Business

Giving credit where credit (union) is due

While Fed governors, economists and lawmakers struggle to find ways to re-ignite the struggling credit markets in order to jump-start bank lending, a quiet success story remains largely unsung, except by those who know the tune.

It goes something like this: credit union customers think they have the answer to what ails us.

Maureen Robinson, a lifelong Long Islander, is among the fiercest advocates. She submitted her mortgage application to only one place: Bethpage Federal Credit Union. When she was rejected, she cleaned up her financial act and returned later.

“I would rather do whatever it takes to finance through them than go anywhere else,” insists Robinson, now comfortably paying off her first home loan.

Roughly a quarter of America’s 7,741 credit unions offer loan and savings products to both households and small businesses. But even they are limited in how much they can lend. Banks have no such restrictions. A proposed amendment that would double the current lending cap of 12.5 per cent faces stiff opposition from bankers who don’t buy the Credit Union National Association’s contention that a higher limit would generate $10 billion in new lending in the first year alone, creating an estimated 100,000 new jobs.

To create wider awareness of the banks’ war against credit unions, Connecticut-based Connex uncharacteristically opted to take its case to the public. Launching a bold series of in-your-face ads that portray bankers as spoiled fat cats working in lush offices, they also built an “unbank” Web site where consumers shared banking nightmares. People paid attention.

Other credit unions are also stepping out of the shadows.

America’s First Federal Credit Union in Birmingham, Ala. aired spots that show bankers “admitting their sins” at sidewalk confessionals, while Washington State’s BECU warns consumers to “Switch Now or Pay Later.”

The banking industry is not laughing.

“Costs are costs. Anytime you squeeze the balloon in one area, a lump emerges somewhere else, whether you’re a bank or a credit union,” cautioned John Hall, spokesperson for the American Bankers Association.

The ABA’s Web site slams credit unions for becoming profitable, billion-dollar institutions offering full financial services.

“Though these institutions look and act like banks, they do not pay taxes or abide by the same rules as banks,” the ABA complained.