Congress should lift the member business lending cap for credit unions, John Farmakides, president/CEO of the $364 million Lafayette Federal Credit Union in Kensington, Md., said at a hearing Thursday on Capitol Hill.
“Just in the last year, we’ve been able to assist very small, traditional companies, such as a specialty bakery with a single owner. At the same time, we have made loans to several consulting firms related to government contracting in addition to a trucking delivery service as well as an innovative solar energy compliance company,” Farmakides said in his testimony, presented on behalf of NAFCU to the House Subcommittee on Economic Growth, Tax and Capital Access on Thursday.
“We urge members of the subcommittee to help credit unions by supporting corrective legislation to modernize the cap,” he added.
The Credit Union Small Business Jobs Creation Act, H.R. 688, would increase the cap from 12.25% of total assets to 27.5%.
That bill was introduced in February. A Senate version was proposed in May.
Farmakides suggested an alternative to the bill’s approach which would include raising the “outdated definition of an MBL from last century’s $50,000 to a new 21st century standard of $250,000, with an indexing of inflation to prevent future erosion.”
Farmakides said the current lending cap has prevented Lafayette from offering the same services from before the financial crisis.
“While our credit union proudly meets our local community’s lending needs, the arbitrary member business lending cap is now having a direct negative impact on how well we can serve our members,” said his testimony.
“Many small businesses come to us looking for large lines of credit to help them meet cyclical challenges. However, any line of credit above $50,000 counts toward our member business lending cap, even if the funds are not extended. This fact hampers our ability to meet the needs of many of our small-business members,” he said.