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ICBA Opposes NCUA’s Business Lending Proposal

Washington, D.C. (Aug. 15, 2008)—The Independent Community Bankers of America (ICBA) criticized the National Credit Union Administration (NCUA) today for its proposal to relax the member business lending rule for credit unions by raising the maximum loan-to-value (LTV) limit for construction and development loans, among other things.

"The NCUA should be imposing greater regulatory restrictions on credit union member business loans, not fewer," said ICBA in a comment letter to the NCUA. "Particularly now during a severe economic downturn, encouraging credit unions to engage in riskier activities such as construction and development lending by relaxing the member business lending rule will unnecessarily expose credit union members, the credit union industry and ultimately the taxpayers to undue financial risks."

ICBA pointed out that the recent failures of Norlarco Credit Union in Colorado and Huron River Area Federal Credit Union in Michigan demonstrate the problems that can occur when credit unions circumvent the member business lending rule and engage in risky business lending activity in which they have little expertise. Both of those credit unions were eventually put into NCUA conservatorship and their assets were sold because of their participation in a Florida land speculation scheme known as "Millionaire University," which involved millions of dollars of construction and residential real estate lending.

ICBA also said that any proposal to ease the member business lending rule would only distract credit unions from the central mission of meeting the credit needs of low- and moderate-income consumers.

Read the letter at www.icba.org.