Credit unions are making a come back with their “not for profit, but for service” philosophy while many banks struggle with their money-making philosophy. Traditionally, millions of Americans have used credit unions due to their people-friendly service, community-based business plans, and flexibility – all things major banks have been forced to give up upon entering into corporate personhood. Rooted in being people-centered instead of money-centered, credit unions have allowed individuals to escape intensified loan rates handed down by major banks.
Although credit unions seem to purport higher moral standards for their members in comparison to the major banks in the United States, they are also competing with payday loan advance outlets as well. Federal regulators have put pressure on credit unions to engage in activities with their members that are not traditionally acceptable. Credit unions have begun entering into contracts with their members for small loans for much more than they would be permitted to do normally, paralleling the tactics of payday loan centers.
More and more rooted banking customers are becoming disgruntled with mainstream banking institutions and credit unions are more than willing to cater to those individuals. Bank of America last month stated that they would be charging customers $5 for using debit cards which will be used to cover expenses lost due to new federal rules – including the Durbin Amendment – clamping down on the amount of fees a banks can charge retailers for customers who use a debit card. According to The Herald, other banks such as Wells Fargo are contemplating a $3 fee rather than the whole $5.
The Durbin Amendment, which went into effect on October 1, 2011, limited banks’ abilities to charge retailers higher fees due to their customers using debit cards. Some of the arguments that arose after the bill had been passed is that it was forced into law despite warnings given from various sources such as consumer advocates, regulators, and economists according to The Credit Union Times . As expected, consumers are now being forced to pay out more money in order to ensure the safety of their money as well as to access it.
With credit unions competing with payday loan centers for small loan market, we could see more regulations coming from lawmakers in addition to other recent regulations that were passed. A major battle in Washington on Wednesday centered on the issue of raising the cap on member business loans, credit unions, and banks. Among the many arguments involved in the hearing was the job creation issue.
Gary Grinnell, (President and CEO of Corning FCU) speaking on behalf of the National Association of Federal Credit Unions argued against the Udall bill, (a bill to raise the cap on member business loans) insisted that raising the cap is required in order to grow, while ABA chairman-elect Albert Kelly counter-argued that the removal of the cap would simply “shift loans from taxpaying banks to tax-exempt credit unions.” Kelly continued by stating that credit unions wanting to expand should seek tax paying bank status and drop their tax-exempt status.
With the many changes being enacted by Federal Legislation, both banks and credit unions will be forced to recognize their own fundamental principles of operation in order to assist in the balancing of the unstable economy in the US. There will be more debates and discussions to come from both sides with the coming of the New Year as consumers pay more to access their money.