Exceeding the MBL Cap

How many credit unions are exceeding the cap for member business loans?

That has been a question posed as a possible new report by the NCUA's Office of the Inspector General (IG) for the last couple of years. The report would have also looked at how well NCUA is monitoring and enforcing the Member Business Lending rules.

However, the IG never started this study.

To find out which credit unions are exceeding the cap, I first excluded any CU that was grandfathered in 1998 for the purpose of making business loans or had a history of making business loans. Next, I excluded any credit union that has a low-income designation or is a community development financial institution.

According to my analysis, 13 credit unions at the end of the third quarter of 2011 exceeded the member business loan (MBL) cap of 12.25 percent of assets. Below is the list.

I will acknowledge that Houston Musicians FCU, which has a member business loan to asset ratio of 22.84 percent, may have been recently added to the grasndfathered list.

In a legal opinion letter denying the credit union's request to treat musical instrument loans to professional musicians as consumer loans, NCUA wrote: "{Y]ou mentioned Houston Musicians’ long history of making instrument loans to its members. We encourage you to discuss your credit union’s possible qualification for an exception to the aggregate MBL limit, as either a credit union chartered for the purpose of making MBLs or as a credit union with a history of primarily making MBLs, with the region."