The Backstory: Structure, Beginnings, Offerings
Why did Credit Unions formalize?
Credit Unions were formed from the beginning by employees from certain companies who wanted more and better options to help workers with basic financial transactions—getting a loan to buy a truck, a car, a plow, or a tractor…there simply weren't options offered by banks to for the little guy.
In 1934, when Congress passed the Federal Credit Union Act, credit unions were structured as not-for-profit financial cooperatives, because their purpose was to give net income generated back to members of the cooperative.
That means credit unions can’t take investments from private shareholders or return profit to anyone but members. Members own the success, not shareholders.
Because we're a cooperative, the credit union can provide better rates for members and lower fees for members, plus all the financial tools of a bank, with personalized assistance. Today, credit unions are there when members need us the most, we'll not abandon them—credit unions help people find the right solutions for their financial needs in life.
How do credit unions provide economic benefits when most of their service seems to be focused on members?
Oregon’s credit unions assist individuals and small businesses with loans so that they participate, compete, and contribute to the local economy.
Credit unions also directly saved Oregonians $110 million in fees last year. That’s an average of $152 per household that was returned to the economy.
Credit unions make a difference in the economy by providing more options to consumers and greater competition in the market place. This keeps rates at the greatest advantage to consumers.
The U.S. Government Accountability Office detailed this competitive effect in a federal report: They demonstrated that wherever credit unions are present in a community, all financial institutions have to compete—when credit unions offer better rates, lower fees, and better service, all financial institutions have to adjust to be competitive.
Credit unions also keep money circulating locally. As not-for profit financial institutions, we return deposits to work in the community—our profits don’t go to another state or another country. In the case of Northwest Community Credit Union, 97% of our deposits and earned income return to work in local communities in the form of loans to consumers and small businesses.
Credit unions are proud to work together to serve the local economy: We partner to create participation loans. Credit unions share in funding small business loans when the amount is greater than one credit union can fund by itself.
We each fund a portion to share a vested interest in the success of that business in the community because it serves the local economy as a whole. This was an important function during the economic downturn. Credit unions, by working together, were able to help local economies keep growing in ways that would not have been possible when the banks ceased to lend. In tough times, and in relatively good times, we're cooperative in adding this kind of value to the community, supporting small business together.
Why talk about taxation/arguments for, against taxation?
Our ability to serve members of the cooperative, the very people we were structured to assist—is being challenged by a push to add additional taxation to credit unions.
Right now, government is taking a hard look at the value financial institutions provide, including considering revising the tax code.
Changes to our federal tax exemption would ultimately reduce the profit we currently return to members in the form of lower fees and better rates.
We don’t invest in the open market, and there’s no source of capital for us from investors or shareholders. So requiring additional taxation would reduce our ability to put earnings to work in the community or for members.
And, additional taxation is something like taxing members twice, as they own the cooperative. The public should understand that credit unions pay taxes. We pay property taxes, payroll taxes, and we pay our fair share.