WASHINGTON—Following Tuesday’s Capital Markets and Government Sponsored Enterprises subcommittee hearing, CUNA sent a letter to Congress urging legislators to pass H.R. 1188, the Credit Union Small Business Jobs Act.
In a letter to subcommittee Chairman Scott Garrett (R-NJ) and Ranking Member Carolyn Maloney (D-NY), CUNA President and CEO Jim Nussle cited the important role CUs play in the economy, how they helped entrepreneurs work their way through the recession when banks exited lending, and the need for small business to have greater access to capital.
Nussle urged Congress to allow CUs approaching the MBL cap to apply to NCUA for the authority to lend beyond the cap.
“This approach which is targeted toward well capitalized credit unions with demonstrated success in business lending enjoys the support of the Department of the Treasury,” wrote Nussle.
Nussle concluded by saying that H.R. 1188 would “allow credit unions to do what they were created to do—provide credit to their members, including small business owners.”
Tuesday CUNA also wrote to the House Appropriations Committee supporting H.R. 1422, the Credit Union Residential Loan Parity Act, a provision that would grant credit unions parity with banks on business lending.
CUNA’s letter is a response to Monday’s letter from the American Bankers Association and the Independent Community Bankers of America to the Appropriations Committee opposing the provision, pointing to the credit union federal tax status and an arbitrary cap on credit union business loans. CUNA said the bankers’ letter was filled with inaccuracies.
“The fact is credit unions were created because borrowers could not access credit from banks, a problem that continues for many consumers and small businesses today,” wrote Nussle. “This proposal would only allow loans made on small rental units to be exempt from the 12.25 percent credit union business loan cap. The bankers’ end game is clear and their views should be disregarded because they are littered with inaccuracies and fallacies. At the end of the day, Congress has the ability to ensure small businesses have access to credit from lenders capable of providing it; credit unions can help if you allow them to.”
H.R. 1422, the Credit Union Residential Loan Parity Act, would reclassify a 1-4 family non-owner occupied property as a residential loan. Under current law, these loans are classified as commercial loans, putting credit unions at a direct disadvantage with banks CUNA explained.
In their letter, the two bank groups said providing credit unions with the exemption would “result in a revenue loss to the U.S. Treasury and increase the federal budget deficit. The proposal has not been considered or debated before the Committee of jurisdiction. We strongly urge you to reject this very controversial proposal.”
The letter goes on to say that “credit unions were created and given a tax subsidy for the purpose of serving individuals of modest means with a common bond, primarily through consumer lending. To ensure adherence to this mission, Congress imposed a cap on member business loans of 12.25% of assets. The cap includes many exemptions, including any loan fully secured by a 1-to-4 family dwelling that is the primary residence of a credit union member. This exemption allows a member to tap their home equity to finance a business. The proposal being suggested by credit unions would expand the exemption significantly by removing the condition the 1-to-4 family dwelling be a member’s primary residence. In effect, it allows rental housing loans to be exempt from the cap.”