Banks slam credit unions' 'opportunistic' grab for commercial loan relief

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Bank trade associations from all 50 states called on House lawmakers Wednesday to reject measures that would temporarily lift the credit union member business lending cap on any loans related to helping small businesses weather the economic fallout from the coronavirus.

Rep. Brad Sherman, D-Calif., introduced legislation late last week that would ease the MBL cap for credit unions, but it’s unclear whether the bill will gain any traction when lawmakers return to Washington, currently slated for early May at the soonest. The proposed legislation would exempt commercial loans credit unions make to help with the coronavirus recovery from the 12.25% MBL cap.

Calling credit unions’ requests “opportunistic and unnecessary,” bank groups said the movement’s latest push for MBL relief “is entirely unrelated to the current crisis” and noted that any loans the industry makes through the Paycheck Protection Program won’t count against the cap.

“Currently only 30 credit unions subject to the cap are at risk of hitting it; that is just five-tenths of 1% of the industry as a whole. Thus, greater than 99% of credit unions nationwide will not be impeded by the cap in meeting the needs of a robust economic recovery,” the bank groups wrote in a letter addressed to House Speaker Nancy Pelosi and Minority Leader Kevin McCarthy.

The letter also points out that a variety of changes have already taken place in the last four years that “make additional changes to the business-lending cap unnecessary.” Along with a 2016 rule from the National Credit Union Administration that allowed CUs to buy and sell loan participations to one another, the 2018 regulatory relief act, S. 2155, exempted some rental properties from the cap.

The banks noted that the Credit Union National Association suggested after that that the industry could “officially declare victory” in a two-decade battle on the issue, since those two changes “will provide more cap space than we had been seeking” in previous legislation that would have doubled the limit.

“We are proud of the joint work banks and credit unions have done together during this crisis, and both industries appreciate the important role we all play to keep liquidity flowing to communities,” the banks wrote. “However, efforts to increase credit union powers in the name of a crisis, including increases to the member business loan limit, are disappointing and distract from important policy priorities that are actually needed to support our small businesses.”

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Commercial lending MBL Coronavirus Law and regulation