Bill raising CU lending limits draws community bankers’ ire

Community bank leaders say a bill that would raise loan maturity limits for federal credit unions would further unbalance the competitive field. 

Under the Member Business Loan Expansion Act, credit unions would be exempt from the 15-year general loan maturity limit under the Federal Credit Union Act, allowing them increased flexibility on loan terms. The credit union lending cap also would increase from $50,000 to $100,000; currently, loans under $50,000 do not count toward the 12.25 percent limit on commercial loans by total assets. Both moves would make it easier for credit unions to make loans to businesses.

The bill, introduced by U.S. Reps. Vicente Gonzalez (D-Texas) and Brian Fitzpatrick (R-Pa.), would amend the definition of a community financial institution under the Federal Home Loan Bank to include credit unions. Community financial institutions are allowed to pledge small business, small farm and small agri-business loans as collateral for advances.  

 Nebraska bankers “are not pleased” with the bill, especially because they feel it is a “direct, in-your-face” continuation of credit unions straying from their stated tax-exempt mission and entering enhanced business lending, said Nebraska Bankers Association President and CEO Richard Baier. He is unsure of whether the bill will pass but hopes the entire Nebraska congressional delegation voices opposition to the proposal. 

Credit unions do not need the lending flexibility the bill affords and should pay taxes if they continue seeking to enlarge their operations, said North Dakota Bankers Association President and CEO Rick Clayburgh. 

The National Association of Federal Credit Unions supports the bill and says it would help small businesses. Similar legislation was introduced in the Senate earlier this year.  

“NAFCU applauds Congressmen Gonzalez and Fitzpatrick for introducing this bipartisan legislation to help credit unions better serve their local communities,” said NAFCU President and CEO Dan Berger. “Credit unions have long sought to provide essential loans to small businesses — including many that are minority-owned or underserved — but have been constrained under the archaic 15-year loan maturity limit and outdated member business lending definitions.

“This new legislation will provide credit unions with increased flexibility to encourage the growth and success of small businesses. It will also ensure that more credit unions can offer affordable, high-quality mortgage loans to consumers by expanding eligibility for FHLB membership,” he added. “This important legislation will provide great benefit to credit unions and their communities and we urge its passage.”