What If Family Service Credit Unions Were For-Profit?

Many Americans use a family service credit union rather than a bank for deposit accounts as well as many types of loans, such as: car loans, personal loans and even home mortgage loans. Credit unions differ from banks in that customers actually purchase a membership in the credit union and thus become an owner of the credit union.

Credit unions are not-for-profit cooperative institutions that offer many of the same services that a conventional bank does. Credit unions are also well known for offering members very low rates for banking services as well as providing low-interest loans of many types to credit union members. However, one might consider what would happen to credit unions if they were to ever become for-profit institutions rather than membership-based not-for-profit institutions.

Credit Unions and Not-For-Profit Status

By operating as not-for-profit cooperative institutions, credit unions exist to further community development or the level of development on a local level by working with a specific group of members depositors. Therefore, the primary function of the credit union is to provide quality banking services and other financial services to its member consumers rather than concentrate on earning a high profit return for the company or shareholders. While credit unions do attempt to earn enough money to be completely self sustainable, they are usually very effective in keeping rates and fees low in order to save members money.

Possible Consequences of Becoming For-Profit

However, if credit unions were to suddenly change strategies and attempt to become for-profit entities or enterprises, there would probably be a lot of changes to the way credit unions conduct their business. First and foremost would probably be an immediate increase in rates and fees to members in order to earn higher profits and expand their market share or customer base.

Also, there would probably also be many changes to the structure of credit unions in general. Now, most credit unions allow members a ‘one member - one vote’ voting system for electing directors and board members. However, if credit unions were to become for-profit bank like institutions, they would probably be some changes to the way directors and board members are elected. In the event that credit unions were to become for-profit institutions, you would probably see a system more closely at akin to other private or publicly held corporations where members or shareholders with more shares are more interest in the credit union would have more voting rights.

In short, there are a lot of ways that your local family credit union would probably change should the credit union ever become for-profit instead of not-for-profit. However, with more and more Americans choosing the smaller, yet friendlier and less expensive atmosphere of a credit union over conventional banks, it is rather unlikely that you will see many credit unions attempting to become profitable corporations or institutions anytime soon. However, if your current credit union does become a for-profit entity, they will certainly still be not-for-profit credit unions that you can choose from.