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By MICHELLE A. SAMAAD CU Times Staff Reporter WASHINGTON and TALLAHASSEE, Fla. — The so-called “battle” for business lending between banks and credit unions is once again making headlines. This time, an article titled “The Battle for Your Money” in the September issue of Florida Trend magazine has prompted several in the credit union industry to criticize the story for what they claim are “half-truths” and unnecessary propaganda. The article’s main focus is on credit unions increasing their business lending presence in Florida by 264% over the past two years–”almost 10 times the 29.9% increase in commercial lending by banks over the same period.” On the flip side, the article acknowledges that credit unions accounted for less than 1% of business loans in Florida in 2005, a total of $369.3 million, citing data from CUNA. As for deposits, credit unions are nowhere near catching up to banks in Florida. The article said while credit union deposits have doubled from $16 billion in 1998 to some $32 billion in 2005, according to CUNA, it’s “still only about an 8.5% share of the market, however. Bank deposits in Florida, meanwhile, rose by 76.5% to some $343 billion during the same period.” The article interviews several credit unions including $2 billion Eastern Financial Florida Credit Union on the launching of CU Business Capital, a business services and lending CUSO. “Eastern Financial is big, with assets of about $2 billion and deposits of $1.75 billion. Having grown to a membership of some 214,000, it’s operating a long way outside its original mandate, serving employees of Eastern Airlines, which has been defunct since 1991,” the article reads. “And it will continue to aggressively market to those who still believe incorrectly that they must work for a company or be related to someone who is affiliated with a credit union, says Lanier,” referring to Gary Lanier, the credit union’s senior vice president of sales and member services. Billion-dollar credit unions remain the source of contention for the banking industry, Alex Sanchez, CEO of the Florida Bankers Association, told the publication. “These are tax-exempt banks masquerading as credit unions,” Sanchez said. He adds that he isn’t against all credit unions, just the “billion-dollar, tax-exempt” ones. Guy Hood, president/CEO of the Florida Credit Union League, took issue with the Florida Trend article saying, “For decades, bankers have spread half-truths and doctored statistics to prove their point that credit unions should be treated as banks,” in a letter to the editor of the publication. “By suggesting that credit unions are actually banks, as the bankers propagandize, it becomes easier to eliminate credit unions, the last viable choice consumers have in the financial sector,” Hood wrote. Hood went on to question what bankers are really threatened by before simply saying, “The bottom line is this: Banks want credit unions to go away.” “Bankers complain that credit unions are growing too fast, becoming too big and stepping into areas previously reserved, they believe, to them,” Hood wrote. “Banks in the ’60s suggested that it was too easy to form credit unions, that there were too many credit unions. Now, after regulations have been changed making it less feasible to form small credit unions, banks complain that credit unions are too big. One wonders when did credit unions actually pass a point that caused this reversal in the banks’ rhetoric?” CUNA President/CEO Dan Mica was equally taken aback by the article and penned a letter to the editor as well. Mica spoke of his tenure as U.S. Congressman representing southeast Florida and hearing from constituents who had either just started or had ambitions to start their own small business and had a need for “affordable capital.” “With that in mind, I was especially struck by how your magazine approached the topic of credit unions making business loans to their members,” Mica wrote. “Incredibly, what seems to matter most, from your perspective, is what credit union business lending will mean for banks and their market share.” Mica corrects the article on a segment that mentions credit unions are just now offering business loans. “This is not a field they have only now ‘moved into’ as your article incorrectly suggests,” Mica said. “Second, your frequent use of the term ‘commercial lending’ calls to mind loans for skyscrapers, strip shopping centers and the like.” In fact, he points out, the average size of a credit union member business loan is about $190,000–”often to the budding entrepreneur or small-business borrower in need of, say, more delivery vans or some new landscaping equipment. In many cases, these are people who turn to the credit union after being turned away by banks uninterested in making business loans of that size.” In Florida, credit unions’ market share is 0.8%, he added. “Bankers have absolutely no reason to be angry about loss of market share in a sector they overwhelmingly dominate,” Mica said. “What ought to be of paramount concern–to policymakers if not to the bankers and their lobbyists–is ensuring small-business borrowers have more choices rather than fewer options in the marketplace.” The Florida Trend article also mentions $5 billion Suncoast Schools Federal Credit Union’s expansion into 14 counties and more than 1,000 select employee groups. The $517 million Achieva Credit Union, formerly known as Pinellas County Teachers Credit Union has also expanded, the article reads, to two counties with “only” 30% of its field of membership working in the educational field. Still, “There’s still some education there,” Christina Gonzales, Achieva communications specialist, told the publication. “I think that is going to be an ongoing challenge for us.” The article provides its account of when credit unions were allowed to expand. “Credit unions began the break with their original mandate in the early 1980s. A recession led the National Credit Union Administration (NCUA), a federal regulatory agency, to allow credit unions to add members outside their original company or group,” according to the article. The passage of the Credit Union Membership Access Act, established credit unions’ right to expand their memberships, but imposed the 12.25% cap on business loans, setting “in motion twin trends of growth and consolidation,” the article said. Since 1998, credit union membership in the state has grown from 3.7 million to almost 4.5 million members, a 22% increase that “outpaces” Florida’s 15% population growth, according to the article. But over the past decade, the number of Florida credit unions has actually dropped 22%, according to statistics from CUNA, the article said. “Five or six credit unions a year go out of existence by merging,” Mark Ivester, vice president of communications for the Florida Credit Union League told the publication. In his letter to the editor, Mica said credit unions continue to get a bad rap from the banking industry. “Credit unions, with their long track record of making safe, sound member-business loans to a segment too often neglected by banks, are fulfilling this important public policy role,” Mica wrote. “For that they should be commended and encouraged–not made out to be some type of threat to an already dominant and exceedingly profitable banking industry.” –[email protected]

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