WASHINGTON (4/19/13)--Noting that credit unions often face greater business lending demand from their members in the wake of natural and other disasters, the Credit Union National Association has thrown its support behind new legislation that would give credit unions more flexibility in making those loans to aid in disaster recovery.
The bill (H.R. 1646), which was introduced by Rep. Carolyn Maloney (D-N.Y.) on Thursday afternoon, would exempt disaster loans made by credit unions from the 12.25%-of-assets member business lending (MBL) cap.
CUNA President/CEO Bill Cheney said Maloney's bill "will enable credit unions to fulfill their mission to their members in times of greatest need."
Because they are not-for-profit cooperatives, credit unions operate with a different incentive structure than banks, tending to be more risk-averse, the letter explained. "This does not translate into reduced credit availability in times of crisis; rather, it results in a counter-cyclical lending phenomenon that keeps credit unions in the market when other lenders pull back," Cheney wrote.
While CUNA supports the bill, and encouraged other House members to back it, Cheney said "the legislation is made necessary not because credit unions need encouragement to respond to their members affected by disasters, but because Congress imposed a statutory cap on credit union business lending in 1998 at the behest of the banking industry."
A more complete way to enable credit unions to serve fully their small business members would be to permit well-capitalized credit unions with significant business lending experience operating near the member business lending cap the opportunity to apply to NCUA for permission to expand business lending up to 27.5% of their total assets, Cheney wrote.
Rep. Ed Royce's (R-Calif.) bill, the Credit Union Small Business Jobs Creation Act (H.R. 688), would increase the MBL cap to 27.5% of assets, from the current 12.25%-of-assets level. Doing so would generate $14.5 billion available for MBLs--and increase jobs by 158,000 in the first year without costing the taxpayer, according to CUNA statistics. Royce's MBL bill has 89 co-sponsors.