Raising the cap on member business loans is risky in light of the problems facing credit unions and would take away businesses from "tax-paying community banks," Independent Community Bankers of America Senior Vice President Stephen J. Verdier wrote senators this week.
Verdier disputed the contention by CUNA and NAFCU that credit to small businesses is in short supply and noted that "small business loan demand is down."
He said that in light of growing federal deficits it would "be more prudent and more beneficial to our national economy to repeal the credit unions' tax exemption," and cited a study indicating that such a tax would generate $30 billion in revenue over 10 years.
Verdier also wrote that credit unions are "critically undercapitalized" and "are facing losses in the $15-$50 billion dollar range."
NCUA Director of Public and Congressional Affairs John McKechnie disputed those points. He wrote in an e-mail that the agency's "most recent data shows an aggregate industry capital ratio of 10.1%. Furthermore 98.3% of all federally insured credit unions are "adequately capitalized," and 96.0% are "well capitalized." He also wrote that the agency "does not concur," with the estimate of the losses that Verdier cited.
Reps. Paul Kanjorski (D-Pa.) and Rep. 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.
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%. The Senate bill mandates that the NCUA give Congress semi-annual reports on business lending and the health of the credit unions that do that kind of lending.