Harborstone Credit Union: No One Takes Better Care of You
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Protect your financial right to choose

The credit union movement in America began with a simple premise: to provide a safe place where people could save their money and get a low-cost loan when the need arose. Most of the people who formed credit unions were people who were not being served by banks, either because they lived in rural areas or because they were people with modest means who banks saw as a credit risk.

If you enjoy your ability to choose a financial institution that puts people above profits and empowers you to reach your financial goals, your action is urgently needed! Congress is currently debating tax reform, and credit unions’ tax-exempt status may be on the chopping block.

If you would like to ensure that credit unions remain tax-exempt, we encourage you to write your representatives in Congress. Learn more at donttaxmycreditunion.org

Your ability to make financial choices could be in jeopardy

You may have heard that Congress is considering stripping credit unions of their tax-exempt status as part of its tax-reform efforts. Banks have been unhappy with credit unions’ tax-exempt status for years, because credit unions provide competition.

A tax on credit unions’ earnings would be a tax on 4.4 million members in the Pacific Northwest. It would significantly diminish the returns on earnings members enjoy, and it could eliminate the choice consumers have to be members of cooperative financial institutions.

More than 96 million Americans belong to credit unions, and their numbers are growing every day. Because banks are beholden to their stockholders to make profits, they aren’t able to provide the same level of services, low-cost loans, and earnings potential as credit unions. And now they see Congress’ thirst for tax reform as their best chance to strip credit unions of their tax-exempt status.

What it means to have a tax-exempt status

Credit unions pay taxes just like all other organizations. We file the same forms to the IRS and follow the same laws. In fact, all credit unions pay payroll taxes, sales taxes, and property taxes. Only credit union income is tax-exempt.

President Roosevelt signed the Credit Union Act of 1934 to enable consumers to form not-for-profit, cooperative financial institutions of their own. The desire then—and now—is to allow members to focus on the needs of their families rather than be forced to meet the needs of bank stockholders.

It is the structure of credit unions as not-for-profit cooperatives that determines their income tax exemption. It really has nothing to do with the products credit unions offer or what size a credit union is. What sets credit unions apart is the cooperative structure.

The real, tangible benefits credit union members enjoy as not-for-profit financial cooperatives is that credit unions are able to return income and earnings to members through lower fees and better interest rates.

The history of credit unions

To ensure that all people were able to have access to financial services, people began gathering in a cooperative spirit to help their neighbors and their communities grow strong. They pooled their savings for the purpose of being able to lend money to those who wanted to buy homes or start businesses. The interest from these loans was then put back into the pool, providing interest dividends for those who chose to save their money. Because they knew each other and lived near each other, they trusted one another. They understood that when one of them succeeded, they all succeeded.

The idea got a boost in 1934 when in the midst of the Great Depression, the U.S. Congress recognized the benefit of credit unions and enacted the Federal Credit Union Act. The purpose of the law was to make credit available to everyone and promote savings.

The growth of credit unions accelerated across the country. Most credit unions were originally formed around an employer-based bond of association. This provided an immediate bond of trust because members shared the same workplace. For people of modest means, the employer-based model was a godsend, as it permitted credit unions to use future paychecks as collateral.

In the end, everyone benefitted. Because people were able to buy homes, they settled down, creating communities and a demand for goods and services that were provided by the new businesses that were supported by the local credit union. It was this spirit of cooperation that helped fuel growth and prosperity in towns and cities across America.

That original spirit of a group of people acting cooperatively to make a better life for their families, neighbors, and communities still exists in today’s credit unions. And the evolution of credit unions has allowed them to open their membership to the communities in which they serve. For example, since 1955, anyone in Washington State may join Harborstone Credit Union.

Learn the truth about Washington State credit unions at nwcua.org/truth-speaks

  • 62% of Washingtonians are credit union members.
  • There are 106 Washington-based credit unions.
  • There are more than 8,000 credit union employees.
  • 88% of consumers have a favorable impression of credit unions.
  • Credit unions saved members $168 million in fees and interest.

Credit unions are not-for-profit organizations

Because credit unions are not in the business of making a profit, they are owned by their members, and all the money earned is put back into the business for the benefit of its members, credit unions have always enjoyed a not-for-profit status, which exempted them from having to pay income taxes.

Credit unions, unlike many other participants in the financial services market, are exempt from federal income taxes because they are democratically operated not-for-profit organizations managed by volunteer boards of directors and because they have the specified mission of meeting the credit and savings needs of members, especially persons of modest means.

By offering loans to those who might not otherwise have access to credit, Congress has always recognized that credit unions provide a public service that is as necessary as any other social program it might subsidize, such as the Centers for Disease Control or Environmental Protection Agency.

How credit unions’ not-for-profit status benefits their members

Credit union members enjoy tangible benefits because of credit unions’ not-for-profit status. A credit union is a financial cooperative, and as with all cooperatives, any money they earn goes back into the business for the benefit of its members. In the case of a credit union, members benefit in the form of lower loan rates, higher savings rates, and fewer fees. Nearly three-quarters of credit unions offer free checking compared with just 39 percent of banks. Credit unions also surpass banks on interest rates on savings products. Interest rates on car loans through credit unions are, on average, one-third lower than through banks.

Not only do these lower rates benefit credit union members, but the competitive pressure from credit unions has also undoubtedly forced many banks to lower their own fees, saving bank customers millions of dollars as well.

Thanks to these more favorable rates, credit union members realize between $4.3 billion and $8 billion in economic benefits a year. And by forcing banks to compete by lowering their own rates, it is estimated that credit unions deliver $10 billion annually in benefits to all consumers.

 
 

 

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