WASHINGTON—Both CUNA and NAFCU have sent letters to the House Small Business Subcommittee on Economic Growth, Tax and Capital Access seeking to underscores the important role credit unions play in lending to small businesses and underserved communities.
The letters were sent ahead of the subcommittee’s hearing to examine the role of community development financial institutions and minority depository institutions in small business lending.
In NAFCU’s letter, Brad Thaler, vice president of legislative affairs, wrote, “Credit unions have been on the frontline, working to ensure their members stayed afloat financially during the pandemic, with programs ranging from skip pays to personal loans. Additionally, during the first round of the Paycheck Protection Program (PPP), credit unions were able to get desperately needed funds to many Main Street businesses that had been turned down by larger institutions. In many instances, these business owners joined the credit union solely because they were the only institutions working to get small dollar loans approved. According to a NAFCU survey, 87% of NAFCU members reported providing PPP loans to new members and businesses that were turned away by other lenders and came to their credit union to apply for a PPP loan,” Thaler stated.
PPP Loans
Thaler also told Congress credit unions have helped the nation’s small businesses under the PPP program.
“We are pleased to see the strong support from Congress for helping CDFIs and MDIs during the ongoing COVID-19 pandemic both in funding support for CDFI and MDI programs and access to important Small Business Administration (SBA) programs, such as the provisions for CDFIs and MDIs with the Paycheck Protection Program,,” said Thaler. “We urge the Committee to continue this support moving forward.”
Thaler told Congress there are additional tools credit unions need to help small businesses.
“The pandemic has also shown that credit unions need additional tools to help underserved communities beyond the short-term bridge provided by the Paycheck Protection Program,” wrote Thaler. “While increasing the scope of other SBA programs will help with the recovery, we need to ensure that small businesses have access to as many potential sources of capital as possible”.
About the MBL Cap
Lastly, Thaler reiterated NAFCU’s support of legislation to exclude credit union member business loans made in response to COVID-19 relief from the credit union member business lending (MBL) cap, such as H.R. 1471, the Access to Credit for Small Businesses Impacted by the COVID–19 Crisis Act of 2021, introduced by Representatives Brad Sherman (D-CA) and Brian Fitzpatrick (R-PA).
CUNA Letter
In its letter, CUNA touched on a number of similar themes, saying “Credit unions recognize that financialinclusion and access to capital are critical to ensuring the survival of many of our nation’s most vulnerable small businesses. As not-for-profit, consumer-owned financial cooperatives credit unions have a laser-focus on our mission of financial inclusion and serving our members. Both Minority Depository Institution (MDI) and Community Development Financial Institution (CDFI) credit unions form an integral part of the credit union movement and enhance our ability to serve underserved groups.”
CUNA noted there are approximately 324 CDFI credit unions (more than two times the number of CDFI banks),representing nearly 30% of all CDFIs and serving nearly 12 million members. In addition, as of Dec. 31, 2019, there were 521 MDI credit unions (over three and a half times the number of MDI banks), representing 10% of all creditunions and serving 4 million memberships, the CUNA letter added.
“One of the most important things that Congress could do to promote financial inclusion and help small businesses would be to ensure that federal law permits all federal credit unions to serve underserved areas,” CUNA wrote. “Under currentlaw, only multiple common bond credit unions are eligible to add underserved areas to their field of membership. Inaddition, credit unions are also arbitrarily restricted in the amount of business lending that they can provide to 12.25 percent of assets. Lifting that cap would ensure small businesses would be able to access the capital they need.”
CUNA said it strongly supports the Expanding Financial Access for Underserved Communities Act, which wouldallow all federal credit unions to add underserved areas to their field of membership and exempt business loans made by credit unions in low-income areas from the credit union member business lending cap.