Credit Unions vs. Banks: Whose Numbers are Right?

That rumble in the street you're feeling is the West Side Story tap-off commencing to get underway between credit unions (aka “Jets”) and banks (aka “Sharks”).

Banks made the opening finger-snap foray into the fray, using numbers to claim that credit unions did a poorer job serving middle- and low-income people. Credit unions responded with the Jazz Hands of “Nuh-uh” – and came armed with numbers of their own that said pretty much just the opposite.

And then there was a bunch of singing, some guy named Tony gets shot, and then Maria cries.

The GAO was called in to weigh in on the debate – specifically to decide whether credit unions deserve their tax-exempt status. From where banks are standing, credit unions shouldn’t have tax exempt status, since they no longer serve people of “modest means.”

Its findings, released this month, highlighted marked growth among so-called "community" chartered federal credit unions, which, unlike those designated to serve a particular group, serve a "well-defined local community, neighborhood or rural district." (Bank advocates say credit unions use this charter to vastly expand their operating areas.) At the same time, the report suggested, credit unions lagged behind similarly-size banks in their efforts to serve the poor.

One of the issues that’s causing some lag time in the successful resolution of the debate: there isn’t firm or accepted definition of “modest means.” Nor is there a standard way to measure this variable. So, for its study, the GAO used the Federal Reserve's 2004 Survey of Consumer Finances — what it called "the most recent available information on the income of credit union members" — and found that "credit unions continued to lag behind banks in the percentage of their customers or members that were of low- and moderate-income households."