ABA Questions OCC Authority to Approve CU-Federal Savings Association Mergers

The American Bankers Association has asked the Office of the Comptroller of the Currency to reject any proposed merger of a federal savings association with a credit union, saying the agency may not have the power to approve such a deal.

“ABA notes, first, that Congress has authorized the OCC to adopt regulations for mergers of Federal savings associations with other ‘savings associations,’” ABA President/CEO Rob Nichols wrote in a letter this week to Blake Paulson, acting comptroller of the currency. “As a threshold matter, it is therefore unclear that OCC has the power to provide a mechanism for acquisition of assets or liabilities of a Federal savings association by an entity such as a credit union.”

The ABA and the Independent Community Bankers of America have been arguing for several years that the credit union tax exemption is outdated. And they have been raising alarm bells about recent credit union purchases of banks, accusing credit unions of using the tax exemption to help finance the deals.

In his letter, Nichols said there are serious policy and legal issues that could severely damage the mutual business model.

“In particular, ABA believes that these purchases may not comply with applicable law and contravene longstanding Federal policies governing mutual institutions, including those of the Office of the Comptroller of the Currency,” he wrote.

He added that the OCC would have the power to approve the liquidation of a federal savings association but that is significantly different from a merger with a credit union.

Meanwhile, the conservative National Taxpayers Union has renewed its call for Congress to reexamine the credit union tax exemption.

“Congress must examine how our broken tax code is contributing to the unequal treatment of banks and credit unions before this trend worsens,” Thomas Aiello, the NTU’s director of federal affairs, wrote in an op-ed posted on the conservative news site, Townhall.

He said that large credit unions operate with “relaxed” membership requirements that Congress never envisioned and engage in activities that are not related to their core function.

He said that at the least, Congress should require all credit unions to file Internal Revenue Service Form 990, which would detail the institution’s expenses. He said Congress also could require tax parity on acquisitions and a possible Government Accountability Office study to evaluate the tax issue.

However, no member of Congress has emerged to take on the credit union tax issue. And when Senate Majority Leader Chuck Schumer (D-N.Y.) spoke at the CUNA Governmental Affairs Conference earlier this year, he pledged to help protect the tax status.