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ICBA Statement on Unlimited Business-Lending Authority for 1,000 Credit Unions

Unilateral Move by NCUA Goes Against Congressional Intent

Washington, D.C. (Aug. 9, 2012)—The Independent Community Bankers of America (ICBA) released this statement following the National Credit Union Administration’s (NCUA) announcement that more than 1,000 credit unions across the nation are now eligible to make unlimited member business loans.

“The NCUA’s decree granting unlimited member business lending authority to more than 1,000 tax-exempt credit unions goes against the will of Congress and any rational regulatory policy authority. Lawmakers set reasonable statutory caps on business lending by credit unions because these tax-subsidized institutions were established to serve people of modest means with a common bond.

“Outrageously, the NCUA has unilaterally acted to designate credit unions as low-income, which could automatically double the number of credit unions with that designation. The administration and NCUA appear to be exploiting the nation’s drought conditions to rationalize these designations—despite the fact that less than half of these credit unions are in states with extreme drought conditions.  Highly controversial legislation to expand business-lending authority has failed to advance in Congress for a decade, but the credit union regulator has thumbed its nose at the legislative branch in favor of its own aggressive actions to dramatically expand the tax-exempt credit unions’ powers.

“By ignoring the will of Congress, the NCUA’s move will aggravate the federal budget deficit and reduce federal revenues by favoring tax-subsidized credit unions over taxpaying community banks. It also will increase risks in the financial system, as evidenced by a January Government Accountability Office report that found that failed credit unions had more member business loans as a percentage of assets than others in the industry. Earlier this year, Telesis Credit Union, which was granted a business-lending waiver, imploded on massive amounts of bad business loans and had to be shut down at a huge cost to other credit unions. No wonder several credit union executives have expressed opposition to expanding the industry’s business-lending authority.

“Credit unions have a generous tax subsidy and lighter regulations because they were established to serve people of modest means, which is why Congress placed a cap on their business-lending authority. ICBA believes that if credit unions are to be allowed to expand further into commercial lending, they should be taxed and required to comply with the Communities Reinvestment Act.”

For more information, visit www.icba.org/advocacy and www.stoptheCUgrab.org.