Farmakides to Congress: MBL cap must be lifted
Dec. 5, 2013 – John Farmakides, president and CEO of Lafayette FCU in Kensington, Md., will testify today on behalf of NAFCU at a House Small Business subcommittee hearing, focusing on how the member business lending cap has hampered his and other credit unions’ ability to offer small-business loans.
The Subcommittee on Economic Growth, Tax and Capital Access hearing is titled “Where Are We Now? Examining the Post-Recession Small Business Lending Environment.” Farmakides will testify alongside witnesses from the Federal Reserve Bank of Cleveland, Dun and Bradstreet Credibility Corp. of Malibu, Calif., the Lending Club of San Francisco and the S.C. Bankers Association of Columbia, S.C.
“While our credit union proudly meets our local communities’ lending needs, the arbitrary member business lending cap is now having a direct negative impact on how well we can serve our members,” Farmakides says in his testimony. “Many small businesses come to us looking for large lines of credit to help them meet cyclical challenges. However, any line of credit above $50,000 counts toward our member business lending cap, even if the funds are not extended. This fact hampers our ability to meet the needs of many of our small-business members.”
Farmakides says the very existence of an MBL cap deters credit unions from starting an MBL portfolio because they know that at some point, they will have to turn members away. He emphasized the credit union industry’s history of supporting small businesses, including data from the Small Business Administration’s Office of Advocacy showing that credit union business lending increased both before and during the financial crisis. It shows banks decreased their lending during the same period.
Farmakides particularly urges lawmakers to support H.R. 688, the “Credit Union Small Business Jobs Creation Act,” introduced by Reps. Ed Royce, R-Calif., and Carolyn McCarthy, D-N.Y., to raise the current MBL limit for qualified credit unions from 12.25 percent of total assets to 27.5 percent.
NAFCU has a strong history of supporting credit union member business lending. It has testified before the Senate Banking and House Financial Services committees on the need to expand credit unions’ MBL authority to support member small-businesses’ needs for growth and hiring.