WASHINGTON-In a recent letter to the Small Business Administration (SBA), CUNA told the agency that notice and comment were unnecessary and a waste of time in allowing credit unions to participate in the SBA's 7(a) loan program. The SBA only permits geographically based credit unions to participate currently due to concerns of discriminatory practices in a limited field of membership, despite an earlier opinion letter from SBA's own lawyers saying it was permissible because the limitations are required by statute. CUNA pointed out that there was no notice and comment period when the SBA decided not to allow most credit unions to participate and therefore, none is necessary to permit them to participate. "We are concerned that, contrary to your stated goal of enhancing credit union involvement, a rulemaking process could result in considerable delays in widening the group of eligible credit unions. Meanwhile, credit unions continue to suffer the effects of being excluded from the 7(a) program," CUNA Associate General Counsel Mary Dunn wrote. The letter also suggested that if the rulemaking process is to be used, SBA should adopt an interim final rule allowing for nongeographically based credit unions to participate in the 7(a) program. The American Banker recently published an article noting the Federal Reserve Board's latest survey of senior bank loan officers which found that only 15% of officers said they tightened lending criteria for small business borrowers in the first quarter of 2002, compared with 40% late last year. However, with bank lending easing for small businesses, NAFCU believes the enthusiasm for getting credit unions more involved in the SBA programs is not dampening. NAFCU Economist Tun Wai commented that business lending "is still a very small part of the credit union portfolio," only 1.6% of credit unions' total loans. Credit unions have $5.4 billion invested in business lending, up 16% from a year ago, according to NAFCU data. He added that less stringent business lending standards by the banks is, of course, good news for small business. "Where banks are very well equipped to handle these kinds of loans, that's probably where the lending is going to go," Wai admitted. "When you look at small business (lending).banks are very much in that market." However, he said many credit unions are simply interested in making micro-loans, such as ones for a taxicab medallion. America's Community Bankers Director and Legislative Counsel Steve Verdier claims that it is unfair to categorize all banks as not interested in lending small sums to commercial entities. While he said credit unions only hold a small portion of the market on business lending, he explained, "Looking at the global aspect of this.we've got members in markets where credit unions are not just 2% (of the business lending market)." It is a very real competitive issue for many smaller banks and savings associations, Verdier said. He added that it also goes back to the principle of the taxation issue. Reviewing a Treasury Department study that came out more than a year ago on member business lending, loans under $50,000 do not even count toward the 12.25% of assets cap on member business lending. While the majority of credit union business loans fall below this amount, 41% are above $50,000. More than 50% went to businesses with less than $100,000 in assets. While the issue was raised on Capitol Hill at the urging of NAFCU, both CUNA and NAFCU are now working the issue from the regulatory angle. So far, lobbyists say SBA Director Hector Barreto has been very receptive to the idea of expanding credit union access to SBA-backed lending. [email protected]