MBA: Study finds credit unions not earning public subsidies

A new report was released this month showing no significant benefit to creating laws that would allow credit unions to capture a larger share of the banking market in Massachusetts. / COURTESY MASSACHUSETTS BANKERS ASSOCIATION
A new report was released this month showing no significant benefit to creating laws that would allow credit unions to capture a larger share of the banking market in Massachusetts. / COURTESY MASSACHUSETTS BANKERS ASSOCIATION

BOSTON – A new report was released this month showing no significant benefit to creating laws that would allow credit unions to capture a larger share of the banking market in Massachusetts.
The report, dubbed “Credit Unions in Massachusetts: Growing, Consolidating and Increasingly Exempt From Regulations,” was conducted by Dover, N.H.,-based PolEcon Research and commissioned by the Massachusetts Bankers Association.
The report, examining 2001 through 2014, comes to several conclusions, including credit union growth is driven largely by just a few large institutions, the industry’s criterion for low-income designation helps exempt members from traditional regulations, and its noninterest income – and lending business – is fueling the industry’s growth.
Paul Gentile, president of the Cooperative Credit Union Association, however, criticizes the report and its findings, pointing out that the same firm has done similar studies in New Hampshire and Vermont and is taking a paycheck from the banking lobby.
“It is commissioned and paid for by the bankers,” he said pointedly.
Mass Bankers, however, points to the report’s findings, and highlights the fact that the number of low-income designated credit unions in Massachusetts has grown from 11 in 2012 to 57 in 2016, including the state’s largest credit unions, each with more than $1 billion in assets.
“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 Daniel J. Forte, president and CEO of Mass Bankers.
The issue lies in whether the credit unions should be considering college students as low-income customers. Mass Bankers argues the state’s credit union industry has grown its low-income designation status by counting college students within its footprints, which exempts it from some regulations.
“Clearly one of the biggest problems, particularly among the commonwealth’s largest credit unions, is that many of them have strayed from their original mission of serving members with a ‘common bond,’ ” said Gilda Nogueira, president & CEO of East Cambridge Savings Bank and vice chair of the Massachusetts Bankers Association. “They offer membership to just about anyone, anywhere and at the same time are looking to expand their powers even further. We are encouraging state and federal lawmakers to look closely at the industry’s record before granting any additional powers.”
But Gentile disagrees.
“We wish they would focus on their own customers, rather than spending resources to attack a not-for-profit cooperative system,” he said. “I am particularly concerned that they don’t understand the challenges college students face. We will continue to work with our young people as they work through this trying economy.”
The full report can be found here.

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