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The Effects of Credit Unions on Bank Rates in Local Consumer Lending Markets

A look into how credit unions presence in a market and other measures of local market structure, impact bank loan rates.

Executive Summary

This is the second study by noted economist Robert Feinberg on the effects of credit unions on the rates banks charge for loans. The first study examined a relatively small group of markets for a single time period. This second study analyzes bank rates on unsecured loans and new vehicle loans in an expanded number of markets over a six-year period.

Data used in this study was obtained from the Federal Reserve System via the Freedom of Information Act, and from the National Credit Union Administration. This research confirms and expands the important findings of the first study.

What is the research about?

Since the completion of the first study, new data has been obtained from the Federal Reserve Board on bank loan rates which, combined with data on credit union rates from the National Credit Union Administration, provides quarterly information on movement in bank and credit union loan rates for two types of consumer loans—new vehicle and unsecured (non-credit card) loans. This data is combined with data on the number and size of bank and credit unions in a market, which was obtained form Sheshunoff Informations Services, Inc. along with some additional data provided by the Credit Union National Association.

This study examines how the credit union share of market and other measures of local market structure, plus credit union loan rates, impact bank loan rates. It also addresses whether bank rates influence credit union rates.

What are the credit union implications?

This study, like its predecessor, provides strong evidence that credit unions have favorable effects on market rates for loans. Credit unions not only deliver favorable rates to their members—their presence in a market also lowers loan rates for bank customers. 

This report is sponsored by the Center for Credit Union Development. 

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