As Congress debates highly controversial legislation to more than double the cap on tax-exempt credit union member business loans, or MBL, the National Credit Union Administration recently announced more than 1,000 credit unions are eligible for a total exemption from the cap as "low-income credit unions."

Their regulator has achieved for them by administrative fiat what they have been unable to accomplish in Congress. Approximately 1,100 credit unions are already designated as "low-income" and are therefore exempt from the MBL cap. Low-income credit unions are also able to accept nonmember deposits and access supplemental capital, flouting the limitations of the tax-exempt charter. Do credit unions, already granted a tax subsidy to serve people of modest means, really need additional inducements to serve low-income individuals?

The low-income loophole, together with MBL exemptions for Small Business Administration loans up to $5.5 million, nonmember business loans and loan participations purchased from other credit unions, loans under $50,000 and any loan secured by the borrower’s primary residence, makes the MBL cap virtually meaningless. The NCUA’s latest announcement, potentially doubling the size of the low-income loophole, ignores the cap outright and the will of Congress.

The MBL cap was not set arbitrarily. Its purpose, as described by the Senate Banking Committee, is "to ensure that credit unions continue to fulfill their specified mission of meeting the credit and savings needs of consumers, especially persons of modest means, through an emphasis on consumer rather than business loans." With the NCUA’s sweeping expansion of MBL authority, which is sure to harm community banks and significantly increase risk to the National Credit Union Share Insurance Fund, why is MBL legislation needed at all?

Jeff Gerhart is chairman of the Independent Community Bankers of America and chairman, president and CEO of Bank of Newman Grove in Nebraska.