After a 12-year wait-not quite the 102 years that Chicago Cubsfans have endured but a frustrating time nonetheless-credit unionscould get additional power to make business loans.
Bipartisan groups of lawmakers in both the House and Senate aretrying to persuade colleagues who are crafting a jobs creation billto include provisions that would raise the MBL cap from 12.25% ofassets to 25%.
Credit unions are “ready to expand their business lending,” andlifting the cap would result in credit unions expanding theirbusiness lending by $10 billion in the first year and create 10,000new jobs, House Financial Services Committee member Brad Sherman(D-Calif.) wrote House Education Committee Chairman George Miller(D-Calif.).
Reps. Paul Kanjorski (D-Pa.) and Ed Royce (R-Calif.) haveintroduced legislation allowing credit unions to make businessloans totaling up to 25% of their assets, an increase from thecurrent cap of 12.25%. It would also raise the minimum dollaramount for counting a loan toward the MBL ceiling from the current$50,000 to $250,000 and exempt from the ceiling member businessloans made to qualifying underserved areas and to nonprofitreligious organizations. It also gives the NCUA additionalflexibility to allow less well-capitalized credit unions to makemember business loans.
A measure on member business lending has been introduced in theSenate by Sen. Mark Udall (D-Colo.) and a bipartisan group ofcolleagues. The Senate measure also raises the cap from 12.25% to25%. But unlike the House version, it wouldn't give the NCUAflexibility on MBLs. The Senate bill mandates that the regulatoryagency give Congress semiannual reports on business lending and thehealth of the credit unions that do that kind of lending. TheSenate measure does not exempt from the ceiling member businessloans made to qualifying underserved areas and to nonprofitreligious organizations.
While lobbyists for CUNA and NAFCU have said they are cautiouslyoptimistic that they could get the cap increase-a cap imposed inthe landmark credit union legislation passed in 1998-such an effortwould set up another fight between banks and credit unions, whichcongressional leaders often like to avoid, especially in electionyears.
Some of the credit unions that have recently faced difficultieshave been tripped up by member business lending.
Utah-based HeritageWest Credit Union, which was merged withChartway Federal Credit Union after the NCUA liquidatedHeritageWest, lost $15.9 million during the first nine months of2009. In the third quarter of 2009, there was a 525% increase inMBL charge-offs and a 53% decline in the value of its memberbusiness lending.
NCUA Chairman Debbie Matz has supported raising the cap and hastold the Treasury Department that the NCUA has “reasonableregulatory standards.”
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