CU Trades Say Lifting MBL Cap Would Allow Billions in Small Business Lending

Credit union trade groups have called on Congress to lift the statutory 12.25% cap on business lending, contending that move would free up billions of dollars that would allow credit unions to continue to make loans to small business.

CUNA this week warned the House Financial Services Committee that many credit unions are approaching the cap, which limits credit unions to extending business loans up to 12.25% of their assets.

“Given the financial needs of so many small businesses, now is the time to provide credit unions with additional flexibility to serve their business members by lifting the cap,” CUNA President/CEO Jim Nussle wrote in a letter to committee leaders.

Nussle said the trade group has conservatively estimated that removing the cap would provide more than $5.5 billion in capital to small and informal business ventures, creating almost 50,000 jobs during the next year.

Last year, 51 state banking associations expressed their opposition to raising the cap, accusing credit unions of making “opportunistic and unnecessary requests for credit union charter enhancements in the midst of a pandemic.”

However, in his letter, Nussle said that additional credit union lending will not impede bank activity, contending that a majority of credit union lending is for loans that banks will not originate.

“This means a majority of credit union lending does not replace lending that would otherwise be done by banks — it is lending that otherwise would not occur,” he wrote.

In his letter, Brad Thaler, NAFCU’s vice president of legislative affairs, noted that Reps. Brad Sherman (D-Calif.) and Brian Fitzpatrick (R-Pa.) have introduced legislation that would lift the cap during the pandemic. He said similar legislation was introduced in the last Congress by now-Senate Finance Committee Chairman Sen. Ron Wyden (D-Ore.)

And Thaler said NCUA Board Chairman Todd Harper and Board Member Rodney Hood have said they favor lifting the cap.

On a related issue, the credit union trade groups and their banking counterparts have joined forces to continue to push the Senate to pass legislation that would extend the Paycheck Protection Program for another two months. The program is scheduled to expire at the end of this month and the trade groups have said that the Small Business Administration may have thousands of loans still pending when the authorization expires.

The House already has passed legislation to extend the program to the end of May; that bill is pending in the Senate.