Credit unions talk a good game when it comes to helping people in times of need. Unfortunately, the economic calamity that has resulted from the pandemic doesn’t seem to meet their stress test for neediness.
Less than 2.5 percent of the $100 billion lent to small businesses since the Paycheck Protection Program (PPP) relaunched in January has been distributed through credit unions according to a report this week from the U.S. Small Business Administration. Considering that credit unions claim to serve one out of every three Americans, the program removed any barriers for them to participate, and these loans do not count against their business loan limit, they are underperforming in 2021—the same story we saw in 2020. Almost a year since the program launched, you would think they would be stepping up to help.
PPP is a much-needed lifeline for small business owners and their employees who have seen their incomes plunge since the pandemic began nearly a year ago. These government-backed loans have supported more than 51 million American jobs during a time of deep economic crisis according to some estimates.
Despite credit unions’ underwhelming performance, they still crow about how their special “mission” to serve members differs from banks. CNBC reported on Feb. 4 that Jordan van Rijn, an economist for the Credit Union National Association trade group, claimed “During periods of risk and uncertainty, banks tend to pull back a lot more on lending and just get a lot more conservative. But credit unions as part of their mission … continue to serve the members.”
Not so much, actually. More than 94 percent of America’s banks have distributed PPP loans during the crisis, while just 16 percent of the nation’s 5,000 credit unions have done the same.
It might be time for credit unions to do a fact check—and then revisit their purpose. The government confers enormous financial advantages to them to serve people with specific needs, including no obligation to pay federal taxes. It’s time to do something with those privileges—or give them up.