Ahead of oversight hearings of the prudential regulatory agencies scheduled for next week, the American Bankers Association called on Congress to address the changing face of large credit unions, as highlighted by a recent announcement by Vystar Credit Union—a $10 billion tax-exempt institution—that it plans to acquire a $1.6 billion taxpaying Georgia bank. If completed, the transaction would mark the largest-ever acquisition of a bank by a credit union.
In a letter to leaders of the House Financial Services and Senate Banking Committees today, ABA emphasized that several credit unions, including Vystar, “have become indistinguishable from traditional tax-paying banks,” yet continue to enjoy an exemption from most federal and state taxes, lighter regulation and no federal community reinvestment obligations.
ABA noted that this acquisition attempt follows a concerning trend of credit unions acquiring taxpaying banks, which has accelerated in recent days. These acquisitions ultimately reduce the tax base that supports local communities and national needs, disadvantage low- and moderate-income communities and threaten safety and soundness and consumer protection, ABA said.
“It is time for Congress to engage and determine whether credit union acquisitions of banks and the negative consequences that follow these transactions meet the public policy goals Congress intended when it created tax-exempt credit unions in the first place,” the association said. “We believe any thoughtful review will lead lawmakers to firmly conclude that it is time for Congress to make the changes needed to return credit unions to their original mission or at least end their outdated tax-exemption.”