By Geneva Sands - 09/13/12 09:25 PM EDT
Credit unions are only allowed to lend as much as 12.25 percent of their assets, but legislation backed by Sen. Mark Udall (D-Colo.) would raise that rate to 27.5 percent.
Udall, at a Wednesday event sponsored by The Hill, said he hears complaints regularly from small-business owners in his state who cannot get access to credit. He argues allowing credit unions to loan more would help alleviate the problem, partly because they would be more likely to finance the level of loans needed by many smaller businesses.
The average loan made by a credit union, according to a paper from R Street Institute and the Small Business Majority that champions the change, is $219,000.
“Here you have a sector, a credit union sector, that's being unnecessarily restricted from doing more to help small businesses gain access critical access to credit,” Udall said, referring to the cap.
Udall argued his bill would “responsibly raise” the limit for credit unions in a way that would spark jobs while doing nothing to endanger the economy. The bill would raise the limit in a tiered process.
Credit unions have been pushing the legislation for a year, and Senate Majority Leader Harry Reid (D-Nev.) has promised that a vote in the upper chamber will take place before the end of the year.
Companion legislation sponsored by Rep. Ed Royce (R-Calif.), who also spoke in favor of the bill at Wednesday’s event, has attracted 140 co-sponsors in the House.
The legislation has been held up by lobbying by banks, which oppose any change in the status of credit unions. They argue the tax-free status of credit unions, which are not-for-profit enterprises, would give them an unfair advantage.
But some of the small-business owners who hit Capitol Hill this week said they would have been unable to access credit if they had depended just on banks.
“We are now at 140 co-sponsors, that shows you the momentum that has been building for this legislation and I think that the reason we have that type of support is because of the perception here on Capitol Hill that there is a real need right now for availability of more capital,” Royce said on Thursday.