WASHINGTON - Credit unions that serve non-profit religious organizations will be exempt from the 12.25 percent-of-asset cap on member business loans if Congress passes a bill introduced June 20 by Rep. Ed Royce (R-Calif.), a member of the House Banking Committee. The Faith-Based Lending Protection Act-H.R. 4701-is backed by the California and Nevada Credit Union Leagues and 11 co-sponsors, both Democratic and Republican. Including Royce they are: Reps. Jerry Lewis (R-Calif.), David Dreier (R- Calif.), chair of the House Rules Committee, Ken Calvert (R- Calif.), Brian Bilbray (R-Calif.), James Gibbons (R-Nev.), Barbara Lee (D-Calif.), Mike Thompson (D-Calif.), Lucille Roybal-Allard (D-Calif.), Lynn Woolsey (D-Calif.) and Shelley Berkley (D-Nev.). Chris Kerecman, vice president of federal government affairs for the CCUL said "the bipartisan co-sponsorship of the bill is a sign of the strength of the measure. Everyone we asked to put their name on the bill agreed to." Kerecman described Royce as a "true supporter of credit unions" and noted that the congressman added his name to the list of co-sponsors of H.R. 1151 immediately after the U.S. Supreme Court ruled in favor of the banks on standing and merit in their suit against NCUA and AT&T Family FCU. When asked why Royce decided to introduce the Faith-Based Lending Protection Act, Kerecman responded, "Because we asked him to. He's always been there for credit unions." The Royce bill is similar to S. 1872 introduced in the U.S. Senate by Senators Jeff Sessions (R-Ala.) and Christopher Dodd (D-Conn.) last November. That bill too would amend the FCU Act with respect to the definition of a member business loan to exclude from it an extension of credit made to a non-profit religious organization. S. 1872 was referred to the Senate Banking, Housing and Urban Affairs Committee but has seen no action since. H.R. 1151 limits a federally insured credit union's loans to members for business purposes to 12.25 percent-of-total assets. The law provides exceptions for credit unions chartered to provide member business loans, who have a history of making MBLs, or whose loan portfolios already consisted primarily of member business loans before the law became effective. There are an estimated 50 credit unions nationwide who make participation member business loans to non-profit religious organizations. The bulk of these loans are originated by three faith-based CUs in California - Evangelical Christian CU, Anaheim; Nazarene CU, Brea; and American Baptist CU, Covina. Since the passage of H.R. 1151, The Credit Union Membership Access Act, Evangelical Christian CU has been working with other credit unions to participate in the loans. Scott Vandeventer, COO, ECCU said this has been difficult because they feel constrained by the capital limitation of the MBL provisions in the law. Many of them have backed out of making the loans out of concern of hitting the MBL cap. Vandeventer said the credit union expects to provide about $200 million in MBLs this year. About $2 out of every $3 loaned out is participated. "Evangelical Christian Credit Union has been an advocate of legislation exempting faith-based credit unions who serve non-profit religious organizations from the member business loan lending cap even before H.R. 1151 was passed," said Vandeventer. "From the first moment we heard of the cap we became an advocate of freeing up something we rely on for lifeline capital." Ninety percent of the loans ECCU makes are classified as business loans. "If participation loans are compromised, there is every reason to believe we wouldn't be able to provide a source of financing that faith-based organizations need to grow," he said. Royce told Credit Union Times that was why he decided to sponsor the bill. "Unless these credit unions are exempt from the member business loan cap, there will be a shortage of available funds to finance these critical loans," he said. "In almost every case, the credit unions that are purchasing the loans and participating in making them are not exempt from the MBL limits. If the bill fails to pass, the pipeline of funds will dry up." Royce described H.R. 4701 as "a narrow change that addresses a significant problem." He explained that only 36 of the 470 faith-based CUs have MBL portfolios. "Since credit unions play such an important role in addressing these lending needs, without legislative action they will find it increasingly difficult to find funds for these loans." CUNA President/CEO Dan Mica said, "We have always thought the language on member business lending introduced in the Senate during the H.R. 1151 debate was too restrictive for credit unions and their members. We look forward to working with Congress on this critically important issue." Now that Royce has introduced H.R. 4701 and gathered a line of co-sponsors behind him from California and Nevada, he said he intends to "move East and fan out and talk with other members of Congress. I predict success." -
ekingoff@cutimes.com
