The bank lobby took the opportunity Friday to point to a credit union failure as a reason to keep the current cap on member business lending.
The Independent Community Bankers of America noted that the $301 million Telesis Community Credit Union had been granted special permission to lend beyond the current 12.25% cap.
Failed business loans have been blamed for the demise of the Chatsworth, Calif., credit union, which on Friday was liquidated by regulators and sold to Premier America Credit Union, also in Chatsworth.
“The credit union’s risky loans, which included a failed Orlando, Fla., shopping center, led directly to its failure and liquidation. This should be a lesson to those advocating H.R. 1418/S. 2231, which would further expand credit unions’ business-lending authority,” the ICBA said in a statement Friday afternoon.
“Telesis Community Credit Union is the case study for why this policy threatens consumers, the economy and credit unions themselves,” said the trade group for nearly 5,000 community banks.
“Congress enacted member-business-lending caps on credit unions for good reason—these institutions are tax-exempt so they can serve individuals of modest means and with common bonds. Allowing them to expand into uncharted territory could put many smaller credit unions into precarious situations, which could lead to failure,” the ICBA statement said.
The broadside also included a shot at credit unions’ tax-exempt status, claimed lifting the cap would widen local, state and federal budget deficits and harm the economic recovery.