U.S. Capitol building. (Source: Shutterstock)
Congress should remove the credit union cap on business lending, Gail Jansen, vice president of business services and operations at Kinecta Federal Credit Union told a House subcommittee Wednesday.
Jansen told the House Economic Growth, Tax, and Capital Access Subcommittee that the cap is "arbitrary" and hampers credit union efforts to assist small business.
The subcommittee is examining the Small Business Administration's proposed FY20 budget. SBA has noted that without changes to current law, the agency will not generate enough from fees and other sources of revenue to offset the cost of issuing guarantees in FY20.
However, Jansen focused on other restrictions to credit union business lending.
Kinecta is based in Manhattan Beach, Calif. and has more than $4.4 billion in assets. Jansen said she is responsible for a portfolio of almost $1 billion in member business loans—including almost $35 million in SBA loans.
She said that in 1998, when Congress passed the Credit Union Membership Access Act, it placed restrictions on credit union business lending. She said that the law said that business loans of more than $50,000 count toward that cap. She said that that figure has not been indexed or adjusted for inflation.
Jansen said that while the government-guaranteed portions of SBA loans do not count toward that cap, the non-guaranteed portions do.
She added that SBA's proposal to increase its fees would have an impact on the credit union's small business lending.
While there is a member business loan cap in most instances, some credit unions are exempt from the cap because of their long history of making loans to specific industries.
That has proven to be a problem for credit unions that made a significant amount of loans to the taxi industry, where taxi medallions were used as collateral. The value of those medallions has plunged as ride-sharing services have grown.
The NCUA's Inspector General has said that the NCUA should do a better job of flagging institutions that have a high concentration of loans linked to particular industries.
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