A concern over states' rights and a question about the NCUA's legal authority over the member business lending proposal during an NCUA board meetingThursday prompted a Hail Mary pass by one board member.

The monthly board meeting ended with a contentious board memberdiscussion, as proposed changes to wording in the MBL proposal fromBoard Member J. Mark McWatters prompted a tense exchange at the endof the meeting.

McWatters asked for changes to the states' rights portion insection 723.10 of the MBL proposal, which exempts federallyinsured, state chartered credit unions from complying if a statesupervisory authority provides a state commercial and MBL rule foruse by federally insured credit unions chartered in that state. Theprovision said this exemption can occur “provided the state rule atleast covers all the provisions in this part and is no lessrestrictive, upon determination by (the) NCUA.”

McWatters said he raised concerns over the wording of theprovision “over a week ago” to the Office of General Counsel andothers. Chairman Debbie Matz criticized McWatters for requestingthat the changes be made on Wednesday night at 6 p.m. and notbringing them to the board's attention earlier.

She said that once the proposal has gone to the printers and theschedule is on the docket, “That ship has sailed.”

Further, Vice Chairman Rick Metsger said he never received acopy of the possible rewording of the provision.

“Your office never shared it with me. I never had a chance tolook at it,” he said, as the all members of the board talked overone another.

Matz further criticized McWatters, stating that if he were inthe office “more than three days a month,” the staff could havediscussions on the matters McWatters brought up.

The proposed changes McWatters offered to the board would rewordthe provision to: “…provided that all the core risk managementprinciples in this part, in all material, respects and complieswith the Federal Credit Union Act.”

NASCUS President/CEO Lucy Ito said in a statement, “As adopted,the spirit of the rule permits state innovation in adopting theirown business lending rules. But the proof is in the pudding – ourconcern is that the ultimate interpretation of the rule staysconsistent with the intention expressed at the table today duringthe NCUA board's discussion.”

Additionally, McWatters asked if bankers' concerns over thelegal authority of the NCUA to make changes to the MBL rule hadbeen addressed.

Pamela Yu, NCUA Staff Attorney, told McWatters that the OGC hadadvised the board that the final MBL rule complies with theFCUA.

According to NCUA advisors, a legal analysis is forthcoming butwill not be part of the public record as it was not available forthe board meeting.

McWatters said in his final concurrence that it is not hisintent to criticize the OGC.

“It is, however, challenging for the board to act on the finalMBL rule at this time without first considering the legal analysissupporting the final rule,” he said.

During her opening remarks, Matz said the new rule begins a newera for the agency.

“This new era will be defined by principles-based regulation,not by prescriptive limits on credit unions,” she said.

The MBL rule passed by a majority vote, despite concerns raisedby McWatters. He added that the regulator's “rigid language createsyet more uncertainty and may raise the regulatory burden of statechartered credit unions. In reality, a rule touted by the NCUA asregulatory relief, may work to the contrary in the day-to-dayoperations of state chartered credit unions that engage in memberbusiness lending.”

The overall MBL rule will go into effect Jan. 1, 2017, yet thepersonal guarantee requirement will be eliminated 60 days after therule's publication in the Federal Register.

Industry organizations applauded the passage of the MBLrule.

CUNA President/CEO Jim Nussle welcomed the new rule, stating,“Expanding credit union member business lending to empower creditunions with greater flexibility and autonomy in offering commercialloans is a major victory for America's small businesses and jobcreators.”

Ito added, “Now, the emphasis turns to engaging the credit unionsystem about this new, 'principles-based' approach to commerciallending. NASCUS will be working with the state system to ensurethat state regulators and federally insured, state chartered creditunions are well-prepared to embrace this new approach.”

NAFCU President/CEO Dan Berger applauded removing the waiverprocess in the MBL proposal. In a statement, he said, “Removing thewaiver process not only eases regulatory red tape, but it alsoprovides credit unions the independence to safely and soundlyaddress the needs of their small business members. Today's actionensures that credit unions can better meet the capital andliquidity needs of our nation's small businesses, which arestruggling to find such access from other lenders.”