Credit unions should not be taxed like banks

In his CUInsight article, “Credit Unions Should Not Be Taxed Like Banks,” James Chemplavil highlights the growing threat to the federal tax-exempt status of credit unions. He emphasizes that credit unions, as nonprofit, member-owned institutions, reinvest earnings into their communities through lower loan rates, higher savings returns, and financial education. At the recent America’s Credit Unions Governmental Affairs Conference, leaders were urged to share impactful stories—such as providing emergency loans to small businesses or supporting families through adoption financing—to demonstrate the unique value credit unions offer. These narratives underscore that taxing credit unions like banks could hinder their ability to serve underserved populations effectively.

Chemplavil also presents data showing that microloans are a vital tool for financial inclusion. The average microloan borrower earns $44,781 annually and has a VantageScore of 557, indicating deep subprime credit. Despite this, 95% of these borrowers successfully repay their loans, suggesting that traditional credit assessments may overlook creditworthy individuals. By utilizing alternative underwriting methods, such as those developed by Salus, credit unions can reduce charge-off rates by up to 90%. Serving younger demographics—90% of microloan borrowers are 41 or younger—not only fulfills the credit unions' mission but also ensures their relevance in a competitive financial landscape.

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