Iowa is the latest battleground state in which credit unions are fighting to retain their tax exemption. Bankers have come after credit unions in force and have gained traction in the state legislature. This state-level activity comes as U.S. Sen Orrin Hatch (R-UT) is questioning the NCUA as to whether credit unions are straying from the purpose of their tax exemption.
The activity at both the state and federal level is spurring credit unions, CUNA, and NAFCU to defend the credit union role in the financial system while reiterating the movement’s purpose and cooperative structure.
The arguments of both sides have been made many times. Whether this round will lead to any change — in Iowa or at the federal level — remains to be seen.
A Matter Of Mission
Senator Hatch’s question is not one credit unions should deflect. Rather, they should address head-on how they are different in structure, mission, and action — with a focus on the latter two.
How credit unions define their mission and the actions they take to deliver on their mission is what creates a distinct competitive difference as well as a distinct member value. It’s also the power behind the tax exemption.
In recent years, Callahan has helped a number of credit unions refine their mission statements. The exercise is not simply filling time during a strategic planning session. Executive teams and boards are taking a step back to seriously consider key questions such as:
How are we defining our mission, and is that relevant to our membership today?
What role do we want our credit union to play with the members and communities we serve?
Does our board, management, and staff understand and align with our purpose?
These are critical questions for every credit union to answer, particularly in today’s environment. Credit unions are enjoying unprecedented success as an industry, which makes now the exact right time to reassess their identity. It is much better to ask and answer tough questions when times are good. It’s more difficult to do so when the environment is challenging.
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As credit unions ask these questions, general statements that highlight financial needs shift to better-defined areas where the credit union can make a real impact. For a growing number of credit unions, it is becoming less about serving the financial needs of members and more about helping them achieve financial health.
This shift positions the movement in a different way. It says credit unions are about not only making loans but also ensuring members can live their lives and pursue their dreams without facing financial hardship. It says credit unions are true financial partners rather than mere cross-sellers of products. It says credit unions are about encouraging savings and promoting responsible borrowing.
Beyond individual members, credit unions also are looking at the communities they serve. After all, their success is tied to the success of their members’ communities — whether defined by a geographic region, company, military base, or something else. Credit unions are looking for ways to leverage their organizational strengths to better meet the needs of communities.
Some credit unions are identifying the “pillars” of strong communities and determining how the cooperative’s activities can support them. These pillars can include a solid educational system that provides a competitive workforce, affordable housing, or a sound healthcare system.
By looking at the community in which they operate, identifying member needs, and developing strategies to support them, credit unions are creating important context for their mission. When Senator Hatch questions the industry’s growth and expansion into areas such as business lending, credit unions can talk about the needs they’ve identified that are not being met by banks. Credit unions are answering the call of their mission and stepping in to meet these needs — growth is a not-surprising outcome.
Any description of what makes a credit union different needs to start with its purpose. Purpose first, and then how purpose shapes all decisions.
A Story Of Purpose
Credit unions deliver on their missions every day. Members recognize the difference, which is why credit unions continue to grow and maintain a significant advantage in consumer trust. How credit unions communicate that difference is important.
Yes, credit unions are cooperatives. More importantly they are mission-driven organizations.
It is mission that separates credit unions from other financial institutions. As such, any description of what makes a credit union different needs to start with its purpose. Purpose first, and then how purpose shapes all decisions, including what products to offer and communities to serve.
Beyond that, credit unions must describe their impact. How many homes do they finance for members? How many small businesses benefit from credit? How many jobs do those small businesses provide? How does credit union lending activity build a stronger community?
Credit unions also can talk about partnerships with other community-focused organizations. How much time do credit union employees serve with these organizations? How do credit union funds support the efforts of these organizations?
The strongest advocates of credit unions are those who benefit from the movement’s mission. Reach out and let them help us tell our story better.
As bankers press ahead with their battle, it creates an opportunity for credit unions to sharpen their focus and better articulate their story. Each credit union needs to be sure they can define their difference to Senator Hatch. It should start with their mission.
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