Credit union issues

B. Frank King and Aruna Srinivasan

Economic Review, 1998, vol. 83, issue Q 3, 32-41

Abstract: In February 1998 the U.S. Supreme Court partially settled a long-running controversy about the concept and extent of common bond limits on credit union membership, interpreting the Federal Credit Union Act as limiting membership to individuals sharing a single common bond. The ensuing debate has extended, quite naturally, to credit union tax status. Meanwhile, the U.S. House of Representatives and Senate have overwhelmingly passed and the President has signed a bill that would substantially annul the Supreme Court decision. ; This article attempts to provide a basis for thinking about current credit union issues. It outlines the origins of credit unions' special legal status as attempts to solve problems such as limited information about individual borrowers who could provide no security and costly procedures for collecting unsecured debt. The article describes how classic credit union characteristics - mutuality and common bond structure-developed to address these problems and how more recent developments are generating pressures to relax common bond limits. The authors conclude that allowing past multiple common bonds to stand and leaving open the way for others has positive implications for credit unions and their customers but negative implications for their competitors, their competitors' customers, and taxpayers.

Keywords: Credit unions; Financial institutions (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (4)

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