NAFCU has made MBL reform an integral part of its Coronavirus relief efforts. As a result of NAFCU advocacy Representatives Bonamici, Haaland and Young sent a letter to House leadership urging them to provide relief for credit unions from the MBL cap in phase four relief legislation. In letters sent to President Trump, National Economic Council (NEC) Director Larry Kudlow, House Financial Services Committee (HFSC) Chairwoman Maxine Waters, and HFSC Subcommittee Chairs, NAFCU advocated for greater relief and flexibility from the MBL cap. More specifically, NAFCU asked the Administration and HFSC leadership to raise the cap from 12.25 percent to 20 percent of the credit union’s assets; raise the threshold for what counts as a business loan; exempt loans to our nation’s veterans; and exempt all government-backed loans (such as SBA loans).
National Credit Union Administration Rulemakings
On August 10, 2018, the NCUA published a notice of proposed rulemaking regarding loans and lines of credit to members. Specifically, the NCUA sought comment on whether longer, more flexible maturity limits for certain loans are warranted. These loans include one-to-four family real estate loans, home improvement, mobile home, and second mortgage loans.
In March 2019, the NCUA finalized the loans to members rule as proposed, which went into effect on April 24, 2019. The rule does not make any substantive changes, but rather makes the regulation “friendlier” through clarifying and technical changes. The final rule (1) identifies in one section the various maturity limits currently applicable to federal credit union loans; (2) clarifies that the maturity for a ‘‘new loan’’ under generally accepted accounting principles (GAAP) is calculated from the new date of origination; and (3) more clearly expresses the limits in place for loans to a single borrower or group of associated borrowers. To learn more about the final rule, see NAFCU’s Final Regulation summary and analysis.
House Financial Services Committee Chairwoman Maxine Waters (D-CA) and HFSC Financial Institutions and Consumer Protection Subcommittee Chairman Ed Perlmutter (D-CO) introduced H.R. 7003, the Expanding Financial Access for Underserved Communities Act, on March 8, 2022. This NAFCU-sought bill would expand the definition of “underserved area” to include banking deserts and exempt business loans in underserved areas from the MBL cap, in addition to allowing all types of credit unions to add underserved areas to their fields of membership.
The Veterans Member Business Loan Act, S. 3813, was introduced by Senators Dan Sullivan (R-AK) and Mazie Hirono (D-HI) in March 2022 and would exempt loans made to veterans from the MBL cap.
On September 7, 2021, Representatives Vicente Gonzalez (D-TX) and Brian Fitzpatrick (R-PA) introduced the Member Business Loan Expansion Act (H.R. 5189), NAFCU-supported legislation that would lift the definition of the lower end of the amount of a loan that would count toward the MBL cap from $50,000 to $100,000. Additionally, the legislation would allow the NCUA Board to set a loan maturity limit greater than 15 years and it would expand the definition of “community financial institution” under the Federal Home Loan Bank Act to include credit unions. NAFCU wrote to the House Small Business Committee in support of this legislation in January 2022.
On April 17, 2020, Representative Brad Sherman (D-CA) introduced NAFCU supported legislation, Access to Credit for Small Businesses Impacted by the COVID-19 Crisis Act of 2020 (H.R.6550). The bill would provide a three-year exemption from the MBL cap. On May 8, 2020, Sherman introduced an updated version of the legislation, H.R. 6789, which would provide an exemption from the cap for 1-year after the pandemic emergency ends for CAMEL 1 & 2 credit unions that make loans to small businesses recovering from the pandemic. House Financial Services Committee Chairwoman Maxine Waters (D-CA) was an original cosponsor of the legislation. On May 11, 2020, Senator Ron Wyden (D-OR) introduced a Senate companion, S. 3676.
On March 4, 2020, Senators Tim Scott (R-SC) and Catherine Cortez Masto (D-NV) introduced NAFCU-supported legislation, Expanding Access to Lending Options Act (S. 3389). The bipartisan bill would provide the NCUA with greater flexibility for maturity products up to 20 years and remove restrictive requirements on mortgages.
On April 12, 2019, Representatives Vicente Gonzalez (D-TX), Paul Cook (R-CA), Tulsi Gabbard (D-HI) and Don Young (R-AK) reintroduced NAFCU-supported legislation, H.R. 2305, that would exclude loans made to veterans from the statutory MBL cap. The bipartisan bill would improve veterans' access to necessary capital by removing outdated regulatory barriers that hinder credit unions' ability to meet the financial needs of our nation's veterans.
On March 8, 2019, Representatives Lee Zeldin (R-NY) and Vicente Gonzalez (D-TX) introduced NAFCU-supported legislation, H.R. 1661, which would give the NCUA greater flexibility in setting loan maturity limits under the Federal Credit Union Act. NAFCU has long advocated for credit unions to have flexibility with respect to loan maturity limits. The current 15-year limit on certain loans is outdated and does not conform to maturities that are commonly accepted in the market today.
On May 24, 2018, the NAFCU-backed Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) became law. The landmark regulatory relief bill included a provision excluding one-to-four family dwellings that are not the primary residence of a member from the member business lending (MBL) cap. As a result, on June 1, 2018, the NCUA approved a final rule amending its definition of an MBL in the Federal Credit Union Act to conform to S.2155. The rule became effective June 5, 2018.