To say the battle to increase the member business lending cap has been an arduous one for the credit union industry would be an understatement.
For at least eight years, proponents have stayed in the ring fighting to convince everyone that the member lending cap must be raised, and it must be lifted now.
But some may wonder if credit unions are growing fatigued with the fight and are ready to or even starting to shift their focus elsewhere in the business services space. Among the leaders that Credit Union Times spoke to, the answer was a resounding no and that to give up now would be an insult to all the time, work and energy put in to expand business lending.
Last week’s Senate Banking Committee hearing on the issue was certainly a giant leap forward, many credit unions leaders agree. Sen. Mark Udall (D-Colo.) has introduced bipartisan legislation, the Small Business Lending Enhancement Act (S. 509), which would raise the MBL cap to 27.5% of total assets.
CU Business Group, a Portland, Ore.-based business lending CUSO that serves more than 340 credit unions, knows firsthand the implications of the lending threshold. For many credit unions, bumping up against the 12.25% of assets MBL cap has become increasingly difficult to navigate.
The CUSO analyzed data from NCUA 5300 statistics as of Dec. 31, 2010 and found that there are 208 credit unions within three percentage points of the 12.25% cap. A total of 375 credit unions are half way to the cap, with MBLs at 6% or more of assets. CUBG President/CEO Larry Middleman said these 375 are the credit unions that are hindered right now by a lack of cap space. They also represent 47 states with total aggregate assets of $555 billion–all having to slow or stop their business lending programs because of the cap, he added.
"I also know of many other credit unions below 6% in MBLs that intentionally moderate their MBL growth for purposes of managing to the cap," Middleman said.
With loan growth difficult to achieve today, Middleman said credit unions are now more than ever looking for new avenues of growth and profitability.
"To be forced to slow, or even stop, business loan originations because of a regulatory cap is hurting not only the credit union industry but most of all the small business members of these 375 credit unions," he said.
Middleman pointed out that while the cap issue has been ongoing for the past eight years, it is still of the utmost importance to a large number of credit unions today. Raising the cap would make a large quantity of business capital available to small businesses all across the nation, he said.
"With the challenges facing credit unions today, this is an opportunity that would help the industry and spur significant economic growth–and, therefore, the cap continues to be high on many credit unions’ radar," Middleman said.
As trade groups and the U.S. Small Business Administration have continued to say, credit unions are pivotal players in aiding entrepreneurs especially during a time when the nation is still trying to pull up out of the muck and mire of a sluggish economy.
On the MBL cap lift, "this is not an issue I see our industry walking away from," said Terrence McHugh, CEO/president of Commercial Alliance, a Troy, Mich.-based business lending CUSO that serves 17 credit unions.
"Credit unions are playing a critical role in helping fuel local businesses today and increasing the MBL cap can help build a stronger economy. Commercial Alliance's credit unions are committed to seeing the MBL cap increased," McHugh said.
Commercial Alliance recently reached a milestone when it surpassed servicing more than $150 million in business loans. Since its first loan in 2005, the CUSO said it has provided consistent support to its credit union members despite challenging market conditions. In 2010, it added four credit unions to its client roster–all were previously involved in business lending but were looking to revamp their programs.
"[The milestone] is also a positive indicator for the small businesses in our credit union communities as many do not realize lending is happening and do not know where to turn to grow their businesses," McHugh said.
CUNA and NAFCU have been front and center in convincing legislators that raising the MBL cap can only yield positive outcomes despite the banking industry’s criticism of the effort.
"Regarding fatigue, all I know is that a number of credit unions have told us their strong interest in having more authority to make business loans; something they feel they need in the face of lagging demand for other loan products, and revenue challenges to boot–interchange being one of them," said Pat Keefe, CUNA vice president of communications.
Keefe acknowledged that "not all credit unions are as interested, perhaps as others" in the MBL cap issue, "but that's nothing new among the diverse world of credit unions and serving their individual member interests."
"Having said all of that, we do believe we have some momentum" especially with last week’s Senate Banking Committee hearing with Udall and Sen. Majority Leader Harry Reid (D-Nev.) signing on as a co-sponsor of Udall’s bill, he noted.