As Harper Heads to Capitol Hill, Bankers Ask House Committee to Probe Credit Union-Bank Deals

The American Bankers Association is urging members of the House Financial Services Committee to press regulators this week on VyStar Credit Union’s proposed purchase of Heritage Southeast Bank—the largest credit union-bank deal in history.

The financial regulators, including National Credit Union Administration Chairman Todd Harper, are scheduled to testify at a committee hearing Wednesday.

VyStar officials announced last month that the Jacksonville, Fla. credit union had agreed to purchase the $1.5 billion Heritage Southeast Bank of Jonesboro, Ga. The purchase by the $10 billion credit union is the largest purchase of a bank by a credit union.

Almost immediately, the Independent Community Bankers of America blasted the deal, contending that the credit union was leveraging its tax-exempt status to purchase the bank.

Brian Wolfburg, VyStar’s president/CEO fired back, saying, “We at VyStar, along with other credit unions, pay a variety of taxes including payroll, property and sales tax while also focusing on giving back to our members and communities in the form of more favorable rates, lower fees and excellent service while choosing to support charitable, civic and nonprofit organizations.”

Last week, Rob Nichols, president/CEO of the American Bankers Association, urged members of the House committee to press regulators on the issue. “Over the years, several growth-oriented credit unions have become indistinguishable from traditional tax-paying banks — while continuing to enjoy an exemption from federal and most state income taxes, lighter regulation, and no federal community reinvestment obligations to support the needs of low- and moderate-income communities,” he wrote. He added, “It is time for Congress to address these concerns.”

He reminded lawmakers that credit unions are not subject to the Community Reinvestment Act, which requires banks to demonstrate that they are assisting the communities they serve. “Indeed, with no mandate to serve those most at risk, credit unions that buy banks do not appear to prioritize doing so,” he wrote.

“It is time for Congress to engage and determine whether credit union acquisitions of banks and the negative consequences that follow these transactions meet the public policy goals Congress intended when it created tax-exempt credit unions in the first place,” he wrote.

Wolfburg said that credit unions exist to serve their communities. “We serve anyone who lives or works in a wide area from Central Florida to Southern Georgia as well as past and present military members and their families all over the world, including current members who live in communities served by Heritage Southeast Bank and its brands,” he added.

In his own letter to lawmakers last week, National Association of Federally-Insured Credit Unions President/CEO B. Dan Berger said that that credit union-bank deals are voluntary, market-based transactions. “These are not ‘hostile’ takeovers,” he wrote. “The bank is the one that ultimately makes the decision to sell to, and merge with, a credit union.”

For the most part, in the past, members of Congress have not jumped into the battle between the banks and credit unions, although Rep. Blaine Luetkemeyer, (R-Mo)., said during the last Congress that he was concerned about credit unions purchasing banks. Luetkemeyer’s family owns a community bank.

Former Senate Finance Chairman Orrin Hatch (R-Utah) raised the tax exemption issue in 2018, shortly before he retired from Congress. However, no other lawmaker took up the issue after Hatch retired.

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