Senate Finance Committee Chairman Orrin Hatch (R-Utah), the top tax policymaker in the Senate, today sent a letter to the National Credit Union Administration expressing concern about whether credit union activities — and NCUA’s supervision — align with the purposes of the tax exemption they enjoy. “I am concerned that the credit union industry is evolving in ways that take many credit unions further from their original tax-exempt purpose,” he wrote to NCUA Chairman Mark McWatters, noting in particular NCUA’s actions to relax field-of-membership constraints, alternative capital use and expanded business lending. “While these may be worthwhile pursuits, they should give us pause and cause a reflection on the core mission of credit unions and their tax-exempt purpose.”
Hatch expressed particular concern about NCUA’s “common bond” requirements, which he said “seems to have been significantly watered down.” He also noted the common credit union tactic of allowing new members to join by paying a nominal fee to join a linked association that may even be “operated by the credit union itself,” as well as the overbroad fields of membership that may make up entire states. “In other cases, credit unions have been established to serve the banking needs of otherwise highly paid individuals with easy access to banking services,” he wrote. “This is not the ‘well-understood sense of cohesion’ that [the 1998 credit union bill] envisaged credit union members sharing.”
Hatch also noted that many credit unions now offer insurance, real estate brokerage and wealth management, “appear[ing] to operate in the same manner as taxable banks,” including acquiring for-profit banks and buying stadium naming rights. Hatch asked NCUA to provide information to the committee on how the agency oversees associations for purposes of CU membership, how NCUA enforces policies related to CUs offering services outside of their tax-exempt purpose and how it oversees executive compensation and corporate sponsorships. McWatters’ response is due by April 6.