WASHINGTON — A bill introduced in Congress last week would expand the powers of credit union to make member business loans by raising the cap on MBLs to 25% of assets, and excluding any loans less than $250,000; all faith-based loans and certain loans made in underserved areas from the cap.
The provisions, sponsored by congressional champion Paul Kanjorski of Pennsylvania, have been proposed in recent congresses unsuccessfully. "Given the current environment, this creates an opportunity for credit unions," said Brad Thaler, senior for lobbyist for NAFCU, which has lobbied with CUNA for an ease on MBL restrictions since they were introduced in 1998 as part of HR 1151, the CU Membership Access Act.
The cap, 12.25% of assets, is generally seen as an impediment to credit union business lending.
"During this time of economic uncertainty, many businesses, especially small businesses, are facing extreme difficulties accessing credit in order to create and maintain jobs," said Kanjorski, the Democrat who sponsored HR 1151, as well as the recent bill creating the Corporate CU Stabilization Fund. "H.R. 3380 aims to fix this problem by using credit unions as a resource to boost lending to small businesses. By permitting credit unions to expand their lending to small businesses, we can work to turn around our difficult financial situation at no cost to taxpayers."
Kanjorski noted how other lenders have retrenched during the economic crisis. America's credit unions could help fill this void in small business lending, but statutory limitations have so far forced many of them to sit on the sidelines," he said.
"Raising the member business lending cap will spur not only small business growth, but job creation for Americans," said Jim McCormack, president of the Pennsylvania CU Association, who has been working with Kanjorski on the bill.
CUNA CEO Dan Mica estimated that credit unions could lend up to $10 billion in the first year if the current lending cap was eliminated, helping small business and spurring economic growth.
The bill would also exclude from the calculation the MBL cap business loans made in underserved urban and rural communities. Loans made to businesses operating on a nationwide basis would not qualify for exemption from the cap, but member business loans made to locally-owned franchises of businesses operating on a nationwide basis would meet the criteria for an exemption, if in an underserved area.
Several of the provisions were in previous bills, including the so-called CU Regulatory Improvements Act, or CURIA and regulatory relief legislation, but were either stripped out or were never voted.
Sen. Charles Schumer, D-N.Y., has indicated he will introduce a Senate bill to also lift the MBL cap.
