Proper Boost for Credit Unions

The Supreme Court delivered a major setback to the growing membership of credit unions in February, essentially saying they must stop expanding beyond single companies or community organizations. The only way to get past the ruling was with new legislation.

The House has rightly started the ball rolling, approving a proposal to permit credit unions to continue enrolling members beyond their founding organizations. It’s a sensible encouragement for a system that has proved both popular and workable.

Of course, credit unions are highly unpopular with commercial banks, which brought the suit that ended up before the Supreme Court. But this has been a classic big guy/little guy struggle--credit unions tend to specialize in consumer accounts and loans for automobiles, houses and other small property. Under the House bill, credit unions could keep their current membership, even if it was drawn from more than one company, and could enlarge their rolls by up to 3,000 members, a sensible limit.

Credit unions arose during the Great Depression when banks were unwelcoming to working people. Nowadays, with banks merging and concentrating, consumer fees are up and services are down. Credit unions saw the opportunity and began recruiting, aided by banking regulators’ loose interpretation of the credit unions’ governing charters. That came to a halt with the Supreme Court ruling.

The banking industry makes the point that the federal tax exemption granted to the nonprofit credit unions gives them a competitive edge. But credit union officials counter that they cannot serve large corporate accounts, where the big money is.

It’s been said that credit unions are the most democratic of financial institutions. Certainly they appear to be the most personable. They deserve enhanced charters.