It's Time to Expand Credit Unions' Member Business Lending: If Not Now, When?

Today, Congress is still reviewing how to help create jobs and jumpstart the nation's fragile economic recovery.

The nation's credit unions and their nearly 94 million members want to know: If not now, then when will the Congress get serious about real efforts to create jobs and improve access to credit for America's Main Street businesses? The bipartisan Small Business Lending Enhancement Act remains the best untried option to help our nation's main-street businesses create jobs and it's incomprehensible that Congress may act on yet another "jobs" bill without considering this legislation.

Recently, legislation was put forward by Senators Mark Udall (D-CO) and Olympia Snowe (R-ME) in the Senate (S. 509) and Representatives Ed Royce (R-CA) and Carolyn McCarthy (D-NY) in the House (H.R. 1418) that would raise the arbitrary member business lending cap credit unions currently face. Restricting credit unions on the amount of business lending they can facilitate is counterproductive to job creation and should be addressed immediately. he Treasury Department and the National Credit Union Administration (NCUA) have signed-off on this common sense proposal that would create jobs without spending a single dime of taxpayer funds. This legislation could spur over $13 billion in new lending and create over 140,000 new jobs in the first year alone at no cost to taxpayers.

Raising the credit union member business lending cap is a win-win for credit unions, small business and our nation's economy. Throughout our nation's financial crisis, credit unions have continued to be one of Main Street's most reliable financial resources. In fact, 2011 data underscores the value of credit unions in today's financial landscape. Credit union membership growth more than doubled from 2010. Lending also continued to grow, with total loans increasing 1.2 percent to $571.5 billion from $564.7 billion in 2010. Specifically, business lending rose by 5.2 percent over the previous year. Credit unions would like to do more but they are hamstrung by this arbitrary lending cap.

Lifting the member business lending cap should be coupled with any other job creation efforts considered in Congress. Anything less represents another missed opportunity to maximize the availability of credit to American small businesses and help our economy recover. Just as our economy is beginning to show signs of an upswing and the stock market is on a rally, it behooves Congress to consider this no-cost option.

If not now, then when?

 

Comments

[Brian McLaughlin]

12:03 PM on 03/30/2012

Fred, I agree wholeheartedly with you on the legislation, but facts would seem to indicated that credit unions have much room to grow. Of the 725 CUs with assets over $250 million, 121 reported no business loans as of September 30, 2011. Of the remaining 604 CUs 176 had less than 1% invested in business loans and another 216 had less than 5%. However, 156 exceed the current cap of 12.25%. This group as a whole has only 3.87% of its aggregate total assets invested in business loans.

Of the 100 largest CUs, all with assets in excess of $1.5 billion 91 have some business banking. 27 had less than 1% invested in business loans and another 30 had less than 5%. But only 1 is currently exceeding the cap. This group as a whole has only 3.01% of its aggregate total assets invested in business loans.

Though clearly some CUs are limited by the current cap, as a whole there remains a great deal of opportunity for CUs to identify and pursue MBL activity. While it is undoubtedly true that that it is only recently that more CUs have moved into business activity, there remains a tremendous opportunity even within the present limitations.

[formontoya]

08:24 AM on 03/16/2012

Do that and the Credit Union you love will turn into the big bank you hate.

[Jason Clarke]

09:26 AM on 03/16/2012

@formontoya - On what are you basing this assumption? In order to exercise expanded member business lending powers credit unions will have to meet stringent requirements from the NCUA in order to maintain the safety and soundness not only of the individual credit union requesting the increase, but also of the credit union system as a whole. In addition, although the cap is arbitrary and could be removed entirely, credit unions are asking Congress to consider raising it from the current very low 12.25% of assets to 27.5%. Credit unions have been prudently lending to businesses in the communities they serve for decades, and this requested increase is hardly a headlong rush into new territory. We are asking to be allowed to help infuse much needed capital into our communities. This will create jobs, support small businesses, and improve competition for financial services - all at no cost to the taxpayers. Some credit unions may grow larger as a result. That means they are helping more people, strengthening their communities by offering low-cost, high-quality financial products and services. Our request is not an attempt to abandon our core mission, but rather to expand our co-operative, member-based service to those in our communities that need it most.

[formontoya]

12:03 PM on 03/16/2012

Do you mean similar to how the banks are supposed to operate? That's worked out well so far...

[frank1946]

11:56 PM on 03/15/2012

Banks hate competition.

Always have, always will !

Credit Unions deserve new business customers, NOW !