Bristol Credit Union (2)

Credit UnionIt is positively amazing how many people put up with all the fees many banks and other financial institutions attach to their savings, checking, and credit card accounts. On July 1, the National Credit Union Administration (NCUA) assisted in the mergers of two financially distressed New York-based credit unions – 65 Family FCU and Kolmar NY Employees FCU. These NCUA assisted mergers are what I would call quiet credit union failures as NCUA does not issue press releases regarding assisted mergers. Information about NCUA assisted mergers are posted under Supervisory Actions (Closed Credit Unions). Kolmar NY Employees FCU was critically undercapitalized as of June 2015 with a net worth ratio of 1.78 percent. Credit union member-owners pay personal income taxes on interest and dividend income from their credit union.

A study by TransUnion found that while auto lending by credit unions is still viewed as the top loan category for future growth, credit unions have a greater appetite for originating mortgages compared to the rest of the financial services industry. According to TransUnion, the share of all mortgage originations by credit unions has increased from 7 percent in Q1 2013 to 11 percent in Q1 2015. In addition, a survey of 90 credit union executives by TransUnion found that six in 10 respondents stated that mortgage originations (ranked in the top 3 loan products) were an area of growth/opportunity/focus for their credit unions in the next 12 months.

TransUnion also noted that credit unions experienced 25 percent growth in non-prime mortgage originations in Q1 2015 compared to 4 percent for the rest of the industry. In fact, when it comes to Federal corporate and personal income taxes, credit unions are taxed identically to one-third of all U.S. banks, those established under Federal law as Subchapter S” corporations. Mr. Gibardi is correct that credit union members pay personal income taxes on interest and dividend income from their credit union; however, he is incorrect to state that credit unions are taxed identically to banks established as Subchapter S corporations.

In comparison, the net income of a credit union goes untaxed at both the corporate level and the personal level. If credit unions were taxed identically to a Subchapter S corporation, then the credit union members would have to pay personal income taxes on the net income of the credit union. It is obvious that his statement that credit unions are taxed identically to Subchapter S banks has a significant factual error and deserves a rating of several Pinocchio noses.Credit Union

As background, 7 credit unions purchased loans from ITT Education Services, the Rochdale Group, and Student CU Connect. The seven credit unions that had participated in a lending program ceased purchasing these loans in 2012 after a three-year contract expired at NCUA’s instigation. Then, as far as interest rates and fee structuring goes, they run it like a bank.

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