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House subcommittee holds MBL hearings

Credit unions had the opportunity to talk about member business lending (MBL) in front of a House Financial Services sub-committee on Oct. 12. NCUA Chairman Debbie Matz testified that the bill (HR 1418) could enhance credit union safety and soundness and help small businesses. Chairman Matz handled many questions regarding credit union stability, loan demand, and the ability to maintain the safety and soundness of credit unions while expanding their business lending portfolios. Chairman Shelley Capito (R-WV) questioned Matz on whether credit unions engaged in business lending were turning down loans as a result of the cap and what would be an appropriate cap. Matz suggested there should be no cap and that credit unions should continue to diversify their lending portfolios to strengthen safety and soundness while fulfilling the credit union mission to serve their members.

Jeff York, in the middle, president/CEO of Coasthills FCU in California testifies before a House subcommittee on MBL legislation.

Jeff York, president/CEO of Coasthills FCU, based in California, testified on CUNA’s behalf.York focused on small businesses and the impediments the artificial cap has on business lending at credit unions. Reps. Blaine Luetkemeyer (R-MO) and Ruben Hinojosa (D-TX) engaged in aggressive lines of questioning regarding the credit union tax status and competitive advantage. York defended the credit union charter and how credit unions serve their members.

Rep Bill Huizenga (R-MI) asked the banks, point blank, if they weren’t seeing demand for business loans, what the harm would be in increasing the cap? Rep. David Scott (D-GA) asked York what the biggest myth was behind the MBL program that is preventing credit unions from garnering support for this legislation. York replied that the banks argue that credit unions lack the experience and expertise to manage these types of loan portfolios but that these loans have been made since the beginning of the credit union movement in the U.S. It was only limited in 1998 by an arbitrary cap.

Rep. Luetkemeyer asked all of the witnesses to state the rates on various loan products. As expected, the credit union rates on consumer loans were lower than bank loans. The bank witnesses said that their business loan rates were lower than the credit union business loan rates, effectively blunting the argument the banks had made throughout the hearing that the tax advantage gives credit unions an “unfair” advantage in the business lending market.

Moving forward, credit unions should document the demand for small business lending. There were a number of questions regarding whether this legislation was really needed because small businesses lending may not be in demand. The League will let credit unions know in the near future about communications between small business members/clients and key members of Congress.

If you have any questions about this hearing, contact LSCU SVP, Governmental Affairs Will McCarty at 866.231.0545 ext. 2137.