Chapter 1 »
Why Is Political Involvement
Important to Your Credit Union?
Members who
understand the
true value of
their credit union
relationship are
more likely to
provide support by
calling and writing
their legislators on
key issues.
Effective political involvement
begins with education. Legislators, the
general public, and even some of your
members may not know much about
credit unions. Misperceptions persist.
Some people think you must work at a
specific company or in a certain industry to qualify for membership in a credit union. Others equate credit unions
with labor unions and other duespaying organizations. Many people are
familiar with credit unions as a great
place to get an auto loan, but they don’t
think of them as full-service financial
institutions. And many of those who
are aware of credit unions’ full line
of services may think of them as just
another form of community bank.
A Central Message:
The Credit Union Difference
The fundamental differences
between credit unions and other types
of financial institutions are at the heart
of many public policy and legislative
debates. A credit union advocate’s first
task is to make sure people understand
the credit union difference. If legislators are informed about what sets credit unions apart in the financial services
arena, they can better understand the
need for open fields of membership,
tax-exempt status, and regulations that
allow credit unions to provide a wide
range of products and services for their
members. The credit union difference
is also an essential message in member
education and marketing: members
who understand the true value of their
credit union relationship are more
likely to provide support by calling and
writing their legislators on key issues.
Figure 1.1 describes the credit
union difference, including the elements of a not-for-profit operation,
member ownership, volunteer boards,
and social purpose. Figure 1.2 presents important arguments on another
important public policy issue—credit
unions’ exemption from federal
income taxes.
The Roles of Credit Union Staff,
Volunteers, and Members
Everyone in the credit union
movement can play a role in political involvement—and the more who
do, the more we can achieve together.
Politics in a democratic society is at
its core a numbers game. The more
people who support an issue, the more
likely legislators are to vote in its favor.
Office holders listen to their constituents, and candidates listen to their
likely supporters. The credit union
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Why Is Political Involvement Important to Your Credit Union?
industry serves more than 84 million
members—a political force with which
to be reckoned. Let’s consider the roles
of credit union executives and volunteers in mobilizing that force.
Directors Must Lead
The key to long-term success is the
recognition that credit union leaders—
the boards of directors and CEOs—
must make it happen. Maintaining a
Figure 1.1
The Credit Union
Difference
New federal laws and regulations are changing the structure and face of the financial services industry. In this time of accelerating change, it’s important to truly understand how
credit unions are unique and different, and why we remain a necessary and extremely
popular financial alternative for 84 million Americans.
• Not-for-profit. Credit unions are not-for-profit financial cooperatives. We exist to serve
our members, not to make a profit. Unlike most other financial institutions, credit unions
do not issue stock or pay dividends to outside stockholders. Instead, earnings are
returned to our members in the form of lower loan rates, higher interest on deposits, and
lower fees.
• Taxation. Credit unions do pay taxes: payroll taxes, sales taxes, and property taxes.
Congress exempts credit unions
from federal income taxes. The exemption was established in 1937, affirmed by statute
in 1951, and reaffirmed in 1998 in
HR 1151, the Credit Union Membership Access Act, which states:
Credit unions, unlike many other participants in the financial services market, are
exempt from Federal and most State taxes because credit unions are memberowned, democratically operated, not-for-profit organizations generally managed
by volunteer boards of directors and because they have the specified mission of
meeting the credit and savings needs of consumers, especially persons of modest means.
• Ownership. Credit unions are economic democracy. Each credit union member has
equal ownership and one vote regardless of how much money a member has on
deposit. At a credit union, every customer is both a member and an owner.
• Volunteer Boards. Each credit union is governed by a board of directors, elected by
and from the credit union’s membership. Board members serve voluntarily.
• Membership Eligibility. By current federal statute, credit unions cannot serve the
general public. People qualify for a credit union membership through their employer,
organizational affiliations like churches or social groups, or a community charter.
• Financial Education for Members. Credit unions assist members to become bettereducated consumers of financial services. Additionally, CUNA is partnering with the
National Endowment for Financial Education, a not-for-profit foundation, to expand
financial education among high school students. A national study shows that just 10
hours of personal finance education can positively affect students’ spending and savings habits for a lifetime.
• Social Purpose: People Helping People. Credit unions exist to help people, not
make a profit. Our goal is to serve all our members well, including those of modest
means. Every member counts. Our members are fiercely loyal for this reason. They know
their credit union will be there for them in bad times, as well as good. The same peoplefirst philosophy causes credit unions and our employees to get involved in community
charitable activities and worthwhile causes. Just ask us.
© 2004, CUNA (www.cuna.org/gov_affairs/legislative/cu_difference.html)
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Why Is Political Involvement Important to Your Credit Union?
Figure 1.2
Why Credit Unions
Are Tax Exempt
Here are just a few reasons:
• Credit unions are not-for-profit, democratic, financial cooperatives, owned by their
members.
• Credit unions’ boards of directors serve as unpaid volunteers, elected by members.
• Credit unions, with limitations on whom they can serve and restrictions on products and
services, also have a social mission to provide service to people of modest means as
part of their member base.
Credit Unions Are Different
• Credit unions were created to provide financial services in a democratic, not-for-profit,
cooperative manner—that is, with member ownership and control. Those characteristics
are the foundation of the tax exemption. Early in the history of credit unions, the U.S.
attorney general declared state-chartered credit unions exempt from federal income
taxes because they were “organized and operated for mutual purposes [in which an
organization’s members share in the profits and expenses] and without profits.” Later on,
in the 1930s, legislators passed a law to exempt federally chartered credit unions from
federal income tax for the same reason. Today, legislators continue to maintain that status because credit unions, while growing and changing, still operate in this unique way.
• Credit unions’ boards of directors serve as unpaid volunteers, elected by members.
Credit unions return all excess income to members in the form of higher deposit rates,
lower loan rates, and lower fees. Credit unions don’t need to create profits to pay stockholders, as do privately owned financial services providers. The amounts banks pay
stockholders dwarf their tax bills: Over the past five years, they’ve paid almost $78 billion more to stockholders than in taxes.
All Consumers Benefit
• All taxpayers, whether members or not, benefit from the presence of credit unions in the
marketplace. Credit union competition helps keep prices lower among other financial
services providers. For example, credit unions offering credit cards now charge an average of two to three percentage points lower interest than other lenders. Imagine how
expensive other lenders would make credit cards or auto loans if they didn’t have to
compete with credit union rates.
Tax Repercussions
• If credit unions paid income tax, the contribution to state and federal treasuries would
make not one penny difference in the taxes you pay as an individual. But the effect such
taxes would have on how much you pay for credit union loans for cars, education, and
houses, or the dividends you earn on credit union savings, would be significant. Just as
banks pass along their tax payments in fees and interest rates, so credit unions would
have to pass along that expense to members, also in the form of higher fees, higher loan
rates, and lower savings dividends. Credit unions, if taxed, also would have to take the
money from funds otherwise dedicated to reserves—the cushion protecting all members
and the credit union from economic shifts. Again, not-for-profit credit unions aren’t like
banks, which have profits aplenty.
Credit Unions Contribute Now
• All taxpayers have legitimate concerns about the federal budget deficit, and state deficits as well. Credit unions and members already participate in reducing those shortfalls.
You pay taxes on dividends your credit union accounts earn. And, members of federally
chartered and/or insured credit unions have over $6 billion in the National Credit Union
Share Insurance Fund (NCUSIF). This self-sufficient fund, another unique feature of
the credit union movement, has never asked for nor needed any money from taxpayers,
unlike other deposit insurance funds. Credit unions are not-for-profit, democratic, financial cooperatives that serve members. As long as that’s true, they’re earning their tax
status.
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favorable legislative and regulatory
environment is as important to the
strategic future of every credit union
as is the development of services and
delivery systems, marketing, information technology, charitable efforts, and
the many other areas that occupy the
time of boards and executives. As credit union volunteers, you must formally
recognize political involvement in your
planning process and make it a part of
your credit union’s strategic goals and
day-to-day operations.
First and foremost, the board must
take the lead. Directors should be willing to get involved as advocates for
their credit union at the local, state,
and national levels and to support the
industry’s political organizations. This
module guides you through the roles
you can take on for your credit union.
As a board member, you can set the
tone by:
• championing political involvement
as an important issue;
• developing a board-approved
plan for political involvement and
fundraising that’s integrated into
your strategic plan;
• establishing a Governmental
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POLITICAL INVOLVEMENT
Affairs Committee and putting it
on your agenda for every board
meeting; and
• being an educator and making
sure that the credit union staff are
kept informed of important political and legislative issues.
The board should include political involvement as a responsibility in
the CEO’s job description. The CEO,
in turn, should encourage members
of the management team and other
employees to get involved in the credit
union movement at the chapter and
state league levels. Some credit unions
appoint a manager with responsibilities
to monitor legislative and regulatory
issues that could impact the organization and to coordinate the credit
union’s political involvement efforts.
The credit union’s chief marketer
has a special role to play in overseeing
the integration of political involvement
into marketing and member education
efforts. Chapter 5 offers suggestions on
how directors can support marketing
efforts by helping to communicate the
credit union difference and pertinent
legislative issues to members and the
public.
On the Front Lines
The board and management should
recognize the role of frontline member
service employees in political involvement. On a general level, employees
must understand the credit union
difference and support the organization’s efforts to differentiate itself
from other financial institutions in the
marketplace. Employees should also
be informed and regularly updated on
Chapter 1 »
League chapters
are an integral
part of the
overall initiative
to influence
legislators,
community leaders,
and consumers.
Why Is Political Involvement Important to Your Credit Union?
important public policy issues about
which members may have questions.
Finally, employees should be
encouraged to get involved in community and public policy issues. Employees may volunteer to attend candidate
forums or town hall meetings and
question-and-answer forums for legislators in the district. A Michigan credit
union encourages its employees to sell
raffle tickets and candy bars to raise
money for political action committees (PACs) at the state and national
levels. A California credit union hosts
an employee breakfast on International
Credit Union Day and encourages staff
members to make $11.51 donations (in
honor of HR 1151) to the California
Credit Union League’s PAC.
Mobilizing Members
Ultimately, the political power of
credit unions rests with their members. If members understand the credit
union difference and appreciate the
value of membership, they are more
likely to lend their support to the credit
union in the form of postcards, letters,
e-mail, and even phone calls to legislators on important issues.
Consider these numbers. Each congressional district on average includes
about 180,000 credit union members.
In a good year at the polls, around
200,000 people vote in each congressional district. It’s easy to see that by
numbers alone, credit union members
have the power to sway an election.
And they’re more likely to vote for candidates friendly to credit union issues
if they know who those candidates are
and if the credit union educates them
about why those issues matter.
Participation at the State
and National Levels
The very nature of the governmental
affairs function lends itself to collective action by and through CUNA,
state leagues, chapters, and at the
most grassroots level, individual credit
unions and your members. Elected
officials and policy makers are more
responsive to a unified voice on an
issue than they are to isolated institutions with divergent opinions.
The Credit Union National Association (CUNA) and your state league
are responsible for coordinating and
directing credit union political involvement. CUNA’s governmental affairs
structure starts with its board, which
sets policies and oversees the work
of the organization’s Governmental
Affairs Committee (GAC). GAC members meet periodically to discuss and
review legislative and regulatory pro-
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issues in your state. League chapters
are an integral part of the overall initiative to influence legislators, community leaders, and consumers. Chapter
gatherings provide opportunities for
political involvement, education, and
activities. As you can see, there are
many opportunities at the chapter,
league, and national levels for volunteers and executives at your credit
union to get involved in the political
process.
Starting at the Grassroots Level
posals and issues and to make policy
recommendations to the CUNA board.
State leagues are similar in structure
and operation to your credit union.
They operate on a not-for-profit basis
and are exempt from federal income
tax. Volunteers, who are elected by the
membership, also govern these state
trade associations. Their mission, like
CUNA’s, is to represent the credit
union movement to the public in general and the government in particular.
Like CUNA, your league most likely
has a Governmental Affairs Committee
that makes decisions regarding policy
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POLITICAL INVOLVEMENT
The following chapters offer a
framework for you and your credit
union to be effective participants in
the future of the credit union movement. Throughout these pages you’ll
find practical recommendations, based
on extensive research from within the
credit union industry, about how to
mobilize grassroots support for important public policy issues. Following
these steps can help you:
• promote awareness about these
critical issues among employees
and members and
• participate effectively in the
democratic process to benefit your
credit union and the movement as
a whole.