Banks and credit unions have renewed a long-standing fight over whether to expand the latter's business lending limit.

Sen. Mark Udall, D-Colo., is trying to attach to the Small Business Lending Fund bill an amendment that would increase the cap to 27.5% of a credit union's assets, up from 12.25%. It is unclear whether the divisive amendment will be offered to the bill that the Senate could consider this week, but its possibility is already mobilizing both sides.

In a letter to Senate Majority Leader Harry Reid, Minority Leader Mitch McConnell and Senate Banking Committee leaders, the American Bankers Association said raising the lending cap would contribute to unfair competition.

"The Udall amendment adds to an already unlevel playing field by increasing the ability of large, tax-advantaged credit unions to take small-business lending away from banks — the bread and butter of community banks across the country… ; any increase in the business lending cap will simply allow credit unions to stray further from their traditional mission," the ABA wrote on Monday.

But the National Association of Federal Credit Unions shot back on Tuesday in a letter to lawmakers that the banking industry is displaying hypocrisy in opposing the amendment and further said credit union loans are less risky than those made by banks.

"If leaders of the banking trades would have spent the last few years as concerned about safety and soundness of their own industry as they seem to be about the credit union community, perhaps the financial crisis we face today wouldn't have been near as devastating," wrote Dan Berger, NAFCU executive vice president of government affairs.

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