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Wednesday, Dec 6, 2023



Is your credit-union membership in danger? Not likely, despite a recent Supreme Court ruling.

The court decided in a case brought by banks that federal credit unions have been signing up millions of members illegally. Ever since 1982, they’ve expanded beyond what the law allowed.

In a fear-mongering press release, the credit unions warned that up to 20 million members may lose their accounts. In personal interviews, however, no one in the industry expects that to happen.

The 4,500 federal credit unions that serve a single employee group or a limited geographical area are unaffected by this decision. It covers only those 2,576 CUs serving multiple employee groups. Under current law, the Supreme Court said, a single CU isn’t allowed to serve multiple groups.

To help the affected credit unions, Congress may revise the law. Any legislation would surely allow current members to stay.

If Congress doesn’t act, the matter goes to the Washington, D.C. District Court, which will flesh out the Supreme Court’s ruling. Ed Yingling, executive director for government relations at the American Bankers Association in Washington, says “the banks will not ask for any remedy that should cause a current customer to lose his or her account.”

That’s not enough for the CUs. They hope to undo the Supreme Court decision entirely. A bill in the House, introduced by Reps. Steven LaTourette, R-Ohio, and Paul Kanjorski, D-Pa., would restore a CU’s ability to include many different employee groups.

A similar bill is expected to be introduced in the Senate by Sen. Al D’Amato, R-N.Y.

“There would conceivably be no limits” as to how many employee groups could join, LaTourette says. Membership could explode, posing stiff competition to smaller banks.

For the banks, the nub of the issue is taxes. Credit unions get a federal tax subsidy, amounting to nearly $1 billion this year. That helps them offer higher interest rates on savings than many banks pay, and lower interest rates on loans.

Fond as I am of CUs, I don’t see why they all should be taxpayer-supported. Small community banks aren’t on welfare. Why should big credit unions be?

Originally, credit unions served people of modest means who were bypassed by banks. In return for this excellent social service, Congress in 1934 authorized them to operate as tax-exempt, non-profit organizations.

But nowadays, banks also encompass customers of modest means. Credit unions, in fact, boast that their members have a higher-than-average education and income. So what entitles them to tax-subsidized accounts?

The 1934 law also said that members should have a “common bond of occupation or association,” or live within a “well-defined neighborhood, community or rural district.”

In 1982, the National Credit Union Administration, a federal regulatory body, reinterpreted the rule of “common bond.” It said that credit unions could take in multiple groups, as long as each of those groups had a common bond. This broad interpretation is what the Supreme Court just overturned.

Many state-chartered CUs have also benefited from liberal rule-making, and banks have challenged them, too.

Politically, CUs cast themselves as li’l ol’ volunteer organizations. Scott Sutherland, a spokesman for the Credit Union National Association in Washington, D.C., likens them to the Girl Scouts or the Little League.

In truth, the big ones are highly efficient community banks. They offer a full range of personal banking services and are currently adding business loans.

That’s exactly the bankers’ beef. The CUs serve the same kinds of customers as do community banks. It’s hard for the banks to compete when they’re taxed and their competition isn’t.

Ironically, only the banks are subject to the 1977 Community Reinvestment Act, which requires them to serve lower-income customers in their communities. The CUs aren’t required to.

The banks don’t object to single-organization or single-neighborhood credit unions, or the few CUs that are designed to serve the poor. But they think that the big, bank-like CUs should be taxed just like a community bank, if they want to continue to sign up multiple employee groups. That seems fair to me.

The CUs are confident that they hold the best political cards.

“It helps tremendously to have unpopular rivals like banks,” Sutherland chuckled to my associate, Kate O’Brien Ahlers. He also laughs off the thought that this Republican Congress would tax the big credit unions.

Maybe he’s right. If so, this would be another bit of corporate welfare that Congress finds OK.

Seniors beware

Attention senior citizens: Some of the organizations claiming to help and represent you may not speak for your interests at all.

They’re enrolling you through direct-mail letters that scare you into sending money. But they don’t necessarily tell you the truth and may, in fact, be acting against you.

As I write, I’m looking at three widely distributed letters one from Citizens Against Government Waste in Washington, D.C., and two from the United Seniors Association (USA) in Fairfax, Va. The letterhead on one USA letter reads, “ALARM (Americans Lobbying Against Rationing of Medical Care).”

All three letters are littered with false statements, some of them absurd. Congress, one shouts, has just passed a “Euthanasia Law,” that’s “something out of the Eastern Bloc or Former Soviet Union.”

They want you to think that Congress this conservative Congress has stolen key portions of your Medicare away. To fight this alleged disaster, they urge you (what else?) to send them money.

Ironically, these organizations are backing a bill that would raise seniors’ medical expenses by giving doctors a way of avoiding Medicare’s cost controls. How many seniors realized this when they sent in checks?

The claims in these letters were specifically rebutted last week by the General Accounting Office, in a special report to Sen. Patrick Moynihan, D-N.Y.

The new law these groups are talking about refers only to doctors who want to charge more than Medicare allows or don’t want to bother filing Medicare claims. Starting this year, they’ll be able to bill you privately assuming that you want to pay out-of-pocket. But, they’ll have to leave the Medicare program for the following two years.

This is actually a liberalization of the program. Formerly, doctors like these were not allowed to deal privately with Medicare patients, period.

When asked for comment, USA and Citizens Against just reiterated their former claims. I’ve read everything they’ve provided in support and can’t find where the GAO was wrong. You’re being doused with misinformation and worse, some of you are paying for it.

Syndicated columnist Jane Bryant Quinn can be reached in care of the Washington Post Writers Group, 1150 15th St., Washington D.C. 20071-9200.

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