Congress Will Again Take Up Business Lending, Consumer Bureau and Deficits
While credit unions don’t have as many issues on Capitol Hill as they did last year, when lawmakers return from recess after Labor Day, there will be enough subjects that will keep industry officials and lobbyists actively prowling the halls of the Capitol.
Credit unions may have another bite at the MBL apple. Several sources have said the House Financial Services Committee will hold a hearing on legislation to raise the cap on member business loans though the committee hasn’t announced the schedule yet.
This would follow a Senate Banking Committee hearing that was held last month at which NCUA Chairman Debbie Matz endorsed the measure.
Credit unions have used the recess to step up their lobbying on the issue. The highest level lobbying was done by University of Iowa Community Credit Union CEO Jeff Disterhoft who urged President Obama to support the legislation during a two-minute presentation at a town hall meeting on Aug. 16 at Northeast Iowa Community College.
“I told him that we are near our cap and just on Monday I had to turn a creditworthy electrical supply company down for loan. I then talked about what raising the cap would do to create jobs and increase the flow of credit to many communities,” Disterhoft told Credit Union Times.
He said that Obama’s body language “indicated that he wasn’t aware of the issue. But Small Business Administration Administrator Karen Mills, who led the session, nodded and indicated that she was very familiar with it.”
Disterhoft said his credit union, which has assets of $1.4 billion, has done business lending for 20 years but has been more aggressive during the past decade.
On the same day, Rep. Erik Paulsen (R-Minn.) toured Richfield/Bloomington CU in Bloomington. During that meeting, credit union executives made the case for raising the cap. Bloomington Mayor Gene Winstead said that credit union loans were key to the survival of the city’s commercial downtown, according to a news release from the Minnesota Credit Union Network.
Sen. Mark Udall (D-Col.) and Rep. Ed Royce (R-Calif.) have both introduced legislation that would allow eligible credit unions to increase their small business lending to 27.5% of total assets at a rate of growth not to exceed 30% a year.
Udall’s bill has 20 co-sponsors in the 100-member Senate and Royce’s bill has 62 cosponsors in the 435-member House.
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 would have to stop making new business loans.
The banking lobbies have vowed to kill the legislation, but lobbyists for CUNA and NAFCU think that at a time of high unemployment lawmakers might be willing to pass measures that, they say, would create jobs.
Immediately after Congress returns, lawmakers will consider the nomination of Richard Cordray, who President Obama picked to be director of the Consumer Financial Protection Bureau. The Senate Banking Committee has scheduled a hearing on Sept. 6 on Cordray.
CUNA and NAFCU haven’t taken a position on the appointment but have urged Cordray to be cognizant of the impact of adding to the regulatory burden of small financial institutions. The CFPB, which began operating on July 21, only has direct supervisory authority over credit unions with assets of $10 billion or more, but all credit unions have to comply with its regulations.
Ohio credit union officials, who worked with Cordray when he was the state’s attorney general and treasurer, have praised him for understanding the mission of credit unions.
It’s not clear if Cordray will get the chance to run the bureau since Republicans have vowed to block the appointment of any nominee as long as the current structure for the agency is in place.
The House passed such a measure, which creates a five-member board to run the bureau, but Senate Democrats have said they oppose it.
The 800-pound-gorilla lurking around everything Congress does will be the House-Senate super-committee that will make recommendations to cut the budget.
The panel, made up of six senators and six congressmen, equally divided between the parties has until mid-November to come up with recommendations for cutting the deficit. The proposal must be voted on with an up or down vote and cannot be amended. If the panel can’t agree on proposals then there cuts that are automatically set to take effect.
While much of the focus will be on cutting spending, the panel could also seek revenues either through raising tax rates (probably not likely) or through tax reform and revamping some tax expenditures, such as the tax exemption for credit unions.