The Final Warning From Iowa

Credit unions narrowly escaped taxation in the Hawkeye State, but other battles are underway, and the war is far from won.

The failure of Iowa bankers this spring to add a new tax on credit unions is not so much a victory as a final warning. Things are about to get more challenging, and the credit union movement needs to prepare.

Leaders in the movement need to commit to working hard and working together, and demand the same from colleagues, vendors, and leagues and associations. Now is the time to build alliances, increase political activity, and perhaps most important, improve our storytelling.

It’s tempting to feel good about things. The credit union movement won in Iowa and won a huge battle to roll back regulation nationally. It’s a new day at the CFPB. Plus, banks are enjoying record profits, which undermines their traditional competitive advantage argument against the tax exemption. But the world has changed, and the banking lobby has gotten smarter.


The new refrain from bankers is fairness, not competitive advantage. They argue that credit unions don’t do their fair share. These days, that kind of populism plays on both sides of the political aisle. Everyone believes in fair. Worse, bankers have set the narrative, cherry-picking facts and telling the credit union story better than we do. The way the bankers tell it, the tax exemption really is unfair.

Don’t tax my credit union! still sounds good, but it begs the question, Why not?

Do we have a good, clear answer we can all agree on? If all we can say is what we’ve always said if we keep refighting the last war we will lose the next war: the one that’s already underway.

Indeed, Iowa credit unions barely had time to celebrate their victory before the bankers fired another salvo, this time trying to force University of Iowa Community Credit Union to change its name. UICCU is Iowa’s largest credit union, and it’s no longer directly affiliated with the university, so it’s a tempting target. And the way Iowa bankers tell the story, what they want is only fair.

In neighboring Wisconsin, the NCUA has waded into a fracas over whether credit unions there can even use the word bank as a verb. Canada did enact such a ban but has since rolled that back. It’s a classic example of a low-likelihood, high-impact threat that can’t be ignored and is often used to distract attention and suck resources away from the core issue.

And the core issue lives, because the near victory in Iowa shows the way forward. Around the country, state bankers associations, community bankers associations, and the ABA are reconsidering every detail of the Iowa campaign, from financial support for state legislators to the arcane details of each state’s tax code, from the media relations campaign and co-optation of influential opinion makers to the applause lines in subcommittee testimony.

Banks are peddling a false narrative about credit unions based on real facts. To counter this, focus on a public narrative about mission. Learn more in How Do Credit Unions Counter Fake News?

By this fall, the fairness narrative will be part of every presentation of every PAC check from every bankers association across the country. When legislatures reconvene in January, anti-credit union bills will be introduced in every state capital. In many places, state credit union leagues will be outgunned and individual credit union leaders will find themselves on the front line of an existential battle.

The bankers need only one victory. If they can capture new revenue for one hard-pressed state budget, claiming fairness while doing so, other states will start to fall like dominoes. In 2021, or maybe 2023, credit unions will be hit with federal income taxes, too. After all, like the bankers say, It’s only fair.

Unless credit unions reclaim their narrative, the outcome in Iowa will prove to be a Pyrrhic victory.

We need to know our history, our facts, and our language. We need to tell the whole credit union story better than the bankers tell their twisted version. Our movement must act quickly, aggressively, and with one clear voice. If we don’t, the end of the credit union tax exemption isn’t a question of if, but of when.

Are you ready to step up?

It’s Time For Tough Questions

Asking tough questions helps the credit union movement flourish. Make Callahan’s Tough Questions commentary on a regular stop for insight on thinking differently about the movement and framing strategies for success.

May 29, 2018

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