Credit unions: an important financial services resource for Alaskans: not-for-profit cooperatives offer members a democratic voice.

AuthorBarbour, Tracy
PositionFINANCE

In today's financial industry, credit unions across the nation serve the needs of more than 87 million consumers. For Alaskans, credit unions are a primary source of financial services for everything from checking and savings accounts, to loans, credit cards and insurance services.

Credit unions are financial institutions formed by an organized group of people with a common bond or "field of membership."

People qualify for membership through their employers, organizational affiliations such as churches or social groups, or through a community-chartered credit union. Members invest in their credit union, pooling their assets to provide loans and other financial services to each other.

As not-for-profit financial cooperatives, credit unions exist to serve their members--not to focus on making a profit. Unlike most other financial institutions, credit unions don't issue stock or pay dividends to outside stockholders. That's because a credit union is owned by its members.

Credit unions are run by a board of directors comprised of members elected by their fellow members to serve voluntarily. Credit unions are very democratic in nature. Each credit union member has equal ownership and one vote, according to Katrina Mitchell, Juneau-based chief examiner for the Alaska Division of Banking and Securities. "It doesn't matter how much money I have in a credit union," she said. "If I have $60 or $60,000, I have one vote."

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Contrary to what some people think, credit unions aren't part of the federal government. And they do pay some taxes--payroll taxes, sales taxes and property taxes. But because they're member-owned, nonprofit organizations, they're exempt from federal income taxes. However, credit unions chartered by the State are obligated to pay federal income tax on certain kinds of income, Mitchell said. She added, "However, this issue is currently in litigation because it treats a federal credit union more favorably than a state credit union."

Credit unions can choose whether they want to be governed by state or federal regulators. There are technically 13 credit unions with a presence in Alaska, including Washington-based Alaska Airlines Federal Credit Union. Only one of Alaska's credit unions is chartered and regulated by the State--Credit Union 1, the second-largest credit union in Alaska. The others are chartered and regulated by the National Credit Union Administration, which charters and supervises federal credit unions.

A DIFFERENT KIND OF CREDIT UNION

Credit unions are distinctly different from other depository institutions, such as commercial banks, mutual savings banks and federal savings banks. Commercial banks, for instance, are normally C or S corporations governed by a board of directors and owned by shareholders.

"Typically, the primary goal of any for-profit corporation is to please its shareholders, who want a...

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