Wisconsin bankers call on Legislature to reject credit union bill

Wisconsin community bankers are rallying against a state bill they say would further benefit credit unions to the detriment of banks. 

The Wisconsin Bankers Association and 87 member banks from across the state recently expressed opposition to the bill and said the proposal would allow a number of changes that would harm community banks: 

  • State-chartered credit unions could issue subordinated debt. 
  • Non-members could be a party to a credit transaction. Credit unions are limited on who they can offer loan products and services to because of their tax-exempt status. The WBA called on enforcement of the current law. 
  • Credit unions could transfer and lease property, subject to guidance by Wisconsin’s Office of Credit Unions.

“Continuing to require that credit unions only do business with members is inherent in the public policy rationale behind which the tax exemption is given,” testified WBA President and CEO Rose Oswald Poels. “Making a substantive change to this foundational public policy principle as proposed in AB 478 should then also call into question, as other states have, the state tax exemption.”

Community bankers say the bill would make it easier for state-chartered credit unions to “grow beyond the intention of their original chartered mission, much to the detriment of Wisconsin’s taxpaying banks and citizens.” 

There were 14 credit union acquisitions of community banks in 2019. That number dropped to six in 2020 before increasing again to 10 this year, said Kirk Hovde, head of investment banking at Hovde Group, during the Bank Holding Company Association annual fall conference. In Wisconsin, five community banks have been acquired by large credit unions over the last eight years. There are 13 Wisconsin credit unions with more than $1 billion in assets. 

“The letter explains that taxpayers can no longer afford to continue subsidizing the credit union industry; the goal is to have these large, aggressive credit unions return to their original mission or become subject to the same regulatory, supervisory, and tax requirements as banks,” the WBA said.  

Community bankers say a federal credit union bill would also work against banks. Last month, community bankers derided the Member Business Loan Expansion Act bill, which would exempt credit unions from the 15-year general loan maturity limit under the Federal Credit Union Act, allowing them increased flexibility on loan terms. The credit union lending cap would also increase from $50,000 to $100,000; under current law, loans under $50,000 do not count toward the 12.25 percent limit on commercial loans by total assets. Both moves would make it easier for credit unions to make loans to small businesses.