We write today to urge you to support the financial readiness of our service members and their families by adopting Sec. 2821 of S.1790 in the upcoming House-Senate conference on the 2020 National Defense Authorization Act. By requiring the Department of Defense to treat on-base banks and credit unions equally when assessing rent and related charges, this language offers the best way to end the increasing exodus of banks from military installations.
This legislation requires DoD to exercise the discretion it already has under 10 USC §2667 (banks) and 12 USC §1770 (credit unions) in the same way for both banks and credit unions. If DoD waives or charges rent for credit unions, this language requires it to do the same for banks. Currently, DoD waives rent for credit unions, thereby subsidizing their on-base operations, while it charges banks ever-increasing rent. Under thesecircumstances, banks can’t compete. Since 75% of on-base banks are community banks with very small margins, every dollar counts. It’s no surprise that this disparate treatment has led to banks leaving more than 40% of our bases. That number grows each year.
Banks and credit unions are different from other non-federal entities operating on military installations. The government does not pay for the financial services it receives or that it requires to be provided to non-customers. Despite these differences – differences that credit unions successfully argued over a decade ago justified “rent-free” status for them – DoD persists in its refusal to treat banks equally unless Congress mandates it.
Credit unions have told you they oppose this legislation because “it will put [them] at a disadvantage.” That is false. This provision would only partially level the playing field for banks on military bases because credit unions still enjoy the biggest federal subsidy of all: tax-exempt status. Nevertheless, it would close the competition gap enough to encourage banks to remain on bases and, hopefully, to entice banks that have already left to return.
If the Senate language does not prevail in the upcoming 2020 NDAA conference, military communities will continue to be disadvantaged by additional military banks closing their doors. When banks and credit unions work together – in collaboration and competition – military families win. They win because they have all the financial education and services both financial institutions can provide. They win because competition keeps prices low. They win because banks and credit unions support community activities and provide free financial services to the government. They lose when all these benefits disappear; these benefits disappear when credit unions have monopolies on military bases.
Very Respectfully,
Steven J. Lepper
Major General, USAF (Ret.)
President & CEO
Association of Military Banks of America
Rebecca Romero Rainey
President & CEO
Independent Community Bankers of America
Rob Nichols
President & CEO
American Bankers Association
