In the U.S., our current 90 million-plus credit union members represent an historic high, and consumer demand for credit union services continues to grow. In the past year alone, credit union membership has increased by 2.1 million, the largest annual increase in more than a decade. In a troubled economy, it’s not surprising: credit unions offer benefits such as low fees, higher savings interest rates, and for many members, free ATM use at more than 28,000 network ATMs.
Despite the important role credit unions play in America, the restrictions they face are burdensome. Under the current law, U.S. retail credit unions (unlike their foreign counterparts and unlike low-income U.S. credit unions) are not allowed to accept additional capital to supplement their retained earnings.
Without access to this supplemental capital, increases in new deposits may dilute a healthy credit union’s net worth ratio, triggering potential regulatory actions. As a result, some financially sound credit unions are being forced to discourage deposits from their members and curtail some of the services that they offer. This makes no sense.
Unfortunately, American consumers are harmed the most because the restrictions imposed by current law decreases their access to affordable financial services. Moreover, communities across the nation suffer because the current law limits the role that credit unions could otherwise play in jumpstarting economic activity by providing affordable credit to those who need it most, be they families or small businesses.
Quite simply, as we inch together toward America’s economic rebound, the restrictions imposed on credit unions must be removed. Current legislation pending in the U.S. House of Representatives, the Capital Access for Small Businesses and Jobs Act, would do so. The legislation, H.R. 3993, would empower the federal regulator of credit unions to authorize supplemental capital for well-managed credit unions, enhancing access to credit and affordable financial services.
Credit unions with access to supplemental capital would be better able to meet the needs of their members by accepting more deposits, making more loans, opening new branch locations to serve more people, and expanding their service offerings. This could make a significance difference to current members and potential members alike.
In addition, expanded capital authority for credit unions would promote the safety and soundness of the credit union system and establish regulatory parity with all other types of federally insured depository institutions. It would also benefit the broader economy by facilitating increased credit for consumers and small businesses.
Without question, countless American consumers are eager to join credit unions for their financial needs, from savings accounts to mortgages. Supplemental capital for credit unions is a step in the right direction to help credit unions meet member demand and, in so doing, stimulate growth in their communities.
As the president and CEO of a credit union, I urge Congress to pass H.R. 3993, the Capital Access for Small Businesses and Jobs Act, in order to give credit unions the option to accept supplemental capital. It’s a common-sense solution that will help credit unions, consumers, and the American economy by bringing us in line with the rest of the world.
Keesee is president and CEO of the Spokane Media Federal Credit Union in Spokane, Wash.