Credit unions have passed a pretty massive milestone: $1 trillion in assets.
According to the Credit Union National Association, credit unions passed the mark in March. The institutions have been on a steady path of growth since 2000, when their collective assets only totaled $450 billion. That path has certainly accelerated over the past year, as frustrated consumers have severed their ties with the banking industry.
Mike Schenk, CUNA vice president of economics and statistics, says credit unions have been able to help save those consumers money -- a lot of money, too. Schenk says the association estimates that credit union members saved around $6.25 billion through their relationships with their nonprofit institutions in 2011. That savings comes in the form of lower interest rates on loans and higher deposit yields.
Still, that savings hasn't given everyone a reason to celebrate. The continuing growth of tax-exempt financial institutions has fueled a fight between community banks and credit unions as credit unions attempt to expand their commercial lending powers. I can only expect that battle to heat up as credit unions report asset figures with plenty of zeros at the end.
I spoke with Paul Merski, executive vice president and chief economist of the Independent Community Bankers of America, who says this milestone for credit unions reinforces that they share many similarities with their banking competitors with one key difference.
"What this really shows is that the credit union sector and the community banking sector are about the same size and are competing with each other," Merski says. "One has grown to a large size and pays taxes, and the other has grown to an equally large size and doesn't pay taxes."
While the tax-exempt issue has been making plenty of headlines recently, Merski says this topic has been buzzing in the nation's capital for quite some time. He cited a 2005 report from the Tax Foundation, a nonpartisan tax research group, which calculates that the U.S. Treasury would have collected more than $31 billion between 2004 and 2013 if credit unions paid taxes.
Merski says he expects the attempt to expand their commercial lending powers will backfire on credit unions, noting that he expects lawmakers to eventually revoke or limit their tax exemption.
What do you think? As credit unions get bigger, should they start paying taxes?