NCUA and Credit Union Industry Encourage Senate Banking Panel to Support Raise in MBL Cap

June 16, 2011 - The Senate Banking, Housing and Urban Affairs Committee held a hearing on June 16 to discuss enhancements to member business lending capabilities for credit unions.

National Credit Union Administration (NCUA) Chairman Debbie Matz testified in support of increasing the cap on MBL with prudent regulatory parameters as included in S. 509, introduced by Sen. Mark Udall (D-Co). Chairman Matz told the Committee that many credit unions could engage in MBL, but do not because of the cap of 12.25 percent restrictive cap. When asked by Committee Chairman Sen. Tim Johnson (D-SD) and Ranking Member Sen. Richard Shelby (R-AL) about the safety and soundness concerns around MBL, Chairman Matz reassured them that the agency would implement a tiered approach for credit unions and make the necessary regulatory enhancements.

“I view member business lending as a safety and soundness benefit, not a risk,” stated Chairman Matz because MBL offers credit unions with more diversity in their portfolios. Chairman Matz also noted the potential positive impact on job creation and local communities from allowing credit unions increased member business lending capabilities.

In the written testimony, NCUA noted to the Committee that six states have their own state-specific MBL rules (Connecticut, Maryland, Oregon, Texas, Washington and Wisconsin.) Also in the written testimony, NCUA stated that the agency believes it should have examination and enforcement authority for credit union service organization (CUSO) and third party vendors, similar to other federal regulators and some state regulators.

Chairman Matz was followed by a second panel of industry representatives. Credit Union National Association (CUNA) President Bill Cheney testified, along with Michael Lussier, chairman of the National Association of Federal Credit Unions and president and CEO of Webster First Federal Credit Union.

Cheney also encouraged the Committee to support S. 509, noting that the legislation could afford up to $13 billion in increased credit union member business lending. “The failure to extend the MBL cap would literally leave money on the table,” said Cheney in the hearing. Lussier had a similar message in support of increasing the cap, and explained to the Committee that his credit union’s ability to serve its community’s business lending needs is restricted by the statutory cap of 12.25 of assets.

Representatives from the American Bankers Association and the Independent Community Bankers of America testified against extending the MBL capabilities of credit unions arguing that credit unions’ federal income tax exemption puts banks at an unfair advantage when offering a similar product.

To read more about S. 509, click here. There is also an identical bill in the House, H.R 1418, the Small Business Lending Enhancement Act of 2011, introduced by Rep. Ed Royce (R-CA).