Credit Unions' income tax exemption is directly tied to their mission

This debate over credit union tax status may seem like high-level politics, but it directly impacts the cost of capital for your customers. Credit unions are a major source of consumer financing for retail sectors like automotive and home improvement. Because they are tax-exempt non-profits, they can often offer lower interest rates and more flexible credit tiers than traditional big banks. For a merchant or service provider, credit unions often act as the 'friendly' lender in your portfolio. They are typically more willing to look at the borrower's full story rather than just a credit score. If the banking lobby succeeds in stripping this tax exemption, credit unions would likely be forced to raise their rates or tighten their lending criteria to maintain their margins. This would mean fewer approvals and higher monthly payments for the people trying to buy your products. For now, the tax exemption remains the backbone of the credit union business model. This allows them to reinvest earnings into better technology for point-of-sale financing and more competitive loan products. Retailers should keep an eye on this space, as any shift in credit union regulation changes the competitive landscape of the consumer lending market.

Source: American Banker — Top News

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