened the capital regulation of credit ions, while simultaneously expanding the ability of credit unions to lend to businesses. As of May 24, the bill has 34 sponsors. ABA has initiated a grassroots letter writing campaign to block this legislation.

ABA Position

In 1998, Congress failed to address effectively issues relating to common bond, taxation, commercial lending, community reinvestment, and safety and soundness. ABA believes that Congress must reconsider the tax exemption and other legislative preferences for credit unions in light of the changes and growth that have taken place in the credit union industry over the past 30 years.

Questions? Please contact Keith Leggett, (202) 663-5506 for more information.