MADISON, Wis. (4/25/12)--Credit unions continue to reap media attention for their efforts to increase member business lending (MBL) authority.
A pending Senate bill (S. 2231), like its counterpart introduced in the House (H.R. 1418), would increase the MBL cap to 27.5% of a credit union's assets, up from 12.25%, under certain conditions.
Within the first year of enactment, the increased MBL authority would help to inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA estimates show.
Senate leadership remains committed to a floor vote on the credit union legislation to increase the member business lending (MBL) cap, a pledge reiterated Monday by Sen. Charles Schumer (D-N.Y.), the third-ranking Democrat in the Senate.
An article in the April 22 edition of The Wichita Eagle described how two Kansas credit unions, reaching current MBL thresholds, may have to start saying 'no' to small businesses seeking loans because of the current 1225% cap.
"Our small business members have been hearing the message we may have to say 'No,' because this arbitrary cap is upon us," Garth Strand, CEO of Hutchinson (Kan.) CU, told the Eagle. "Short of being out of compliance and being out of regulation, we don't have any choice but to comply."
Strand stressed that increased business lending should not be framed as a banks-versus-credit union issue.
"It's really a small-business issue," Strand said. "Our economy is struggling, and we need as many jobs as we can get. We should be looking for solutions and not roadblocks."
In the same article, Bob Corwin, CEO of the state's largest credit union at $820million in assets, Wichita-based Meritrust, said member business loans account for about 5% of its asserts right now.
"We think, just from the principle of the thing, credit unions should not be restricted in any kind of lending without any real rationale or justification for it," Corwin told the paper.
Haley DaVee, vice president of governmental and public affairs for the Kansas Credit Union Association, noted in the article that an MBL cap increase would not mean an immediate explosion in business lending by credit unions. She noted the bill would lift the cap only for credit unions that:
- Have five years of experience making member business loans.
- Employ loan officers on staff with at least two years of commercial lending experience.
- Maintain a member business loan portfolio that totals 80% of the 12.25% cap for at least four quarters preceding the credit union's request to increase its lending cap.
Hutchinson Strand concluded the article expressing hopes the bill passes because he doesn't want to be forced to turn away from his small business members' needs: "We are trying to find a solution for them, and we are stuck," he said.
The current MBL cap also prevents some credit unions from entering the business lending market, Scott Earl, president/CEO of Mountain West Credit Union Association told the Colorado Springs Business Journal (April 23). "It was not a big enough part of their lending portfolio to hire experts in small business lending," Earl said. "But, with a higher cap, credit unions that had been reluctant to get into small business lending may embrace it.
Mountain West Credit Union Association represents credit union in Arizona, Colorado and Wyoming.
"That is where we could see the biggest change happening," Earl said. "Most (credit unions) would find it appealing --if it fits into their business plan, they would think about this."
In an article in Finance & Commerce, Patrick Pierce, CEO at the City and County CU in St. Paul, stressed that the MBL legislation would improve the economy at no cost to tax payers.
"Congress wants to see the economy grow, and we want to get more loans out to businesses that will put people back to work," said Pierce said. "If they let credit unions do what we do well, we'll help create jobs, and it's not going to cost the government a dime."
Ryan Donovan, senior vice president of legislative affairs for the Credit Union National Association, explained in the Finance & Commerce article that credit unions increased their business lending efforts during the recession, while commercial lending at banks declined.
Data from regulators showed business lending at Minnesota credit unions grew between 1.1 % and 11.8% between 2007 and 2011. Meanwhile, business lending (excluding commercial real estate) fell 11.3% at Minnesota-chartered banks in the 2009- 2011 period.
In a April 22 NewsOK article, Gary Jones, president of Credit Union Association of Oklahoma, said allowing credit unions to make more business loans would create more jobs and enhance the U.S. economy.
"The members of the credit unions have not been able to get money from the commercial banks because generally they're not of a size that they (the banks) are even interested in," Jones said. "Our members have come to us and said we'd like to have some money for our business, and there is an artificial cap on what we can loan that we know is restricting our ability to respond to these requests from our members."
Bill Hammond, president/CEO of the Texas Association of Business contributed an opinion editorial to the Houston Chronicle in favor of the legislation. Hammond also noted that business lending at banks has plummeted in recent years.
"But there has been one bright spot in the tough lending picture, and that is credit unions," Hammond wrote.
"Credit unions have been not-for-profit for more than 100 years and still have less than 5% of the business-lending market," he added. "It's unlikely that raising the cap will do anything other than provide more small business owners the chance to succeed while filling gaps in the marketplace."
Mike Beall, Missouri Credit Union Association president/CEO, contributed a letter to the editor to recent edition of the Springfield Business Journal. Beall described how the MBL legislation would create jobs and help small businesses in Missouri.
"It's time to do all we can to raise capital safely and soundly for small businesses," Beall wrote in his letter.