Banks vs Credit Unions: Rhetoric vs Reality

In partnership with

Scott Simpson is President & CEO of America’s Credit Unions

Every few months, the Independent Community Bankers of America (ICBA) dusts off the same argument: that credit unions, by virtue of their not-for-profit tax status, represent some sort of market distortion. Their latest critique hinges on the almost comical premise that consumers hearing “great rates for everyone” in a credit union jingle is cause for congressional alarm. If anything, this reveals far more about the priorities of bank lobbyists than it does about credit unions. They object to credit unions competing with banks by providing consumers with better rates and services. 

Sheep in Sheep’s Clothing

The core fallacy in ICBA’s argument is the portrayal of credit unions as predatory actors. This inversion of reality requires overlooking the foundational structure of credit unions: not-for-profit, member-owned cooperatives that succeed only when their members do. Their incentives are aligned with the people they serve, not external shareholders. Profits are returned to members through better rates, lower fees, and reinvestment in local communities. This is not a marketing slogan; it is an operating model, and one that has withstood decades of scrutiny. 

One of the more persistent myths is that the credit union tax status somehow enables hostile takeovers of community banks. This claim collapses under even cursory examination. The data is clear: What the credit union tax status actually enables is lower rates on loans, higher rates on savings, better customer service, and an institution that is focused on member financial well-being rather than squeezing every penny possible out of them. Bank-to-credit-union mergers are voluntary, market-based transactions approved by the selling bank’s board of directors. These are choices made by institutions seeking to preserve local ownership, continuity of service, and a mission-driven approach that benefits the community long after the ink on the contract dries. 

If the ICBA were genuinely concerned about consumers, they might acknowledge that the alternative to these acquisitions is often bleak: communities turning into banking deserts or seeing their local institutions swallowed by massive national banks whose primary loyalty is to shareholder return. Credit unions invest in communities; banks too often extract from them. 

 Lending that Matters

Similarly, the claim that credit unions lend less to small businesses relies on a selective and misleading use of Small Business Administration (SBA) data. A more honest reading of the same dataset — SBA 7(a) loan activity from 2010 to 2023 — reveals that the banks choosing to sell to credit unions were barely participating in SBA lending to begin with. After acquisition, those same branches increased their small business lending under credit union stewardship. The numbers are not ambiguous. The rhetoric is. 

Independent research confirms this reality. A study from American University shows that the mere presence of credit unions in a local market drives down costs and improves products for consumers across the board. Competition works. In fact, Americans benefit to the tune of roughly $23 billion each year due to the competitive pressure credit unions place on banks. If that is the ICBA’s definition of a market distortion, consumers should welcome more of it. 

It is no surprise, then, that banks have spent the past decade rapidly retreating from communities, closing more than 20,000 branches between 2012 and 2024. Credit unions, by contrast, opened a net 673 branches over the same period. Where banks see diminishing returns, credit unions see neighbors, workers, and small businesses worth investing in. 

Listen to Consumers

Most telling of all: when Americans are asked directly how they feel about credit unions acquiring banks, they side overwhelmingly with credit unions. In a recent national survey, 66% of respondents supported these acquisitions; when presented with both banks’ and credit unions’ arguments, support rose to 74%. The public is not confused about who is acting in their best interests. 

Credit unions exist for a simple purpose: to create economic opportunity and financial resilience for the people and communities they serve. Bank lobbyists may continue to recycle talking points, but the facts, and the public, tell a different story. This is the distinction between rhetoric and reality.

The opinions shared in this article are the author’s own and do not reflect the views of any organization they are affiliated with.

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