Member Business Lending

Updated February, 2010

When Congressed passed the Credit Union Membership Access Act (CUMAA) (P.L.105-219) in 1998, they put in place restrictions on the ability of credit unions to offer member business loans.    Congress codified the definition of a member business loan and limited a credit union’s member business lending to the lesser of either 1.75 times the net worth of a well-capitalized credit union or 12.25 percent of total assets.   Also pursuant to section 203 of CUMAA Congress mandated that the Treasury Department study the issue of credit unions and member business lending.

In January 2001, the Treasury Department released the study, “Credit Union Member Business Lending” and summarized the following:

Business lending is a niche market for credit unions. Overall, credit unions are not a threat to the viability and profitability of other insured depository institutions. In certain instances, however, credit unions that engage in member business lending may be an important source of competition for small banks and thrifts operation in the same geographic areas.

In the current economic crisis, many credit unions have capital to help America’s small businesses.   However, due to the outdated member business lending cap, their ability to help stimulate the economy by providing credit to small businesses is hampered. Removing or modifying the credit union member business lending cap would help provide economic stimulus without costing the taxpayer a cent.

In the Senate, Mark Udall of Colorado recently introduced legislation, the Small Business Lending Enhancement Act (S. 2919) that would remove the Member Business Lending cap.   Congressmen Paul Kanjorski (PA) and Ed Royce (CA) have introduced similar legislation, the Promoting Lending to America’s Small Business Act (H.R. 3380), in the House.   Both bills would:

·                     Increase the MBL cap to 25% of total assets

·                     Increase the minimum business loan subject to the cap from $50,000 to $250,000

Leaders in the Senate are expected to announce the details of a jobs package in early 2010, and NAFCU is making a concerted effort to ensure that a provision to raise the credit union member business lending cap is taken into consideration as the legislation is crafted.   NAFCU supports S. 2919 and H.R. 3380, and urges Members of the House and Senate to support increasing the outdated MBL cap.