American Banker: Bankers Claim NCUA Made End Run Around Congress

Posted by Marissa Anema Monday, August 13, 2012 10:53:00 AM


On Friday, an article by the American Banker reported that “banking trade groups are furious about a move by the NCUA to notify more than 1,000 credit unions that they may not need to comply with a cap on business lending.”

According to the article, at issue is an NCUA decision on Tuesday to notify 1,003 credit unions that they're eligible to be considered low-income credit unions, which are exempt from the statutory cap on loans to member businesses.

In order to get that label, more than half of an institution's membership must be located in a designated low-income area. Until recently, it's been up to credit unions to show the NCUA that they meet the criteria, an often arduous process.

But over the last year, the agency has been making those determinations on its own by matching information from federal credit unions with 2010 Census data, according to David Marquis, the NCUA's executive director. The decision on Tuesday is part of an effort to reach out to those institutions.

According to the American Banker, “The action this week is the latest twist in the ongoing saga over the extent to which credit unions should be allowed to compete with banks on commercial loans. Banking groups see the agency's move as an end run around Congress, which has discussed but has yet to pass a bill that would raise credit unions' business lending cap.”

James Ballentine, the American Bankers Association's executive vice president of congressional relations and political affairs, suggested that the regulator's action will yield large benefits for credit unions.

The American Banker pointed out that an “administration fact sheet stated that nearly half of the eligible credit unions are in severely drought-stricken states. But the flip side of that statistic is that slightly more than half of the eligible credit unions—53%, to be exact—are not located in such states.”

Mary Dunn, deputy general counsel at CUNA, said that the agency's decision was actually part of an administration-wide effort to reduce regulatory burden on various industries.

"I think the fact that it might have some connection with drought relief is sort of incidental," she said.

But bankers accused the NCUA of being opportunistic.

"To use a weather emergency to take advantage of this opportunity is really an overreach by a regulator that we think has run amok," Ballentine said.

To read the American Banker article in full click here.


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