Capital Corner: Time for Truth Telling on Banks Selling to Credit Unions

Let’s face it, the issue of banks selling to credit unions has proven to be unfortunately durable, particularly on Capitol Hill. It came up early and often during the tax reform debate earlier this year; a number of credit union friends, particularly those with their hands on the pen as the One Big Beautiful Bill was being drafted, explicitly told credit union advocates that “you are going to have to deal with this. It’s not something that most of Congress agrees with credit unions on.”

The banking industry is doing its best to keep this issue alive despite credit union transactions accounting for a whopping 0.3% of bank assets (see the recent ICBA study purporting to show a detrimental effect on local communities when a credit union provides a lifeline and replaces an otherwise-closing bank). Also see DCUC’s Jason Stverak’s excellent rebuttal, pointing out, among other things, that banks closed 1,700 branches between 2004–2018, while at the same time credit unions opened 1,700, often in underserved and rural areas. Credit unions don’t just talk the talk when it comes to serving the consumer marketplace; they walk the walk every day, meeting people where they live and work.

It’s about time that credit unions take the ample high ground available. Instead of this being a negative, we need to start reminding both lawmakers and the financial public what’s really going on here, namely, that a bank management has decided to voluntarily sell, accept the best offer, and a credit union is willing to step in and start providing a better deal for consumers. And the key is to involve third-party voices in the defense of what is really a win-win for consumers and small communities.

Consider:

• When a bank is purchased by a credit union, it is usually one located in a small town or rural area. The credit union and its allies should proactively begin outreach to the local community—town mayors, town and county councils, local business groups—and explain what’s actually going on: financial services are not just being preserved, but improved. Because credit unions offer a better deal for consumers than banks.
  
• Without a credit union stepping in, a small bank often is either purchased by a large money-center bank or it closes its branches and ceases to exist. Either way, consumers in those communities are left without access to a brick-and-mortar presence. A credit union buying a bank prevents that from happening and will benefit consumers living in smaller and rural communities.
  
• One basic tenet in the Public Relations business is that third parties are almost always the best advocates. While credit unions, DCUC, and other industry voices can try their best to justify and explain our side of the story, it will be much more persuasive for local government and private sector third parties outlined above to step up on behalf of credit unions. They can articulate a “credit unions came to our rescue” narrative much better than credit unions themselves can. And that assertion has the added virtue of being true.
  
• Enlisting local media and social media should also be a priority. Early and often. George Orwell once said that “in a time of deceit, telling the truth is a revolutionary act.” This is a debate credit unions can and must win, and we have to start by being smart and strategic in correctly framing the issue.