Now comes the House’s turn.
At press time, Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) were planning to introduce legislation to raise the cap on member business loans to as much as 27.5% of a credit union’s assets.
"Given this year’s budget deficit is projected to reach $1.6 trillion, more stimulus spending is not an option. The Small Business Lending Enhancement Act will provide much needed financing for small businesses without spending a single tax dollar," they said in a letter to colleagues seeking support for the measure.
The Royce-McCarthy bill would be a companion measure to a bill introduced last month by Sen. Mark Udall (D-Colo.). It has 18 co-sponsors.
Udall has said he’s not sure if it will be a standalone measure or attached to another bill. He attempted to attach it to a small business funding bill but was unable to do so. Lobbyists for CUNA and NAFCU said they expect any action on the measure would take place in the Senate first.
Last Wednesday, the Senate’s No. 3 Democrat said there was a "decent chance" that the Senate will pass the measure.
"If you believe in small business lending, why not increase the cap? As I understand it, the initial cap was an arbitrary number, and there hadn’t been one before," Sen. Charles Schumer (D-N.Y.) said in response to a question from Credit Union Times. Schumer is a co- sponsor of the measure.
Eligible credit unions will be able to increase their small business lending to 27.5% of total assets, at a rate not to exceed 30% a year. Credit unions must be well-capitalized, be at or above 80% of the current cap, have five or more years of member business lending experience and be able to demonstrate sound underwriting and servicing. If a credit union’s net worth ratio falls below the well-capitalized requirement (currently 7%), it must stop making new business loans.
Currently, loans to businesses of $50,000 or more count toward the cap. CUNA and NAFCU have tried to raise that to $250,000 but that is not part of the Royce-McCarthy bill.
Though the credit union trade associations are strongly behind the measure, they will have to overcome the political clout of the banking lobby, which has made killing the bill a top priority.
Last month, the Independent Community Bankers of America listed stopping the cap increase as one of its top 12 priorities for the year.
The group will be "opposing expanded powers for credit unions, particularly the proposal to raise the cap on ‘member’ business loans," according to a list of priorities that the group agreed to at its annual meeting.
According to CUNA and NAFCU, if the cap were raised, credit unions could lend an additional $13 billion in the first year and create approximately 140,000 new jobs.
Approximately 2,500 credit unions offer business loans.