Credit unions face tough questions

While banking advocates have cheered, national and local credit union groups expressed concern Thursday over a recent government report that raises questions about the direction of the credit union movement.

In a November report, the U.S. General Accounting Office said that while federal credit unions generally have strengthened their financial condition, there are nagging questions about whether they are fulfilling their larger mandate. Questions, local bankers suggest, that may be addressed first in Utah.

On Thursday, credit union groups responded, stating that the GAO perpetuated misinterpretations from the American Bankers Association and relied on flawed or inappropriate data when making its findings.

• Between 1992 and 2002, the financial condition of the credit union industry improved and, according to the GAO, "remained higher than those of other depository institutions." The industry's assets have grown and profitability has stabilized.

• The number of credit unions declined from 1992 to 2002, while total industry assets grew. This, according to the report, "has resulted in two distinct groups of credit unions — larger credit unions, which are fewer in number and provide a wider range of services that more closely resemble those offered by banks, and smaller credit unions, which are greater in number and provide more basic financial services."

• There is a question about whether federal credit unions are serving people of "modest means," as dictated by statute. "Our analysis of available data suggested that the income of credit union members is similar to that of bank customers; although credit unions may serve a slightly lower proportion of low- and moderate-income households than banks," the report stated. The GAO said available data indicates that 36 percent of households that primarily or only used credit unions had low and moderate incomes, compared with 42 percent of households that used banks. Further, the report stated, data from the Home Mortgage Disclosure Act's 2001 loan application records indicated that credit unions provided a slightly lower percentage of their mortgages to low- and moderate-income households than banks of comparable asset size.