Updated March 2014
When Congress passed the Credit Union Membership Access Act (CUMAA) (P.L.105-219) in 1998, they put into 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" which 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 operating in the same geographic areas."
A 2011 study commissioned by the Small Business Administration's Office of Advocacy also found that bank lending was largely unaffected by changes in the credit unions' business lending, and that credit unions have the ability to offset declines in bank business lending during a recession (James A. Wilcox, The Increasing Importance of Credit Unions in Small Business Lending, Small Business Research Summary, SBA Office of Advocacy, No. 387. September, 2011).
While the recovery from the worst financial crisis since the Great Depression remains fragile, credit unions have the capital to help America's small businesses thrive. However, due to the outdated member business lending cap, their ability to help stimulate the economy by providing credit to small businesses is hampered.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 dime. In addition, it is worth noting that officials at the Treasury Department and the NCUA have expressed support for lifting the MBL cap. Several outside groups from all sides of the political spectrum have also endorsed the legislation including the Consumer Federation of America (CFA) and Americans for Tax Reform (ATR).
In February 2013, at the beginning of the 113th Congress, Reps. Ed Royce (R-CA) and Carolyn McCarthy (D-NY) reintroduced legislation - the "Credit Union Small Business Jobs Creation Act (H.R. 688) - that would lift the arbitrary member business lending cap from 12.25 to 27.5% of total assets. Led by Senator Mark Udall (D-CO), a bipartisan group of Senators introduced similar legislation (S.968) in May 2013. Under these bills, credit unions would need to meet the following criteria to be deemed eligible:
- Must be considered well capitalized [currently 7% net worth ratio]
- Must have at least 5 years of member business lending experience
- Must be at or above 80 % of the current 12.25% cap for at least 1 year prior to applying
- Must be able to demonstrate sound underwriting and servicing based on historical performance and strong leadership management
On March 13, 2014, Reps. Ed Royce (R-CA) and Jared Huffman (D-CA) introduced legislation to exempt certain residential loans from credit unions’ federal statutory cap on member business lending. The “Credit Union Residential Loan Parity Act” (H.R. 4226) would exempt loans for non-owner-occupied, one- to four-unit dwellings from credit unions’ statutory MBL cap, making it possible for credit unions to lend more to small businesses without running up against the current cap.
NAFCU has a strong history of supporting credit union member business lending and has testified before the Senate Banking and House Financial Services Committees on the importance of this issue. NAFCU would also support alternatives to a straight member business lending cap lift such as raising the minimum loan amount that would count against the member business lending cap.
You may be assured that NAFCU is committed to pursuing all legislative avenues to maximize the possibility of this issue being considered moving forward.
Member Business Lending Comment Letters
6-15-2013 NAFCU letter regarding MBL
6-6-2013 NAFCU letter to Small Business
12-6-12 Reid McConnell letter on MBL/TAG/IOLTA
12-3-12 Johnson-Shelby letter on MBL/TAG
3-14-12 Reid-McConnell If Not Now, Then When? Letter Supporting MBL
2-29-12 Member Business Lending Support Letter to President Obama
2-29-12 Boehner-Pelosi Member Business Lending Support Letter
2-29-12 Reid-McConnell Member Business Lending Support Letter
2-7-12 Boehner-Pelosi Small Business Lending Enhancement Act
2-7-12 Reid-McConnell Small Business Lending Enhancement Act
1-31-12 Graves-Velazquez Member Business Lending for Job Creation
11-30-11 Johnson-Shelby MBL for Job Growth
10-25-11 Bachus-Frank Job Creation Legislation Mark-Up
10-17-11 Landrieu-Snowe "Small Business Lending Enhancement Act of 2011"
10-6-11 Boehner-Pelosi Call for Action Letter on H.R. 1418
9-8-11 Boehner-Pelosi Letter Supporting H.R. 1418 for Job Creation
7-11-11 Boehner-Pelosi Letter Supporting H.R. 1418
6-21-11 Graves-Velazquez "Small Business Lending Enhancement Act of 2011" Support Letter
6-15-11 Reid-McConnell S. 509, Credit Union Member Business Lending Support Letter
6-15-11 Boehner-Pelosi H.R. 1481, Credit Union Member Business Lending Support Letter
4-15-11 Boehner-Pelosi H.R. 1418 Member Business Lending Support Letter
3-9-11 Reid-McConnell S.509 Member Business Lending Comment Letter
2-8-11 Ryan-Van Hollen Job Creation Comment Letter
11-16-10 Landrieu-Snowe Member Business Lending Comment Letter
9-20-10 Pelosi-Boehner H.R. 5297 Member Business Lending Comment Letter
9-14-10 Reid-McConnell H.R. 5297 Member Business Lending Comment Letter
9-7-10 SBA Administrator Mills Member Business Lending Comment Letter
9-2-10 Pelosi-Boehner Member Business Lending Comment Letter
9-2-10 Reid-McConnell Member Business Lending Comment Letter
7-29-10 Reid-McConnell Udall Member Business Lending Amendment Comment Letter
7-13-10 Reid-McConnell Udall Member Business Lending Amendment Comment Letter
6-30-10 Udall Amdt 4443 Support Comment Letter
5-17-10 Frank-Bachus Business Lending Comment Letter
3-2-10 Pelosi-Boehner Member Business Lending Comment Letter
3-1-10 Brown-DeMint Member Business Lending Comment Letter
2-24-10 Warner-Corker Resolution Fund Comment Letter
1-19-10 Reid-McConnell Member Business Lending Comment Letter