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Credit Unions vs. Banks Again Over Member Business Lending Rules

By Roy W. Urrico

Screen-Shot-2013-07-10-at-11.42.39-AMCredit Union and bank lobbyists appear headed for a showdown . . . again. The banking industry has become gradually more determined in their attacks on credit unions, calling for a repeal of the credit union tax status, criticizing credit unions for satisfying member business lending needs in the market, and opposing regulatory alterations that would give eligible credit unions access to supplemental capital and improve the safety and soundness of the credit union system.

Credit unions have been making member-business loans (MBLs) since their inception in the early 1900s. In the first 90 years of existence, there was no business lending cap. When Congress passed the Credit Union Membership Access Act (CUMAA) (P.L.105-219) in 1998, they restricted credit unions’ ability to offer member business loans. Congress codified the member business loan definition and limited a credit union’s member business lending to the lesser of either 1.75 times the net worth of a well-capitalized credit union or 12.25 percent of total assets. Also pursuant to section 203 of CUMAA, Congress mandated that the Treasury Department study the issue of credit unions and member business lending.

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