The time is right to let credit unions help small business

While this legislation contains many provisions designed to spur job growth, it fails to include one critical taxpayer-friendly solution to help small businesses: raising the arbitrary member business lending cap on credit unions.

An amendment in the Senate proposed by Sen. Mark Udall, D-CO, would lift this arbitrary and outdated cap. The Udall amendment would raise the credit union member business lending cap to 27.5 percent of assets, up from 12.25 percent. This amendment is a carefully crafted compromise between key lawmakers, the National Credit Union Administration (NCUA) and the Department of Treasury.

The Udall amendment specifically addresses any safety and soundness concerns by requiring participating credit unions to be well capitalized and by limiting a credit union’s member business lending portfolio growth to no more than 30 percent annually. In addition, a credit union would need five consecutive years of experience in underwriting and servicing member business loans, and it would have to meet a series of other standards set by the NCUA.

Allowing this amendment to be added to H.R. 5297 would be a tax-free victory for small business and our struggling economy. Lifting the cap would not cost taxpayers one penny and it would give small business access to critically needed capital to grow and create jobs.

At the National Association of Federal Credit Unions (NAFCU), we have long recognized the vital role that small business plays in the success of our nation’s economy.

Throughout these challenging economic times, credit unions - not-for-profit, member-owned financial institutions - have continued to prove their commitment to small business. Between December 2009 and March 2010, credit unions’ member business lending increased two percent for a total of nearly $29 billion while bank business loans declined by 7.4 percent over the same period.

A March 2010 survey of NAFCU members reflected that, on average, over 20 percent of their credit unions’ member business loan applications in 2009 came from members that were turned away by banks.

Credit unions would like to do more to help small business. Unfortunately, credit union member business loans are artificially limited by law to 12.25 percent of assets - an outdated amount that was set last century.

It is our belief that adding the Udall amendment to H.R. 5297 would be a win-win for small business, taxpayers and our economy.

Raising the member business lending cap does not require the authorization of any new funds. It simply allows credit unions to lend more to small businesses. NAFCU strongly supports including the Udall amendment in H.R. 5297. Lifting the arbitrary member business lending cap can reinvigorate small businesses and put our nation on a solid road to financial recovery.


Fred R. Becker is the president of the National Association of Federal Credit Unions.