After Long Wait, Congress May Take Action to Raise MBL Cap
Bipartisan groups of lawmakers in both the House and Senate are trying to persuade colleagues who are crafting a jobs creation bill to include provisions that would raise the MBL cap from 12.25% of assets to 25%.
Credit unions are "ready to expand their business lending," and lifting the cap would result in credit unions expanding their business lending by $10 billion in the first year and create 10,000 new jobs, House Financial Services Committee member Brad Sherman (D-Calif.) wrote House Education Committee Chairman George Miller (D-Calif.).
Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) have introduced legislation allowing credit unions to make business loans totaling up to 25% of their assets, an increase from the current cap of 12.25%. It would also raise the minimum dollar amount for counting a loan toward the MBL ceiling from the current $50,000 to $250,000 and exempt from the ceiling member business loans made to qualifying underserved areas and to nonprofit religious organizations. It also gives the NCUA additional flexibility to allow less well-capitalized credit unions to make member business loans.
A measure on member business lending has been introduced in the Senate by Sen. Mark Udall (D-Colo.) and a bipartisan group of colleagues. The Senate measure also raises the cap from 12.25% to 25%. But unlike the House version, it wouldn't give the NCUA flexibility on MBLs. The Senate bill mandates that the regulatory agency give Congress semiannual reports on business lending and the health of the credit unions that do that kind of lending. The Senate measure does not exempt from the ceiling member business loans made to qualifying underserved areas and to nonprofit religious organizations.
While lobbyists for CUNA and NAFCU have said they are cautiously optimistic that they could get the cap increase-a cap imposed in the landmark credit union legislation passed in 1998-such an effort would set up another fight between banks and credit unions, which congressional leaders often like to avoid, especially in election years.
Some of the credit unions that have recently faced difficulties have been tripped up by member business lending.
Utah-based HeritageWest Credit Union, which was merged with Chartway Federal Credit Union after the NCUA liquidated HeritageWest, lost $15.9 million during the first nine months of 2009. In the third quarter of 2009, there was a 525% increase in MBL charge-offs and a 53% decline in the value of its member business lending.
NCUA Chairman Debbie Matz has supported raising the cap and has told the Treasury Department that the NCUA has "reasonable regulatory standards."