Credit Union Ruse

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Digital Credit Union

The egregious $5.2 million Digital Credit Union naming-rights deal on the former Worcester Centrum sports and entertainment complex in Worcester, Mass., cost individual taxpayers $2 million when you consider that 40 percent of the cost was savings accumulated from not paying taxes.

Digital Federal Credit Union has assets totaling $3.8 billion as of June 30, 2011. It conducts business in four almost completely non-contiguous states – Colorado, Georgia, Massachusetts and New Hampshire. It was established in 1979 for the employees of Digital Equipment Corp. Digital went out of business in 1998, yet Digital the credit union lives on.

Digital Federal Credit Union’s net income or profit from January 1, 2006 – June 30, 2011 was $87.4 million. It now holds accumulated profits, otherwise known as retained earnings, totaling $290 million. According to its Web site, Marlborough, Mass.-based DCU is the largest credit union headquartered in New England as measured by assets and among the top 25 nationwide.

Digital may be the “poster child” example of the large credit union that policy makers should consider taxing. DCU has been chosen as the credit union for more than 800 companies and organizations and serves almost 340,000 members in all 50 states. Where is the “common bond” that is supposed to characterize credit union members?

There are several ways to qualify for membership in DCU:

1) Eligibility by family relationship to a current DCU member;
2) Eligibility by company you work for or retired from;
3) Eligibility by organization you belong to;
4) Eligibility by community.

Digital Federal Credit Union has experienced phenomenal growth. Membership has more than quadrupled from 75,963 to 338,883 in that same time period.

DCU membership
(Source: NCUA)

During the same time period of 6/97 – 6/11, assets of DCU increased sixfold from $504 million to $3.8 billion. Total deposits and shares had a comparable increase from $464 million to $3.3 billion.


DCU Assset and Deposit Growth

(Source: NCUA)

In addition to its growth in deposits and assets, DCU has considerably increased its amount of member business loans outstanding from $12 million in 6/97 to $400 million in 6/11, an increase of almost 3200 percent!

Still not convinced Digital should be taxed like a bank? Read on:

  • It has engaged in an aggressive campaign to open new branches, seemingly without regard to geographic restrictions.

  • Recently the credit union advertised on exceptionally expensive Red Sox television broadcasts and invested in other forms of aggressive, far-reaching and costly advertising.

  • The real stunner: it invested $5.2 million for the naming rights to the Worcester Centrum sports and entertainment arena. (If you take into consideration the notion that if the standard 35 percent combined state and federal tax rate were applied to Digital, that’s almost $2 million dollars of the cost of those naming rights coming out of tax-paying consumers’ pockets.)

This is a not-for-profit institution deserving of a tax exemption?

Digital avoided paying over $30 million in income taxes over the past five and one half years. To say the least, small community banks that operate much like small credit unions but pay taxes, have a difficult time competing against the likes of Digital Federal Credit Union, and individual taxpayers are subsidizing its competitive advantage.

CLICK HERE to listen to an excerpt from Digital's sponsorship message from National Public Radio indicating that anyone can become a member.
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