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Head of Senate committee questions CU tax exemption, NCUA supervision

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Head of Senate committee questions CU tax exemption, NCUA supervision

Senate Finance Committee Chairman Orrin Hatch said he is concerned that some credit unions are evolving away from their original tax-exempt purpose, and he requested a wide range of information from the National Credit Union Administration regarding its oversight of the industry.

In a Jan. 31 letter to NCUA Chairman J. Mark McWatters, Hatch said some credit unions are offering a variety of services that may be beyond the scope of their original mission, including insurance products and wealth management. "While these may be worthwhile pursuits, they should give us pause and cause a reflection on the core mission of credit unions and their tax-exempt status," Hatch wrote.

He said credit unions have also entered lending lines including business lending, which has not historically been related to their mission.

He also raised questions about recent changes to field of membership rules and said in some cases credit unions operate similarly to taxable banks. Hatch pointed out that the credit union tax exemption requires that the government "closely oversee the credit union industry to ensure that it continues to fulfill its intended purpose."

The National Association of Federally-Insured Credit Unions, or NAFCU, responded to the letter by saying that changes made to the NCUA's field of membership rules are well within the agency's legal authority and are in keeping with the Federal Credit Union Act. Carrie Hunt, NAFCU's executive vice president for government affairs and general counsel said the tax exemption "has long provided a tremendous value to credit union members and the overall economy of the United States."

Credit Union National Association President and CEO Jim Nussle tweeted that credit unions' mission in part is providing access to credit for their members, particularly those of modest means. "That's a mission they have fulfilled for more than 70 years, through multiple financial crises, and it's a mission that remains unchanged today," he wrote.

Independent Community Bankers of America President and CEO Cam Fine thanked Hatch in a tweet and said the credit union industry for too long has enjoyed the benefits of competing with tax-paying community banks.

Hatch requested that McWatters respond to seven questions he posed in the letter related to field of membership, services credit unions offer to members and executive compensation by April 6.

In an email, NCUA spokesman John Fairbanks said the agency is reviewing Hatch's letter and will respond.