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The nation's community bankers have asked the new Congress to re-examine the credit union tax exemption, contending it is outdated and unfair.
The Independent Community Bankers of America "urges Congress to restore balance to the American financial services marketplace and help close the growing budget deficit by re-examining the justification for the outmoded, 100-year-old credit union tax subsidy," Rebeca Romero Rainey, the group's president/CEO, wrote in a recent open letter to the 117th Congress.
In the letter, Romero Rainey renewed bankers' arguments that credit unions have become "virtually indistinguishable" from tax-paying commercial banks. She charged that growth-oriented credit unions are using their tax exemption as leverage to purchase community banks.
And she said the purchases will create a "brain drain" of local lending expertise at a critical time — the pandemic and upcoming economic recovery.
The letter made it clear that the perennial battle between banks and credit unions over the credit union tax exemption is not going away.
In addition to the ICBA, the American Bankers Association has continued to criticize credit unions on its website, explorecreditunions.com.
Credit union trade groups have made it clear they intend to continue to battle banks.
As a matter of fact, NAFCU has distributed a list of its priorities for 2021; that list includes "fighting back against meritless banker attacks."
In her letter, Romero Rainey outlined other priorities, several of which are in line with credit union trade group priorities.
For instance, she said the ICBA opposes efforts to allow post offices to offer expanded financial services — an idea supported by many Democrats. "Financial services are best provided in a competitive, private and free marketplace that openly and efficiently benefits customers," she wrote.
CUNA and NAFCU also have also opposed postal banking.
Romero Rainey also told lawmakers that they should ensure that fintech companies are not given an unfair advantage over depository institutions — a familiar refrain from credit union trade groups.
And she said that as more states legalize cannabis for medical or recreational use, marijuana-related businesses should have access to the traditional banking system. CUNA is among the groups that have pushed for legislation that would give depository institutions a safe harbor if they service such businesses.
Romero Rainey also cited other types of financial institutions that the ICBA is concerned could have a competitive advantage over traditional banks.
For instance, she said that Farm Credit Service lenders are able to use their advantage as Government Sponsored Enterprises to siphon loans away from community banks.
And she said that a "loophole" allows commercial companies and fintech companies to own Industrial Loan Companies.
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