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OLYMPIA, Wash. – It’s still too soon to tell what longterm effect Washington State’s new member business lending rule will have on state-chartered credit unions’ MBL loan portfolios. After all, at press time the rule had only been in effect for five days. But that doesn’t worry the state’s credit union regulator. He wanted to be sure a MBL rule was in place that allowed state-chartered credit unions to compete effectively for members’ business, and that is the attitude of many state regulators. At press time, two states in addition to Washington had MBL rules that had been approved by NCUA – Missouri and Texas. According to NASCUS, there are at least three other state regulators that are in the process of writing MBL rules for their respective state-chartered credit unions. “Prior to NCUA’s approval of our MBL rule in January, Washington state-chartered credit unions hadn’t had to turn away many members for member business loans,” said Parker Cann, director of the Division of Credit Unions for the Washington State Department of Financial Institutions, “so it wasn’t because there was a lot of demand from members for member business loans that prompted us to write our own rule. We wanted to be sure for the future that state-chartered credit unions could compete for this business.” The situation was the same in Texas when Credit Union Commissioner Harold Feeney sent the state’s proposed MBL rule to NCUA for approval. Texas was the first state to have its MBL rule approved by NCUA. “Member business lending is a legitimate activity for state-chartered credit unions and as a state regulator we should be prescribing these rules,” Feeney said. Unlike some other rules and regulations that are approved by a state and used as a model by other regulators, NASCUS President/CEO Doug Duerr said when it comes to states formulating their own MBL rule, credit unions shouldn’t expect to see a model used in the process. “Some language will be used because it is well written, but overall every state will have to craft its own MBL rule which meets the particular needs of credit union members in that state,” he said. Feeney agreed with Duerr’s assessment. Since NCUA requires the language in a state’s MBL rule to be equivalent or substantially equivalent to the agency’s rule, “We can assume there will be some degree of standardization between state’s rules.” According to NCUA December 2000 call report data, member business loans accounted for .84% of federal credit unions’ loan portfolios. That compares to 2.44% that MBLs comprise of state-chartered CUs’ loan portfolios. Duerr said the disparity demonstrates not just that state-chartered credit unions are more involved in making member business loans than federal credit unions, but that state-chartered credit unions are under greater pressure from members in their community to offer member business loans. “The pressure is starting at the bottom, among the members, and is filtering up to state-chartered credit unions and then to the state regulator. The credit unions are not creating the demand by offering member business loans, they’re responding to demand from their members,” Duerr said. -

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