Time to Raise the MBL Cap for Credit Unions?

By Rohit Arora

Fred Becker, President and CEO of the National Association of Federal Credit Unions (NAFCU), is calling upon Senate leaders to pass a bill to raise the credit union member business lending cap (MBL) from 12.25 percent of assets to 27.5 percent. Increasing this cap would allow credit unions to make more capital available for small business loans, which can be a profitable part of a credit union’s portfolio.

The bipartisan Credit Union Small Business Jobs Bill, S. 2231, introduced by Senator Mark Udall(D-CO), and retiring Senator Olympia Snowe (R-ME), would increase the MBL cap from 12.25 percent of assets to 27.5 percent for eligible credit unions.

When Congress passed the Credit Union Membership Access Act in 1998, it created restrictions on the ability of credit unions to offer member business loans by a credit union’s member business lending to 12.25 percent of total assets. Research has proven that the cap hinders credit union lending to small business and does little, if any, harm to banks and other institutions.

In January 2001, the Treasury Department released a study, “Credit Union Member Business Lending” which found that ‘Business lending is a niche market for credit unions. Overall, credit unions are not a threat to the viability and profitability of other insured depository institutions.’

Last year, the SBA’s Office of Advocacy also found that bank lending was largely unaffected by changes in credit union business lending, and that credit unions have the ability to offset declines in bank business lending during a recession (James A. Wilcox, The Increasing Importance of Credit Unions in Small Business Lending, Small Business Research Summary, SBA Office of Advocacy, No. 387. Sept. 2011).

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