Wisconsin credit unions have seen strong growth in recent years. In fact, total membership in credit unions statewide now exceeds 3 million.
Even as the number of credit union members is rising, the number of actual credit unions is falling—by 39 percent since 2010. That’s made it tougher for many residents of the Badger State, especially those in rural areas, to find affordable loans and other financial services.
Fortunately, a bipartisan group of senators is working to protect access to smaller, community-based financial institutions by relieving them of the onerous and costly federal regulations that have driven many to close their doors. Wisconsinites should urge their own Sens. Ron Johnson and Tammy Baldwin to join that group.
Credit unions are nonprofits. Members deposit their money, and the credit union lends it to other members. So when a cashier at the corner shop pays interest on a credit union loan, she isn’t lining the pockets of a Wall Street tycoon. She’s paying back the farmer down the road, the teacher at the neighborhood school, and other members of her community.
For decades, credit unions have offered financial products geared toward working and middle-class Americans. The average mortgage from a credit union is for $203,000. At commercial banks, it’s 64 percent bigger—$333,000. Six in ten credit union business loans are for $50,000 or less.
But credit unions—and the community lending they enable—are disappearing because of federal rules enacted in the wake of the Great Recession.
The 2010 Dodd-Frank Act provided for numerous regulations intended to keep Wall Street in check and protect consumers. But those regulations have also snarled community lenders that had nothing to do with the financial crisis in costly red tape.
Here in Wisconsin, regulations now cost the average credit union $1.25 million. Credit unions have no choice but to offset those costs by scaling back services, charging higher fees on loans, merging with their competitors, or closing up shop altogether.
Fortunately, the Senate Banking Committee just advanced the Economic Growth, Regulatory Relief and Consumer Protection Act—S. 2155—which would provide smaller community lenders some much-needed regulatory relief.
The bill would raise the asset threshold at which financial institutions are subject to the most stringent Dodd-Frank rules. That would relieve smaller institutions, which don’t pose a systemic threat to the financial system, of significant regulatory costs.
The bill would also make the process of obtaining a mortgage faster and more efficient. That will help many Wisconsinites buy homes and build wealth.
Small businesses would benefit from this reform push, too. S. 2155 would reclassify certain loans for rental properties as residential, no longer business loans. This simple change would free up an extra $4 billion for credit unions to lend to small businesses.
Eleven Democrats, 11 Republicans and an independent have already signed on as cosponsors. Sens. Johnson and Baldwin should consider becoming the 12th members of their respective parties to get behind the bill.
By joining their colleagues to ease the regulatory burden on credit unions, Wisconsin’s senators can ensure that millions of middle-class Wisconsinites will be able to retain access to affordable loans and other financial services.