Removing Barriers Blog

ICBA’s Opposition to MBL Rule Misses the Point: Small businesses need more access to credit
Posted June 23, 2015 by CUNA Advocacy

At its meeting last Thursday, the National Credit Union Administration (NCUA) proposed a rule that would removes several barriers that keep credit unions from more fully serving their small business members, putting more decisions in the hands of credit unions.  It surprised no one that shortly after the proposal was announced, the Independent Community Bankers of America (ICBA) released a statement this week in opposition to the rule.

ICBA said that the plan to expand business-lending authority for credit unions would “widen federal, state and local budget deficits and increase risks to the financial system while doing little to improve access to credit.”

ICBA further claimed that credit unions have a cap on member business lending in order “to limit risky lending and to restrict these tax-exempt institutions to their fundamental mandate of serving people of modest means.”

These claims are familiar yet fundamentally not true.

In a communication to Capitol Hill combatting similar claims by banks just a week ago, CUNA CEO Jim Nussle dispelled rumors of why the cap exists and explained that credit union business lending fulfills the credit union mission:

“The unfortunate fact is that Congress imposed this cap because in 1998 the bankers successfully took advantage of a legislative situation in which the credit union system needed a new law enacted. The cap is arbitrary; it has a deleterious effect on small business lending; and it is wholly inconsistent with the credit union mission to create sources of credit for provident and productive purposes: without question small business lending represents lending for productive purposes.”

Credit union business lending precisely fulfills the mandate from Congress. Furthermore, credit unions have been a source of financing for small businesses when banks pulled back. The adjacent chart illustrates small business loan growth at credit unions and banks since the beginning of the financial crisis.JUNENR It is clear that credit unions are an important source of liquidity to small businesses, particularly during crises. Legislation and rule makings which expand credit unions’ ability to lend to small businesses would not restrict access to credit as ICBA claims, but instead it would expand access to credit. Credit unions serve a vital role in their communities and would be better able to serve small businesses with expanded authority on small business lending.