Citing the need to free up more money to help businesses expand, Sen. Charles Schumer (D-N.Y.) said last week that he plans to introduce legislation to lift the cap on member business loans that credit unions can make.
In a letter to Schumer, American Bankers Association President Edward L. Yingling wrote that raising the cap on member business loans would result in credit unions "straying further from their traditional mission of serving consumers, especially those of modest means."
Credit unions have been subject to an MBL cap of 12.25% of their assets since 1998.
Schumer is chairman of the Joint Economic Committee and a member of the Senate Banking Committee. He said the bill would require the NCUA to make two reports a year to Congress on small business lending and loan delinquencies so that Congress can monitor the impact of the cap elimination.
Credit unions have been pushing for this for a long time, and both CUNA and NAFCU have said it would inject $10 billion of capital into the economy. Earlier this year, House Financial Services Committee Chairman Barney Frank (D-Mass.) expressed doubt that there was enough support for getting such a measure passed in the House this year.
NCUA Chairman Michael E. Fryzel praised Schumer's initiative and said that these kind of loans provide a "tangible and important benefit for small businesses, provided that the loans are properly regulated and made in a prudent manner, consistent with safety and soundness standards."
The top lobbyists for both CUNA and NAFCU, who have been promoting the issue for several years, praised Schumer's efforts.
"This is excellent news for both credit unions and the country's small businesses," said CUNA Senior Vice President of Legislative Affairs John Magill. "Credit unions have stood ready to help small businesses, but many are chafing against the arbitrary statutory cap that exists under current law."
NAFCU Senior Vice President of Government Affairs Dan Berger wrote that many "small business owners are members of credit unions around the country and rely on our services."
The measure is certain to run into strong opposition from the banking lobby, which was one of the main forces behind instituting the cap.
While eliminating the member business lending cap has been a part of several bills introduced in both the House and Senate-most notably the Credit Union Regulatory Improvements Act-it was not in the regulatory relief bill that passed the House last year but went nowhere in the Senate.