House Subcommittee Considers MBL Reform; NCUA, CUNA Outline Benefits

Thursday, October 13, 2011 11:16:00 AM

WASHINGTON - NCUA Chairman Debbie Matz and Jeff York, President/CEO of Coasthills FCU, testifying on behalf CUNA, discussed the benefits increasing the MBL cap would have on the nation's economy and small businesses during a hearing yesterday before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit.

Matz testified that "more than one in five credit unions making member business loans that are subject to the cap have reached 50% or more of this [12.25% of assets] ceiling."

Matz recognized three tangible benefits of member business lending in her statement: it allows small businesses to obtain reasonably priced loans as a result of more competition, prudent member business lending diversifies credit union portfolios, and it spurs job growth and expands consumer access to goods and services in communities.

Later, as part of a panel of five witnesses, York said his $617 million-asset credit union's business loan portfolio currently stands at around 7% of assets, and added that his credit union could reach the upper limit of the 12.25% lending cap within six months.

However, he explained, credit unions "cannot simply lend up to the cap and then halt lending," as doing so could harm their ability to lend to current business-owning members.

York said credit unions that consider getting into the business lending marketplace are also forced to examine whether there would be a benefit in business lending if cap concerns would force them to slow down or end this practice within a few months.

Testifying bank representatives said that the demand for small business loans was not high at the moment. However, York countered those statements, saying that small business owners are coming to credit unions for help after they are turned away for loans at banks.

H.R. 1418 currently has 88 co-sponsors, including Representatives Andrews (D-1), Holt (D-12), Pallone (D-6) and Rothman (D-9) from New Jersey.

A similar Senate bill (S.509) has 20 co-sponsors; neither of New Jersey's senators has endorsed the reform.

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