New ECONorthwest Analysis Debunks Bank Claims about Credit Unions


June 7, 2013

Lynn Heider
503.358.0773 (mobile)

New ECONorthwest Analysis Debunks Bank Claims about Credit Unions

Finds that credit unions’ tax-exempt status does not confer an unfair competitive advantage over commercial banks.

FEDERAL WAY, Wash. – A first-of-its kind economic analysis finds no evidence that state and federal tax policies offer credit unions unfair competitive advantages over banks. In fact, the data analysis found credit unions are not unfairly taking market share from banks, credit unions still serve people with modest savings and they do not unfairly benefit from not-for-profit tax status, all contrary to commercial bank lobbyists’ claims.

Cooperative, not-for-profit credit unions have a corporate income tax exemption because they return benefits to members in the form of lower fees and better interest rates. The American Bankers’ Association is attacking credit unions’ tax exemption in Congress, and in Oregon, the bank lobby tried to pass three anti-credit union bills this year.

ECONorthwest economists Randall Pozdena and Michael Wilkerson were commissioned this spring by the Northwest Credit Union Association (NWCUA) to evaluate national commercial bank and credit union data from 1948 through 2012 and Oregon and Washington data from 1995 through last year. Pozdena and Wilkerson were given the latitude to analyze the dataset and deploy mathematical methods that would statistically test the bankers’ arguments.

Their report, titled “Credit Unions vs. Banks: The Myth of the Uneven Playing Field,” debunks several arguments banks have employed over the years in their attempts to persuade congress and state legislatures to pass additional taxes and regulation on not-for-profit, member-driven credit unions.

The ECONorthwest economists’ findings include:

  • Credit unions’ cooperative management model allows them to provide superior deposit and loan rates and greater protection from risk relative to investor-owned banks.
  • Trend analysis shows commercial banks continue to dominate the financial services market in deposit and asset shares; credit unions’ tax structure has not positioned them to harm banks’ market share.
  • Consolidation of smaller credit unions was historically a response to the risk and operational inefficiencies of small scale and not driven by tax policy.
  • Credit unions are continuing to serve Americans with modest savings, with the share of small accounts declining much more slowly than at commercial banks. Credit unions hold a smaller share of large accounts than commercial banks. Commercial banks’ share of accounts over $100,000 is 240% higher than credit unions’ share.
  • Credit union staff is paid less in salary and bonuses per employee than commercial banks, consistent with cooperatives’ focus on maximizing member benefits.

Credit unions’ cooperative financial services model is a consumer-friendly choice. As member-driven cooperatives, efficient decisions are made in the members’ best interests. “Numerous articles and studies have argued that credit unions have become de facto commercial banks and therefore should be subject to corporate income tax,” said Pozdena, a senior ECONorthwest economist and former Federal Reserve Bank economist. “None of the studies have employed rigorous statistical analysis attempting to identify correlated variables or causal factors.”

Troy Stang, president and CEO of the Northwest Credit Union Association, said, “The ECONorthwest study finally brings new, data-driven evidence to counter the bogus arguments the banking industry repeatedly asserts in an attempt to undermine credit unions.”

“I hope the Wall Street bank lobby will now focus more on improving their own services to consumers, rather than on trying to harm credit unions and their members,” said Stang. “Credit unions have always been and remain focused on one thing: helping their members.”

In addition to the ECONorthwest analysis, a new “Community Investment Report” documents the variety of ways Washington credit unions contribute to their communities. A survey of 43 Washington credit unions—large and small—finds they contributed more than $4.2 million in cash and more than 41,000 volunteer hours in 2012 to children’s hospitals, schools, scholarships, food banks and other local charities. Those credit unions also donated more than $1.2 million in staff time to those community causes. 

A copy of the economic report is available here and Washington’s Community Investment Report is available here.


The Northwest Credit Union Association is the not-for-profit trade association serving 164 of Oregon and Washington’s credit unions and their 4.4 million members. The NWCUA is the voice of the Northwest credit union movement, providing legislative, regulatory and public advocacy in addition to education, compliance, networking support and business solutions to its members. For information on how to join a credit union, please visit

Download a copy of the release.

Posted in NWCUA.