By Jason Stverak
As the federal government shutdown enters its fourth week, credit unions have emerged as frontline financial first responders. Across the country, especially in military communities and regions dense with federal employees, credit unions mobilized immediately to ease the financial stress on those who serve our nation. From day one – even hour one – credit unions have been “putting members first”, offering emergency relief to tide families over until Washington gets its act together. This member-first ethic is not new; it’s the credit union difference in action.
From the Defense Credit Union Council’s perspective, these examples are a source of pride and proof of purpose. As Anthony Hernandez, DCUC’s CEO, noted, “Credit unions have always been a source of stability for military families, especially during times of uncertainty”, demonstrating once again the credo of “people helping people”. Indeed, DCUC member credit unions nationwide – those serving bases and defense communities – have stepped up with an extraordinary range of relief measures. Many are offering 0% interest furlough loans, skip-a-pay options on existing loans, waived overdraft and late fees, and penalty-free withdrawals for affected members. This is what “service before profit” looks like in practice.
Perhaps most striking is how quickly policymakers themselves took notice. In Washington, we’ve heard from congressional offices seeking information on credit union assistance programs to share with constituents. Lawmakers know that during a shutdown, “credit unions are on the front lines, ready to help, especially in challenging times”. In other words, credit unions’ rapid response has not only supported families—it’s building policy capital with our representatives. Every skip-a-payment granted and every emergency loan approved is another concrete example we can point to on Capitol Hill to show how credit unions deliver for the public when it counts most. This goodwill and credibility with lawmakers come from trusted relationships and a track record of doing the right thing. It’s a form of political capital earned not through campaign contributions or lobbying clout, but through actions that align with the public interest. And it’s paying off: policymakers increasingly see credit unions as partners in problem-solving, not just another financial sector interest.
Turning Goodwill Into Action: Time To Advance Key Reforms
With this heightened credibility, now is the time to turn goodwill into concrete legislative action. Credit unions have proven their commitment on the frontlines of this shutdown; Congress should recognize that by advancing long-sought reforms that will help credit unions serve Americans even better. Two priorities in particular deserve immediate attention: the Veterans Member Business Lending Act and expanded lending authority for credit unions.
First, pass the Veterans Member Business Lending Act (VMBLA). This bipartisan bill would exempt loans made to veteran-owned small businesses from counting against credit unions’ member business lending cap. Why is this so important? Under current law, federal credit unions are arbitrarily limited – capped at 12.25% of assets – in how much they can lend for business purposes. This decades-old cap, born of the 1990s, is “outdated” and has unintentionally stifled entrepreneurs. It especially hurts veteran entrepreneurs, who often face greater hurdles in accessing capital. A joint SBA/Federal Reserve study found that veteran business owners apply for credit more but are denied at far higher rates than their non-veteran peers. These are men and women who have led troops in uniform, now trying to start businesses back home. They shouldn’t have to fight another battle to get a modest loan. Credit unions, with their not-for-profit, community-focused model, are ideally positioned to help – if we remove the arbitrary roadblocks. By excluding veteran business loans from the cap, VMBLA would “eliminate barriers to credit for veteran-owned small businesses” and “unlock more capital for veterans at no cost to taxpayers.” It’s a common-sense way to honor those who served: let their credit union say “yes” to a startup loan or an expansion line of credit, rather than turning them away due to a bureaucratic limit. Lawmakers from both parties agree – this provision is cost-free and pro-growth – and its swift passage would “unlock the potential of veteran entrepreneurs, fostering a more inclusive and robust economy.”
Second, expand credit unions’ lending authority more broadly to fuel small business growth. Even beyond veteran-specific loans, Congress should raise the limits on credit union business lending that are hampering Main Street. Legislation already on the table would help. The Increasing Credit Union Lending for Business Growth Act, for example, would double the threshold for what counts as a business loan under the cap – from $50,000 to $100,000. In practice, that means more mom-and-pop shops and solo entrepreneurs could get the small loans they need without pushing their community credit union up against a rigid ceiling. Raising or adjusting the cap gives credit unions the flexibility to extend more credit to local businesses “without increasing risk”, because these are prudent loans to local borrowers we know and trust. This isn’t about helping credit unions; it’s about helping the economy. When credit unions can safely lend more, jobs are created and communities strengthened. The bottom line: if Congress wants to see more economic resilience on Main Street – especially after the strain of a prolonged shutdown – empowering credit unions to lend is a surefire, zero-cost way to do it.
Not-for-Profit And Proud: Don’t Tax What’s Working for Communities
As we push for these pro-growth reforms, we must also dispel the misguided notion floated by a few lobbyists and members of Congress that credit unions should be taxed like banks. Let me be clear: credit unions’ tax-exempt status is not some loophole or handout – it’s a recognition of our cooperative structure and mission. We are not-for-profit, member-owned financial cooperatives. That means our “profits” are returned to everyday members in the form of lower loan rates, higher savings yields, and low or no fees. Indeed, credit unions collectively return an estimated $37 billion to members each year through better rates and lower fees. If credit unions were taxed as for-profit banks, those benefits would shrink or vanish – hurting 135 million member-owners and countless communities. Studies show it would be penny-wise, pound-foolish: the roughly $3 billion in federal taxes that might be gained would pale in comparison to the economic fallout. One recent economic analysis estimated that eliminating the credit union tax exemption would cut U.S. GDP by $266 billion over the next decade and cost 822,000 jobs. For every $1 in taxes, over $100 in economic output would be lost. In short, taxing credit unions would be a tax on their members – military families, teachers, nurses, you name it – and on the community services credit unions provide.
We’ve seen time and again why Congress preserves the credit union tax status on a bipartisan basis. It’s because credit unions live out a public purpose. We serve many areas that banks retreat from – including rural towns, underserved urban neighborhoods, and military bases where high-cost alternatives would otherwise fill the void. If you force smaller credit unions to close or consolidate” through new taxes, military bases and underserved neighborhoods would be vulnerable to predatory lending and financial exclusion. That’s not conjecture; it’s exactly what would happen if the not-for-profit model were undermined. And let’s dispel another myth: banks often claim unfairness, but they conveniently ignore the myriad tax breaks and subsidies they enjoy. For-profit banks benefit from tax strategies and loopholes that let them minimize their bills – without delivering anywhere near the same community return. If there’s to be any conversation about taxing credit unions, it must be accompanied by a full examination of bank tax practices. The truth is, our tax status is earned through our structure and our service. It allows us to focus on financial well-being rather than shareholder wealth. It is, in essence, “a critical investment in America’s communities, not a cost to the government.”
Mission-Driven And Resilient By Design
This government shutdown has tested the mettle of many institutions – and credit unions are passing that test with flying colors. The ability of credit unions to ramp up relief efforts so quickly is no accident; it stems from our mission-driven model and financial strength. Remember, credit unions have a long history of stability and resilience. During the 2008 financial crisis, for example, not a single credit union failed, and none needed a taxpayer bailout – a stark contrast to the for-profit banking sector. Even now, amid economic uncertainty, credit unions remain well-capitalized and safe. No one has ever lost a single penny of insured deposits within the credit union system. In other words, the credit union model builds in prudence and member-focused decision-making that keep these cooperatives strong through thick and thin.
Why is this relevant now? Because when crisis strikes – whether it’s an economic downturn, a natural disaster, or a political standoff – credit unions don’t have to scramble to change their DNA. Service is in our organizational DNA. We don’t answer to Wall Street equity analysts or chase quarterly earnings targets at the expense of our communities. We answer to our members. That means we can offer a 0% emergency loan or defer a mortgage payment out of genuine concern for a family’s well-being, rather than fretting about profit margins. This shutdown, credit unions once again showed that “we’re 100% committed to fight for our members through these uncertain times.” Our employees on the front lines at branches and call centers have been working overtime to devise personalized solutions – exemplifying a people-helping-people ethos that no shareholder-owned bank can replicate in the same way. This mission-driven approach is not just altruism; it’s also a source of financial resilience. By prioritizing long-term member trust over short-term gain, credit unions avoid the kind of speculative risks that have sunk many banks. As one credit union leader put it, we are “the antithesis” of the big banks that engage in risky bets for a few executives’ enrichment. Our focus is on steady, reliable service – and that in turn makes us steady, reliable institutions.
Recognizing The Moment: A Call To Action For Congress
The past month has vividly illustrated why credit unions are so essential to the financial fabric of this country. When military members, veterans, and federal workers were thrown into uncertainty through no fault of their own, credit unions answered the call. We didn’t do it for headlines or accolades; we did it because it’s our mission. But policymakers are taking note. They see which institutions step up for their constituents in times of need. Now, Congress must recognize this moment for what it is: an opportunity to strengthen those very institutions that have had Americans’ backs. That means swiftly enacting pro-credit union reforms and opposing any efforts to undermine credit unions’ ability to serve.
Pass the Veterans Member Business Lending Act and other credit union lending enhancements without delay. With the shutdown highlighting how much communities rely on credit unions, it’s time to cut the red tape that limits our support for local businesses. Give us the tools to help create jobs and spur recovery – we will use them responsibly, as we always have. Reject misguided calls to tax credit unions. Punishing the very cooperatives that are helping hold families together during this crisis would not only be irony of the worst order, it would be economically damaging to communities. As I’ve said before, those who defend our nation deserve financial certainty and should never be used as bargaining chips in a budget standoff. The same principle holds: the millions of Americans who belong to credit unions should not be treated as piggy banks to plug budget gaps, nor should their community institutions be politicized.
Instead, let’s channel the cooperative spirit we’ve seen during this shutdown. Congress should stand with credit unions – just as credit unions have stood with their members – by enacting policies that help us serve even more effectively. Expand our capacity to lend to those who need it most. Protect our not-for-profit structure that enables us to return value to everyday people. And ensure that going forward, we can continue to be that pillar of stability for military families, federal workers, and communities nationwide. Lawmakers often talk about supporting our troops and strengthening our economy. Here is a tangible way to do both: support the credit unions that are making a difference on the ground. The nation’s 4,400 plus credit unions have proven their commitment during this shutdown. Now it’s time for Congress to match that commitment with action. Recognize this moment, reward what works, and help us help more people. That’s a win-win that should cut through any partisan divide. After all, in times of national uncertainty, trusted local institutions like credit unions aren’t part of the problem – we are part of the solution, and we’re ready to do even more. Congress, let’s get it done.
Jason Stverak is Chief Advocacy Officer at the Defense Credit Union Council.