Study Finds Mass. Credit Unions Stretch ‘Low-Income’ Loophole

Credit unions in Massachusetts provide insufficient consumer benefits to offset the favorable taxt and regulatory treatment they enjoy, according to a study released today by research firm PolEcon. “The benefits to Massachusetts consumers do not appear significant enough to warrant laws and regulations that, by design, or as a consequence, result in credit unions capturing a larger share of the banking market in Massachusetts,” the study found.

CUs have grown in part by gaming the low-income CU designation, which provides substantial regulatory relief; the number of low-income CUs in Massachusetts has risen from 11 in 2012 to 57 in 2016, in part by counting college students within CU footprints.

However, the study found little benefit to consumers from the low-income designations. The four Massachusetts low-income CUs with assets of more than $1 billion were more likely than banks to make more mortgage loans to high-income borrowers and less likely than banks to serve low-income mortgage customers.

“This ‘low-income’ designation is a significant loophole that could become a greater risk if these institutions are allowed to expand exponentially with no limits on commercial lending or membership,” said Massachusetts Bankers Association President and CEO Dan Forte.