For nearly one hundred years, for-profit banks have sought to undermine credit unions from evolving their products and services to better serve their members’ needs and increase their market share. Unfortunately, this conflict continues to dominate DoD banking policy discussions with one side focused on serving its military members and the other focused on profit as a condition for serving military customers on the installation. The argument is really that simple.
Once again, for-profit banks are asking Congress to give them a handout by seeking another provision in the National Defense Authorization Act that would require DoD to treat them the same as credit unions when it comes to leases. There are fundamental flaws in the banker’s arguments, many of which were discussed in depth in a credit union industry rebuttal in Military Times last October.
Historically, defense credit unions are asked to remain on base as an alternative to the high transactional costs and poor service by other financial institutions, including banks. As member-owned and not-for-profit entities, it is understood that defense credit unions excel at keeping interest rates low and are more in tune with member needs (e.g., deployments). Both features help improve the financial readiness of our military while protecting against financial predators.
This focus on service to their members and their community over profits is what led Congress to give the DoD discretionary authority which allows credit unions to use land and space on military bases at no cost. It is a well-earned exemption which credit unions strive to maintain. Plus, this exemption only applies when at least 95 percent of the membership served by the allotment of space or the facility built on the leased land is composed of individuals who are, or who were at the time of admission into the credit union, military personnel or federal employees, or members of their families. Now banks want this same exemption without having the same underlying principles of being non-for-profit financial institutions.
While banks argue for “parity” on this issue, the fact is that banks can also obtain leases at a nominal cost. Under the Military Leasing Act, 10 USC §2667, banks can demonstrate to DoD how they would use their lease to serve and provide value to the men and women of the base. However, banks have not exercised this authority, and one must wonder why not.
Instead, banks have opted to end-run DoD and go to Congress to get a handout without any limitations on who benefits most from the additional profit — it is not the military community. Despite record bank profits in recent years, banks argue that serving on-base is not profitable enough to stay. That is their choice. However, banks have now decided that if they cannot get an exemption, no one should get it. They are using a bank-only issue to once again try to prevent credit unions from serving their members to the best of their ability. Ultimately, it is the military community who loses the most under this gambit.
A weaker argument is that perceived favoritism towards credit unions harms service members. Yet, how many military members have you heard complaining that their bank is moving off the base? Especially when off-base military banks, such as USAA and First Command Bank, have increased their market share as they continue to encroach onto military installations in direct violation of DoD regulations. It seems military members already have plenty of choices if they want to support a profit-centered bank instead of a defense credit union.
Finally, only a banker would argue that size, not community served, should define what a credit union can do for its members. It is the old large versus small credit union trick. Plus, it’s especially disingenuous for the banking industry to attempt to introduce taxation into the discussion — considering there are nearly 2,500 Subchapter S banks of all sizes that pay zero dollars in corporate income tax, you would think the for-profit bank sector would want to leave that discussion alone.
Bottom line, the banker’s proposed end state is unfair to our military as any savings generated will be put into the pocketbooks of bank shareholders versus our members, their families, and the communities in which they live. The banker’s argument is also deceptive since no one is deprived of quality financial products and services when banks choose to leave the base — defense credit unions (and off base military banks) have been successfully filling the gap for many years.
Once again, there can be an important role for both banks and credit unions on the installation. However, it is important for policy makers to understand the differences. Credit unions simply put our members first — ahead of profit. If banks want to be treated like credit unions, they need to start acting like them. Equal treatment needs to focus on service, structure and ethos, not increasing the bank’s profit sustainability. Our service members deserve more!
Anthony Hernandez is president and CEO of the Defense Credit Union Council and a retired Air Force colonel, three-time commander, and former banking liaison officer.
Editor’s note: This is an Op-Ed and as such, the opinions expressed are those of the author. If you would like to respond, or have an editorial of your own you would like to submit, please contact Military Times managing editor Howard Altman, email@example.com.