Community Banks Impaired Trying to Serve Military: On-base Favoritism of Credit Unions Harms Service

On-base Favoritism of Credit Unions Harms Service Members as an active-duty overseas military veteran and community banker, I have personally witnessed a troubling trend on U.S. military bases: the shrinking availability of banking options to service members. Locally based community banks are being driven off bases by a quirk decreased more than 40 percent since 2004. And community banks make up 75 percent of on-base banks, meaning these are local institutions — not global megabanks — exiting military bases. While credit unions have defended the 1996 lease exemption Congress gave them as a big bank issue, the data By James Smith, President & COO • FMS Bank, Greeley, CO in federal law allowing tax-exempt credit unions to operate show this is simply not the case. rent-free while the Defense Department does not extend this 1996 law considers these services in-kind payment for leases same treatment to banks — making it impossible for banks to In fact, military credit unions are the largest in the country remain on base. and extending themselves beyond military families. Tax-exempt Navy Federal has expanded rapidly to more than $125 Fortunately, Congress is considering legislation that would re- billion in assets, dwarfing community banks. Tax-exempt Penstore needed rent parity between banks and credit unions to tagon Federal has partnered with Goldman Sachs to provide preserve access to responsible and regulated financial services a nearly $1 billion loan to finance a luxury mixed-use real esfor military personnel at a time of significant economic stress. tate development in the nation’s capital while advertising that Banks have operated for decades on military installations at credit union industry’s founding purpose of serving people of no cost to the Defense Department. In fact, banks provide free modest means with a common bond, which originally justified services to service members, such as financial counseling, and credit unions’ other unfair competitive advantage — their tax to the government, such as cash for deployments. However, a exemption. “anyone can join.” These institutions contrast sharply with the and fees for credit unions — but not for banks. Ultimately, the costs of this military banking exodus are borne by service members and their families. As military banks are This disparity takes its toll as the cost of leases and utilities rise squeezed out due to the taxpayer-funded competitive advanand banks are forced to make the difficult decision to cut their tages of credit unions, military personnel and their families losses and leave the base. Bases with full-service banks have lose out on the full range of financial services, and the quality and innovation that results from choice and competition.

As a young enlisted soldier without personal transportation, I had no choice but to use the financial services located on base when I was stationed at Fort McClellan in Alabama and at the Robinson Barracks and Airfield Nellingen in Germany. When I wanted to buy a car, the only choice for a loan was the one on-base bank, and I was obliged to agree to whatever terms and conditions they offered out of pure necessity. I was limited to one bank; today, many soldiers are limited to one credit union. The declining availability and diversity of on-base financial services is presenting the same problem to more and more service members.

Service members have also increasingly sought assistance from the predatory lenders often positioned just outside the base gates that offer high-interest, short-term loans. In fact, active-duty military personnel obtain payday, tax-refund, and pawn-shop loans at significantly higher rates than their civilian contemporaries.

Leveling the competitive playing field with military banks and ending the growing credit union monopoly on military installations will strengthen the financial position of military personnel while limiting the debt traps, high interest rates, and financial emergencies that frequently plague service members. Little wonder that last year the Military Coalition — a consortium of 34 military and veteran service organizations representing more than 5.5 million service members and their families — endorsed the change.

Fortunately for military personnel, Congress will debate legislation again this year to end the disparate treatment of banks and credit unions on military bases. An amendment to the 2021 National Defense Authorization Act would require the Defense Department to treat credit unions and banks the same with respect to rent. In other words, if the department waives or charges rent for credit unions, it would be required to do the same for banks.

This equitable treatment language is included in the Senate version of the defense spending bill, but not the House companion. To end the banking exodus from military bases and restore financial services access and competition for service members on base, Congress should fully pass this measure and send it to the president to be signed into law. During this time of unprecedented economic stress, financial favoritism should not put service members at a disadvantage.

Editor’s note: This is an Op-Ed and as such, the opinions expressed are those of the author.

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Forbes Magazine Recognizes Four Arkansas Banks Among the World’s Best t he Arkansas Bankers Association congratulates four Arkansas banks for making the Forbes magazine’s “World’s Best Banks” list. The publication released its second-annual list of the “World’s Best Banks” in June 2020. In total, 23 countries were represented on the list with 450 banks making the cut. Four Arkansas banks featured in the top 25 list include Arvest Bank, headquartered in Lowell; Centennial Bank, headquartered in Conway; BankOZK headquartered in Little Rock and Simmons Bank, headquartered in Pine Bluff.

Arvest Bank was the top-rated Arkansas bank of those in the United States, with a ranking of number seven among the country’s banks and this marks the second consecutive year Arvest has received the honor, Bank OZK was ranked number 16, Simmons Bank was ranked number 19 and Centennial Bank was ranked at number 22.

Lorrie Trogden, President/CEO of the Arkansas Bankers Association said, “What a distinguished spotlight for the state of Arkansas to have four banks in the top 25 of the Forbes list. I am incredibly proud of the investment all Arkansas banks give to support the economic growth, health and vitality of their communities. Our banks have over 26,000 dedicated employees who are passionate about serving the needs of individual and business customers throughout the state, it’s this commitment to Arkansas that gives the state some of the top banks in the world.”

Candace Franks, the Arkansas State Bank Commissioner, stated, “As Arkansas Bank Commissioner, I salute our four Arkansas banks named in the top 25 of Forbes Best Banks 2020. This recognition is for outstanding customer service and satisfaction which are traits we have in common throughout our Arkansas banking industry. Congratulations and I am so proud of our Arkansas banks! “

Alisha Curtis, Chief Communications and Legislative Director of the Arkansas Department of Commerce, commented, “Arkansas has a great reputation for having among the most influential banks that conduct business at a very high level all over the world.”

Secretary of Commerce Mike Preston went on to say, “Arkansas’ economic environment is conducive to facilitating growth in the financial services sector. Our regulatory burden is not excessive and with our accommodating economic infrastructure, it makes Arkansas a great place from which to do business. I congratulate these four banks for being among the world’s best.”

According to Forbes, the rankings were based on “general satisfaction and key attributes like trust, fees, digital services and financial advice.” Forbes partnered with market research firm Statista to conduct surveys and more than 40,000 surveys were conducted with banking customers from around the world. The Arkansas Banker n Fall 2020 37