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Credit Union Liquidation Exemplifies Threat of Controversial Business-Lending Expansion

H.R. 1418/S. 2231 Dangerous for Economy, Credit Unions, Consumers

Washington, D.C. (June 1, 2012)—The Independent Community Bankers of America (ICBA) released this statement following the liquidation of Telesis Community Credit Union in Chatsworth, Calif., by regulators. 

“Today’s liquidation of $301 million-asset Telesis Community Credit Union once again shows the dangers of allowing tax-exempt credit unions to expand their member-business-lending parameters. Telesis Community Credit Union was granted special permission to lend beyond the 12.25 percent cap established by Congress. The credit union’s risky loans, which included a failed Orlando, Fla., shopping center, led directly to its failure and liquidation. This should be a lesson to those advocating H.R. 1418/S. 2231, which would further expand credit unions’ business-lending authority.

“Telesis Community Credit Union is the case study for why this policy threatens consumers, the economy and credit unions themselves. Congress enacted member-business-lending caps on credit unions for good reason—these institutions are tax-exempt so they can serve individuals of modest means and with common bonds. Allowing them to expand into uncharted territory could put many smaller credit unions into precarious situations, which could lead to failure.

“ICBA is once again urging lawmakers to examine this case of risky lending and whether it reflects Congress’ intent to ensure tax-subsidized credit unions serve individuals of modest means. More credit union failures will only weaken our still-fragile economy. Additionally, H.R. 1418/S. 2231 would widen budget deficits at the federal, state and local levels because these institutions do not pay taxes.

“H.R. 1418/S. 2231 would do more harm than good as the nation’s economy struggles to recover. Help promote a robust recovery by saying no to H.R. 1418/S. 2231.”