WASHINGTON – Leading bankers will tell Congress this morning that credit unions’ efforts to increase the limit on member business loans should be considered within the context of the federal tax exemption, which they will say gives credit unions an advantage over banks in making loans.
“What bothers bankers is they [credit unions] appear to want to have a charter like banks and not pay taxes,” said Floyd Stoner, chief lobbyist for the American Bankers Association, which is scheduled to testify this afternoon at the House Financial Services Committee’s hearing on raising the MBL limit, a goal sought by credit unions for more than a decade.
The ABA was among the banking groups that succeeded in getting the MBL cap enacted into law as part of HR 1151, the 1998 CU Membership Access Act. Stoner said that was because before the Act credit unions didn’t do much business lending. The ABA and other banking lobbies have succeeded in blocking credit unions’ efforts to get the cap raised since then.
He said the bankers’ main objection to raising the limit is the advantage the tax exemption provides. “It’s a pricing advantage,” Stoner told Credit Union Journal yesterday.
Credit union representatives at this afternoon’s hearing will testify that raising the limit on business loans will provide more capital for small businesses and create jobs without costing taxpayers any money. But the ABA’s Stoner said those loans would be made otherwise by banks paying taxes – if there were a demand for the loans. He said if there was demand for those loans the banks would already being making them.
Stoner also disputed the assertion by the credit union lobby that dozens of credit unions – close to 175 – are bumping up against the 12.25% of assets cap on MBLs. “By our estimation very few credit unions are close to the cap,” he said. “We believe 29 credit unions are within 1% of the cap.”
The ABA’s witness, Albert Kelley, Jr., president of SpiritBank in Bristow, Okla., and a witness for the Independent Community Bankers Association, Sal Marranaca, president of Cattaraugus County Bank in Little Valley, N.Y., will testify at today’s hearing with NCUA Chairman Debbie Matz, Jeff York, president of Coasthills FCU who is speaking for CUNA, and Gary Grinnell, president of Corning CU appearing for NAFCU, all of whom will press for an increase in the MBL cap.
