WASHINGTON — Same arguments different venue.

While the hearing topic was a bill to raise the cap on member business loans, credit unions and banks sparred over a range of subject a House subcommittee hearing.

Appearing before the House Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit, credit union representatives argued that raising the cap would enable them to create thousands of new jobs and better serve their members.

“Raising the cap is something that is necessary and pro-growth,” said Gary Grinnell, president/CEO of Corning FCU in Corning, N.Y., testifying on behalf of NAFCU.

But ABA Chairman-Elect Albert Kelly said any increase would “shift loans from taxpaying banks to tax-exempt credit unions.”

Kelly added that credit unions wanting to make more business loans should convert to banks or lose their tax-exempt status.

NCUA Chairman Debbie Matz said raising the cap would allow credit unions to diversify their investments and mitigate risks. Bankers, however, said additional lending would jeopardize safety and soundness because commercial loans are riskier.

Rep. David Scott (D-Ga.) asked Matz how much urgency there was for raising the cap.

Matz replied that credit unions could serve the needs of more of their members. She also said credit unions make loans that other institutions are unable or unwilling to make but said her agency doesn't keep data on how often that occurs.

Reps. Ed Royce (R-Calif.) and Carolyn McCarthy have sponsored the legislation and so far it has 86 cosponsors.

Sen. Mark Udall (D-Colo.) has sponsored companion legislation in the Senate and it has 21 cosponsors.

Both bills require that 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.

Instant Insights /

CUs and Banks Renew Feud Over MBL Hike: Onsite Coverage

Related Stories

Recommended For You