Wednesday, December 01, 2010 8:57:28 AM
HIGHTSTOWN, N.J. - In response to an article previously published in New Jersey Business Magazine titled "DOBI Commissioner Considine Calls for More Lending", NJCUL President/CEO Paul Gentile wrote a letter for the December issue of the magazine explaining and defending credit unions' tax exemption status and other issues.
In the letter titled "New Jersey's Credit Unions Seek to Help Taxpayers by Driving Municipal Deposit Competition", Gentile explains the origin of the tax exemption; the Federal Credit Union Act signed into law in 1934 by President Roosevelt. He goes on to point out that "Congress has consistently reaffirmed it because of the credit union structure and the unique role credit unions play in the financial services industry."
Addressing the DOBI Commissioner story, Gentile addresses the term "level playing field" used in reference to credit unions. "Credit unions are grossly disadvantaged to the bank structure. For any institution to grow and expand, capital is the essential ingredient. Credit unions have no ability to raise capital other than retained earnings. This means credit unions must manage their businesses prudently each year and slowly build capital," he explains.
Gentile also addresses the issues of restrictions on member business lending (MBL) and municipal deposits (GUDPA) that credit unions face that other institutions do not, stating that these restrictions deprive municipalities of a "key weapon in their arsenal" against raising taxes.
"We believe we can drive competition in some markets that will lead to better rates for public entities, which ultimately helps taxpayers," Gentile explains.
To read Gentile's letter in its entirety, click here.