The Regional CUSO Alliance, an association of member business lending CUSOs, said the proposed elimination of personal guarantees would cripple underwriting and punish those credit unions that have not "excessively abused their privileges."
The NCUA has proposed eliminating four regulatory relief items under Regulation 742 for well-capitalized and well-run credit unions. The RCA believes the proposed personal guarantee elimination change "seems to solve a problem that does not even exist" and "any changes may cause unintended consequences, either by severely limiting the competitive capability or by exposing credit unions to potential good faith violations of the core policy."
"With or without regulatory requirement, the need to ask a business owner to stand behind his or her company's debt is a critical underwriting consideration both philosophically and financially," the alliance wrote in an April 26 letter to the NCUA.
Officially formed in November 2009, the RCA represents 15 business lending CUSOs that support more than 400 credit unions with nearly $3 billion in commercial loans outstanding. Less than one-half of 1% of the loans serviced by RCA members has no personal guaranty offering proof that "credit unions have exercised prudence and restraint with their authorities relative to waiving personal guarantees," the alliance said.
"We urge the NCUA to hold accountable the 'some' who have excessively abused their privileges but not at the expense of the 'most' who have exhibited tremendous diligence in protecting their depositors."