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Op-ed: Good public policy pays dividends in Colorado

Monday, January 27, 2020   (0 Comments)
Posted by: Amanda Averch
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Good public policy pays dividends in Colorado

State regulator denies credit union attempt to purchase bank

Don Childears, CEO

Colorado Bankers Association 


Every year, the state of Colorado misses out on more than $65 million in revenue it could collect if credit unions paid income taxes like everyone else. Even the multi-billion-dollar credit unions pay $0.

Meanwhile, the average Coloradan pays $5,800 in income taxes annually. 


You read that right. The teen who scoops ice cream after school, the single mother working two jobs and the senior citizen who lives on a fixed income all pay more income tax than a $2 billion credit union.

And the state, whose budget is already stretched thin, is struggling to meet the needs of an increasingly large Colorado population, as roads and bridges need repair and expansion and schools must grow to accommodate new generations. It goes without saying that every dollar is needed.


Colorado isn’t unique in that circumstance.  On a national level, that lack of income tax deprives the U.S. Treasury of roughly $2 billion every year. Recently, credit unions have been spending their extra cashflow on a shopping spree snatching up community banks across the country – with the exception of one failed attempt in Colorado.


Thanks to solid public policy and accurate interpretation, the state will continue to collect income tax from a northern Colorado bank, following a January decision by the state banking board to decline Cache Bank & Trust’s attempt to sell its assents to a $2.2 billion credit union, based in Boulder.


Banking industry advocates in the 1980s secured legislation (Colorado statute 11-103-709) to prevent Coloradans’ deposits or loans from being transferred to institutions with fewer consumer protections, stipulating that a bank can sell all of most of its assets to another bank (emphasis added), mentioning no other purchaser. So, it appears a bank may only sell to another bank.


That statute became relevant again in September 2019 when Cache Bank & Trust, with branches in Fort Collins, Greeley and Denver, had agreed to sell its $121.7 million in assets to Elevations Credit Union, a $2 billion credit union based out of Boulder (formerly the University of Colorado Credit Union).


Because the Colorado Division of Banking is required to approve all M&A transactions for state-chartered banks in the state, CBA wrote the Division of Banking ahead of any hearing, citing the statute.

When the Division heard Cache’s proposal in January 2020, Cache pursued a second approach in seeking approval: the state’s “wildcard statute,” which states, in part,  “The banking board has the power to authorize such banks to engage in any banking activity (emphasis added) in which state banks could engage were they operating as national banks at the time such authority is granted, so long as such activity is not prohibited elsewhere in this code…”  


The banking board interpreted the law as CBA did, and denied the application with a 6 to 1 vote, a sound decision applauded by bankers across the state – and the country.


The banking industry had no quarrel with either Cache Bank & Trust or Elevations Credit Union; but banks continue to push for a fair and competitive free market in which all participants play by the same rules.

Purchases of banks by tax-exempt credit unions have been on the uptick across the country, leaving government coffers short of much-needed revenue. In 2019, credit unions announced the purchase of 16 banks in the U.S.


The justification for credit unions tax exempt status is that they are supposed to serve people with low and moderate incomes, or those who share a common bond, such as employment or residence. Simply living and working in a large county is makes a mockery of “common bond.”


The mini-trend of credit unions purchasing tax-paying banks and removing those dollars from state and federal coffers is concerning. Not only do credit unions not pay taxes and take money from taxpayers’ hands when they buy a bank, but they also do not have the same level of restriction, regulation and transparency, which makes them susceptible to risky debt.


Worst of all, taxpayers are paying for credit unions to grow bigger and riskier – and they have no say in the matter.  

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