Expansion of MBL authority for all FICUs a priority for NASCUS in 2003

ARLINGTON, Va. – It’s going on five years since the member business lending rule was enacted as part of the Credit Union Membership Access Act, and NASCUS says it’s time to amend the MBL limitations to allow for increased member business lending authority and flexibility for all federally insured credit unions, including state-chartered CUs. Just as the savings and loan industry sought broader business lending authority as part of this year’s reg relief legislation – and will likely seek similar authority in next year’s reg relief bill if this year’s bill isn’t enacted, or in a broad-based banking industry bill in 2003- “shouldn’t NASCUS be seeking similar business lending relief from federal statutes for state-chartered credit unions in the next Congress?” the association’s government relations committee asked in a report they presented at a meeting held during NASCUS Annual Conference in New Orleans earlier this month. Jim Jordon, CEO, Schools Financial CU, Sacramento, Calif. and NASCUS Council Chair of the association’s Government Relations Committee stressed that understandably the association’s policy position is focused on the expansion of MBL authority for state-chartered credit unions, “but that doesn’t exclude federal credit unions.” Prior to the enactment of H.R. 1151, it was left to state regulators to decide the member business lending policy for their respective state-chartered credit unions. MBL provisions in H.R. 1151 now preempt state law. Currently though, seven states have their own MBL rules that closely resemble NCUA’s and have been approved by the agency. NASCUS is exploring four legislative policy approaches to expand FICUs’ MBL authority: 1 – change the language of the FCU Act so the current MBL limitations in the federal law only apply to federal credit unions. 2 – raise the current 12.25% MBL limit for all credit unions. 3 – change the definition of “member business loan” as contained in the FCU Act to exclude extensions of credit of less than the Freddie/Fannnie Mae conforming mortgage loan limit (currently $300,000) and leave the current 12.25% limit unchanged (the current federal statute only exempts extensions of credit up to $50,000 from the MBL definition.) 4 – exclude loan participations purchased by a credit union from the MBL limitation and allow them to be regulated as a type of investment. Of the four approaches, Jordon said the first would be the most difficult to achieve and the least likely NASCUS will pursue. “We don’t want to separate ourselves from federal credit unions,” said Jordon. NASCUS’ Jonathan Lindley, vice president, national advocacy agreed, saying, “It would be difficult to get consensus from the credit union community on this, and there may be some people who would see this as giving an advantage to state-chartered credit unions.” The “most likely” approach, he said, is the second one. Lindley stressed that, “It is important that the credit union community speaks with one voice on this issue. There’s no such thing as a NASCUS agenda that Congress will pass. The entire credit union industry needs to go to Congress and tell them that either they support expanding member business lending authority for both savings and loans and credit unions or they support it for neither. They can’t expand the powers of one and not the other. ” At the end of this year, Lindley will report to the NASCUS leadership on his discussions with the other credit union trades on business lending relief and the status of any consensus among them on the issue. “ We have to start now to build a consensus,” said Lindley. The association got a headstart on this when it invited John McKechnie, senior vp of government affairs for CUNA to its annual conference to brief him on the MBL relief options NASCUS was exploring. McKechnie told Credit Union Times that, “CUNA wholeheartedly agrees credit unions need relief from the MBL cap and more flexibility to do small business lending, and the association is interested in trying to find a way to do that.” That’s why, he said, CUNA has been having discussions with the Small Business Administration, Congress and NCUA. The association also held a small business lending summit in April. “The common refrain CUNA is hearing from its membership is that the legal restraints on credit unions’ member business lending activity are not helpful to either federal or state-chartered credit unions. CUNA, like NASCUS, is interested in helping credit unions have better flexibility and access to make member business loans. There are a wide variety of options available to credit unions, both legislative and regulatory, to make policy changes.” -