Member Business Lending

Issue Activity

ICBA Sues NCUA Over MBL Rule

On September 7, 2016, the Independent Community Bankers of America (ICBA) filed a lawsuit against the National Credit Union Administration (NCUA) challenging the agency's member business lending rule. ICBA's complaint alleges that NCUA violated the Administrative Procedure Act by carving out new commercial lending exemptions not expressly authorized by the Federal Credit Union Act. NAFCU will continue to advocate for implementation of the rule which will ease regulatory burdens and allow credit unions to safely and soundly address the needs of their small-business members.

On January 24, 2017, the United States District Court for the Eastern District of Virginia issued a decision granting the dismissal of the ICBA's lawsuit. The Court dismissed the lawsuit on procedural grounds, noting that the suit was untimely and ICBA lacked standing because it could not show an impending harm to its members as a result of the MBL rule. Aside from these procedural defects, the Court opined that the MBL rule would still pass muster under federal law.

NCUA Amends MBL & Commercial Lending Rule

On February 19, 2016, the NCUA Board unanimously approved a final member business lending rule that amends Part 723 of NCUA's Rules and Regulations regarding the ability of federally-insured credit unions to make Member Business Loans (MBLs). The majority of the rule is effective January 1, 2017, while the personal guarantee requirement was eliminated in May 2016.

Download NAFCU's Final Regulation summary and full text of the rule (member-only; login required).

The rule removes the prescriptive underwriting criteria and personal guarantee requirements of the current regulation, thereby eliminating the current waiver process. Instead, the rule allows credit unions to implement a principle-based risk management policy related to its commercial and business lending activities. Addressed as part of NCUA's regulatory modernization initiative, the final rule:

  • gives credit union loan officers the ability, under certain circumstances, to not require a personal guarantee;
  • replaces explicit loan-to-value limits with the principle of appropriate collateral and eliminating the need for a waiver;
  • lifts limits on construction and development loans;
  • exempts credit unions with assets under $250 million and small commercial loan portfolios from certain requirements; and
  • affirms that non-member loan participations do not count against the statutory MBL cap.

This rule comprehensively overhauls the way that NCUA approaches commercial lending, from both a regulatory and supervisory perspective. Currently, Part 723 considers commercial lending as synonymous with the member business lending definition under the Federal Credit Union Act (FCU Act). The final rule, however, will expand Part 723's scope to apply to commercial loans as newly defined under the proposal. The rule will also delineate which loans are subject to the statutory MBL cap and those which are subject to certain safety and soundness policy and infrastructure requirements. 

Read NAFCU's comment letter on Member Business Lending.

Recent MBL Legislative Advocacy for Credit Unions

On January 10, 2017, Representatives Ed Royce (R-CA), Jared Huffman (D-CA), Don Young (R-AK) and Peter DeFazio (D-OR) reintroduced the Credit Union Residential Loan Parity Act (H.R. 389), which would exempt certain residential loans from credit unions' federal statutory cap on member business lending. The bill 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. In April 2017, Senator Ron Wyden (D-OR) introduced legislation similar to H.R. 389 that would also exclude loans for the purchase of one-to-four unit, non-owner-occupied buildings from the MBL cap.

In the 115th Congress, NAFCU will continue to pursue support and passage of legislation to increase or remove the arbitrary business lending cap that currently applies to credit unions. MBL related measures introduced  in the 114th Congress included:

  • H.R. 1133: Introduced March 2, 2015 by Chairman of the House Veterans Affairs Committee, Rep. Jeff Miller (R-FL). The bill would exempt loans made to "veterans" (including anyone who served on active duty, and who was discharged or released under conditions other than dishonorable) from the member business lending (MBL) cap. This legislation would help to ensure that veterans have more resources to aid their success after their service.
  • The "Credit Union Small Business Jobs Creation Act" (H.R. 1188): Re-introduced on March 2, 2015 by Reps. Ed Royce (R-CA) and Greg Meeks (D-NY). The bill would lift the arbitrary member business lending cap from 12.25 to 27.5% of total assets. Under the bill, 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 September 10, 2015, Senators Rand Paul, Sheldon Whitehouse and Jack Reed introduced legislation (S. 2028) similar to H.R. 1188 that would also lift the member business lending cap from 12.25% to 27.5% of total assets.

NAFCU's Position on Member Business Lending

While recovery from the financial crisis 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 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).

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. 

We are committed to pursuing all legislative avenues to maximize the possibility of this issue being considered moving forward. 

Issue Background Information

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.

A January 2001 study by the Treasury Department and a 2011 study commissioned by the Small Business Administration's Office of Advocacy, both 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.

Recent Media Outreach

NAFCU has stayed at the forefront of this issue and continued to champion credit unions in major media nationwide.

Credit Unions Kick Lending Up a Notch (TheMReport, June 6, 2016)

 More House Leaders Support Legislation to Raise MBL Cap (Credit Union Journal, May 24, 2016)

CFPB OKs Rule for Mortgage Lenders in Rural, Underserved Areas (Credit Union Journal, March 23, 2016)

The Case for Raising the Credit Union Lending Cap (Forbes, September 16, 2015)

SBA Calls for More CUs: Onsite at NAFCU Caucus (Credit Union Times, September 15, 2015)

MBL Legislation Introduced In The Senate (, September 10, 2015)

NAFCU Applauds Sens. Paul, Whitehouse Introduction of Bill to Raise Member Business Lending Cap (September 10, 2015)

Bankers Vow 'Vigorous' Opposition to Expanded MBL; NAFCU Responds (, June 23, 2015)

NAFCU Statement In Response ICBA's MBL Attack (June 22, 2015) 

Trade Associations Weigh In On MBL Proposal (, June 18, 2015)

NCUA Proposes Drastic MBL Regulation Changes (Credit Union Times, June 18, 2015)

NAFCU Statement on NCUA Board Proposal To Eliminate MBL Waiver Process (June 18, 2015) 

NAFCU Applauds Reps. Royce and Huffman Introduction of H.R. 1422, the "Credit Union Residential Loan Parity Act" (March 18, 2015)

Credit unions mean business (The Hill, March 11, 2015) 

MBL Relief Bill Introduced (Again) in Congress (, March 2, 2015)

MBL Bill Reintroduced (Credit Union Times, March 2, 2015)

NAFCU Hails Rep. Miller's Reintroduction of Legislation Excluding Veterans' Loans From MBL Cap (March 2, 2015)  

NAFCU Applauds Reps. Royce, Meeks Reintroduction of the 'Credit Union Small Business Jobs Creation Act of 2015' (March 2, 2015)  

NAFCU, SBA Agreement Aims to Expand Small Biz Loans (, February 26, 2015) 

Small Business Administration and National Association of Federal Credit Unions Join Forces to Solve the Entrepreneurial Credit Crunch (Yahoo! News, February 25, 2015) 

Small Business Administration and National Association of Federal Credit Unions Join Forces to Solve the Entrepreneurial Credit Crunch (MarketWatch, February  25, 2015) 

SBA Creates Another CU Alliance (Credit Union Times, February 25, 2015)  

SBA, NAFCU Signs MOU To Encourage Loans To Entrepreneurs (Credit Union Journal, February 25, 2015) 

Recent Policy Letters

Read recent letters from NAFCU to members of Congress on member business lending issues that affect credit unions and their members.

4-25-17 NAFCU Letter on Tomorrow's Hearing on the Financial CHOICE Act

1-24-17 NAFCU Letter on NCUA's Member Business Lending Rule

9-7-16 NAFCU Letter on NCUA's MBL Rule

4-13-16 NAFCU Letter on Removing Barriers Preventing Credit Unions from Serving More Small Businesses

2-18-2016 NAFCU Letter on NCUA's Final Member Business Lending Rule

2-3-2016 NAFCU Letter on Removing Barriers Preventing Credit Unions from Serving More Small Businesses

2-1-2016 NAFCU Letter on Tomorrow's House Ways and Means Hearing entitled "Reaching America's Potential: Delivering Growth and Opportunity for All Americans"

11-16-2015 NAFCU Letter on Tomorrow's Hearing, "National Entrepreneurs' Day"

9-11-2015 NAFCU Letter in Support of S. 2028, the "Small Business Lending Enhancement Act of 2015"

5-18-2015 NAFCU Letter on How Credit Unions are an Important Source of Capital Access for Small Businesses

3-2-2015 NAFCU Letter in Support of the Credit Union Small Business Jobs Creation Act of 2015 (H.R. 1188)

5-12-2014 NAFCU's Letter to the House in Support of Member Business Lending (H.R. 688)

5-12-2014 NAFCU's Letter to the Senate in Support of Member Business Lending (S. 968)

6-15-2013 NAFCU letter regarding MBL

6-6-2013 NAFCU letter to Small Business

View all NAFCU Policy Letters

Recent Regulatory Comment Letters

March 5, 2014 - MBL amendments and improvements letter to NCUA

View all of NAFCU's Regulatory Comment Letters

Updated November 2017