Fact Checking CUNA's Testimony on Member Business Lending

I decided to review CUNA's testimony from the June 16th hearing on Credit Union Member Business Lending before the Senate Banking Committee. I had some problems with the numbers and statements from CUNA's testimony.

CUNA states in its testimony that there are 334 credit unions near the cap. CUNA defines being near the cap as having a member business loan to asset ratio greater than 7.5 percent.

Unfortunately, being near the cap does not mean a credit union is subject to the cap. As best as I can determine, the 334 number appears to include credit unions that are not subject to the statutory cap because they have either low-income credit union status or a charter exclusion. It is also unclear whether CUNA includes privately-insured credit unions in its analysis.

NCUA testifies that there are 289 credit unions that are near or at the cap including those with grandfathered regulatory waivers. However, NCUA never defines what is near.

NCUA in its testimony states that 1,177 credit unions that are not subject to the statutory cap. If you exlcude those credit unions that are not subject to the cap, NCUA finds that only 162 credit unions (2.65 percent multiplied by 6,115 credit unions) have a member business loan to asset ratio of at least 9.8 percent of assets at the end of the first quarter.

Additionally, CUNA cites the example of Listerhill Credit Union in Alabama as being impacted by the cap. The only problem is that Listerhill Credit Union has a low income designation. This would mean that the credit union is not subject to the cap.

Furthermore according to CUNA, if S. 509 (The Small Business Lending Enhancement Act ) is enacted, credit unions could lend an additional $13 billion to small businesses in the first year. However, NCUA Chairman Debbie Matz testimony seems to downplay the overly optimistic forecast of CUNA.

NCUA Chairman Matz stated that credit unions could extend several billion more dollars in member business loans in the first few years after the passage of S. 509 and its implementation. In fact, NCUA writes: "If each credit union most likely to qualify immediately for higher MBL limits under the bill increased member business lending by 30 percent, more than $2 billion in credit would be extended." Additionally, she notes that those credit unions that are not near the cap, including those that are not currently making business loans, are likely to increase their member business lending activity and this could result in "an additional $2 billion to $3 billion in credit" over the next few years.

There is a big difference in $13 billion in the first year and several billion in the first few years.

CUNA in its testimony states that many of the business loans made by credit unions would not otherwise have been made by banks or other taxable lenders. But on page 17 of its testimony, CUNA states that to the extent to which credit union business lending crowds out bank business lending, it would mostly be from smaller banks.

For community banks, that is the issue. Credit unions can leverage their tax exemption to crowd out business lending by community banks.

Moreover, Webster First FCU actaully acknowledges that credit union business lending does crowd out lending from other financial institutions. According to Webster First FCU's testimony, "[w]e have assisted many real estate owners who own multi-family units in refinancing their existing mortgages from other institutions."

So, I encourage you to do your own fact checking.