WASHINGTON—NAFCU and CUNA have written to members of a House Small Business subcommittee in advance of its hearing this week on how to kick start entrepreneurship and Main Street economic recovery.
In separate letters to the subcommittee, the trade groups emphasized the need for relief for credit unions from the what they called an arbitrary member business lending (MBL) cap.
NAFCU Vice President of Legislative Affairs Brad Thaler stated credit unions' participation in the Small Business Administration’s (SBA) paycheck protection program (PPP) has “helped countless Main Street small businesses survive the lockdowns required by the current pandemic.”
Thaler urged the committee to consider several changes to the Federal Credit Union (FCU) Act as they begin to examine the long-term recovery of small businesses that will allow credit unions to continue to provide much-needed access to capital to their members.
Specifically, Thaler said the restrictions contributing to the MBL cap under the FCU Act are arbitrary and reiterated the association’s call for relief from the MBL cap amid the coronavirus pandemic.
‘Ability is Hampered’
“As the country faces recovery from the impact of COVID-19 on the economy, many credit unions have the ability to go beyond SBA programs to help small businesses create jobs and stimulate the economy,” wrote Thaler. “However, due to the outdated and arbitrary MBL cap, that ability is hampered. Providing relief from the cap would help provide economic stimulus and create jobs without using taxpayer funds.”
Thaler went on to voice the association’s support for H.R. 6789, the Access to Credit for Small Businesses Impacted by the COVID-19 Crisis Act of 2020, introduced by Rep. Brad Sherman (D-CA), which includes a provision that allows for temporary relief from the MBL cap for loans to help small businesses recover from the crisis. Similar legislation was introduced in the Senate by Sen. Ron Wyden (D-OR).
Both bills would allow credit unions with CAMEL rating of 1 or 2 to exempt from their MBL cap loans made within the year from when the national emergency that was declared on March 13, 2020, expires to small businesses to aid in their recovery of the coronavirus pandemic. In addition, both bills would also extend changes to the NCUA's Central Liquidity Facility (CLF) made by the CARES Act through 2021.
CUNA Response
Meanwhile, in its letter CUNA emphasized that credit unions are robust business lenders and could do more to help with the pandemic recovery. CUNA reminded the committee that the member business lending cap of 12.25% of assets restricts capital from getting to Main Street businesses in need.
“We urge Congress to enact legislation that exempts credit union business loans made during federally declared disasters and emergencies from the arbitrary credit union business lending restriction,” the letter reads. “Failure to do so would represent a decision to leave critical assistance on the sidelines when small businesses, Main Street, and the nation’s economy need it the most.”
“CUNA conservatively estimates that temporarily removing the MBL cap will provide over $5 billion in capital to small and informal business ventures, creating nearly 50,000 jobs over the course of the next year - at no expense to the federal government,” the letter continues. “Furthermore, additional credit union lending will not impede bank lending activity. A majority of credit union lending does not replace lending that would otherwise be done by banks. SBA research specifically shows that roughly 80% of credit union business loans are loans that banks would not make.”