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<p>With unending attacks on credit union interests, such as those in recent weeks by the American Bankers Association, credit unions need to field an offensive effort rather than letting the defense play the entire game. Tired of waiting for that to happen, I decided to put my own credit union versus banks offensive plan together. It begins by acknowledging that commercial banks have lost sight of their original purpose which was, as their name implies, to conduct commercial banking activities. Thus, credit unions need to spearhead a legislative effort that would prohibit banks from making consumer loans. Furthermore, banks were not created to be in the insurance business. Nevertheless, they slipped in the insurance industry’s back door through some clever legal, political, and regulatory maneuvering. Being allowed to sell insurance products under a commercial banking charter is one thing. Being able to sell them is quite another. As the editorial director of Insurance and Technology Magazine said in a recent issue, “Banks don’t understand insurance and don’t know how to sell (it).” She’s right of course. Since it is never too late to reverse a mistake, credit unions should team up with the insurance industry lobbyists to immediately oppose any further insurance activity by commercial banks. On a longer range basis, CU and insurance leadership should initiate state by state (since the insurance industry is regulated state by state) legal actions to get commercial banks entirely out of the insurance industry. Next, credit union leadership needs to offer credit union grassroots support to the National Association of Realtors to assist NAR in keeping commercial banks out of the real estate market, another industry they are anxious to invade. Commercial banks were never intended to sell houses and then make loans to the buyers. Credit unions need to join forces with the real estate and insurance industries because the entry by commercial banks into these areas harms consumers. Besides having no insurance or real estate expertise, there is an obvious and blatant conflict of interest when commercial banks hang insurance and real estate shingles on the front door of their commercial banks. What will be next? Pizza! In regard to commercial bank tax advantages, credit union lobbyists need to lead an initiative that would make it nonpermissible for commercial banks to convert to Sub Chapter S Corporations. S-Corporations have become an out-of-control tax dodge for more and ever larger commercial banks. The Sub Chapter S provision of the tax code was never intended for commercial banks. Current S-Corp commercial banks must be required to convert to not-for-profit institutions. Other offensive moves by credit unions include working towards regulatory and legislative proposals that would limit the size of banks. When initially chartered, it was never envisioned that commercial banks would reach the mega-billion dollar range. The current provision that no one bank can represent 10% of the industry’s assets needs to be reduced to 2% to protect consumers. All future mergers (with a limit of three established) should be subject to the approval of the customers of the merging commercial banks as should the opening and closing of all branches. Somewhat related, banks should be required to take the cost of name changes (signage, letterhead, coffee mugs, advertising, etc.) out of their after-tax profit. There is a long list of other initiatives that credit union interests need to undertake to help the banking industry do their chartered job. Such a list is only fair since bank lobbyists constantly attempt to help credit unions fulfill their mission by opposing every CU initiative designed to help CU members. Such a priority list would include these (and more): To protect consumers, impose limitations on types and amounts of fees banks may charge. To protect employees, limit staff layoffs only to those not caused by bank executives’ mistakes. To protect stockholders, senior management compensation and perks need to be drastically reduced to a reasonable ceiling controlled by regulation. To prevent conflict of interests, all monetary payments to bank boards need to be eliminated entirely. (A volunteer board would better represent the interests of bank customers.) A credit union political effort also needs to be made to prohibit commercial banks from serving the poor. The definition of “poor” will be established by credit unions. Also, commercial banks should not be allowed to serve any consumer who is a member, or potential member, of a credit union. The rationale behind this is that commercial banks do a disservice to these consumers by charging higher rates and fees than they could get at their CU. Under this provision, individual commercial banks would be required to document why any pay day lenders are located within one mile of the bank, assuming the bank is meeting its CRA (Community Reinvestment Act) obligations. In the legal area, the banking industry needs to be placed under a limit regarding the number of lawsuits it files against credit unions in any one year. Politicians need to understand that these lawsuits only make lawyers rich and harm consumers. Enough already! Is all of this a bunch of nonsense? Of course it is. What right do credit unions have to tell the banking industry how it should conduct its affairs within appropriate regulatory authority and the law of the land? None! On the other hand, is this any more nonsensical than what the banking industry constantly does to credit unions? Fortunately for members, credit unions are very good at playing defense. But it is time for the offense to take the field. Come on bankers, go pester the approximately one million other not-for-profits in the United States and leave the 10,000 credit unions do what they do better than anyone.serve their 80 million members. As a friendly reminder to the banking industry that credit unions are different, I repeat my definition: A credit union is a not-for-profit financial cooperative organized to serve the changing financial needs of all the members who own it.” Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected]</p>

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Peter Westerman

 

Credit Union Times

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