WASHINGTON–Another CEO is sounding the alarm over the existential threat the loss of the tax exemption would be to credit unions.
In remarks to Mitchell Stankovic’s Underground meeting, Brett Martinez, CEO of Redwoods Credit Union in Santa Clara, Calif. said the issue is about more than the tax exemption, it’s about “the elimination of the credit union credit union movement.”
And if that happens, the world will have between 9,000 and 9,500 banks.
It’s a scenario Martinez said his credit union has included in its ongoing scenario planning.
“Some of you are saying taxation doesn’t mean the elimination of credit unions; I think it does,” Martinez said. “One of the things I’ve been studying my whole career is taxation in other countries.”
Specifically, Martinez pointed to Australia and Canada where once tax-exempt credit unions have lost that exemption. Many credit unions have disappeared in those countries, and Down Under many have changed their charters to become what are known as customer-owned banks.
‘Wiped into the Frenzy’
“My congressman is on the Ways and Means committee and has been for 18 years now. They’re not in control right now, but he says this is real,” Martinez said. “A lot of you may not agree with that and certainly the people that aren’t here evidently don’t agree with that or they would be here fighting for credit unions. He said that (loss of the exemption) won’t be on purpose, it will be on accident because if things happen, it’s going to happen quick. You can just get wiped into the frenzy.”
Martinez asked if credit unions have planned for an environment in which they are paying income taxes as well as one in which NCUA is swept into another agency.
Credit unions are at the same time adjusting to debit interchange rules and potential credit interchange laws proposed in Congress.
“And wait until real-time payments hits the U.S. Go to another country and figure out what happened in fraud losses when real-time payments hit,” Martinez said.
Know Your Story
Separately, Martinez urged credit unions to know their story and how it differentiates them.
“Who is your competition?” he asked. “For us, it’s BofA, Citi, Chase and Wells. They make our jobs easy every single day. But how do you differentiate against that? Do you know what that story is? How do you tweak your products just a little bit?”