Answer: Consumers, both those who belong to credit unions and those who do not, benefit directly from the tax exemption. Credit unions’ competitive rates along with their dedication to service keep other financial institutions in check. In fact, the Chairman of the American Bankers Association indicated in a 2005 letter that his record-breaking profits would have been even higher had it not been for competition from credit unions’ competitive rates. We are proud that we are able to save both members and non-members money simply by existing in the marketplace.
Consumers would also lose access to favorably priced products and services. Credit unions have no legal access to capital markets. They cannot issue stock, sell bonds, or issue commercial paper. Instead, credit union capital can only be built from the surplus left over after expenses are deducted and dividends are paid. Lack of capital access severely limits the capability of credit unions to expand and invest in new services and products. This critical difference is often misunderstood, or simply unknown to critics of the tax-exempt status of credit unions. Taxation would limit the only avenue of capital formation allowed to credit unions and, as a result, limit credit unions’ ability to serve their members.