During a hearing on April 10, CUNA floated in its testimony a proposal to raise the de minimus threshold for a business loan to $500,000 and to index it to inflation going forward.
Currently, the de minimus threshold is $50,000. That means the total of all such extensions of credit to a borrower or an associated member less than $50,000 does not count against the member business loan cap of 12.25 percent of assets.
An increase in the de minimus threshold from $50,000 to $500,000 would represent a substantial expansion in the credit union business lending authority. This would significantly free up credit unions to make large commercial loans; because loans under $500,000 would no longer count against the cap. This would further move credit unions away from their mission of meeting the credit needs of consumers, especially those of modest means.
Moreover, raising the threshold would pose a significant safety and soundness risk to the National Credit Union Share Insurance Fund (NCUSIF). These loans would no longer be subject to the National Credit Union Administration's Member Business Loan regulation, because they would no longer be defined as member business loans.
While most people would agree that business loans under $50,000 don't pose a material risk to the NCUSIF, the same cannot be said for loans of $500,000.
Rather than raising the threshold, Congress should eliminate the de minimus member business loan threshold. All business loans made by credit unions should count against the member business loan cap.
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That's an absurd threshold and they know it. It's a negotiating tactic. They are hoping for somewhere between $100K-$200K so they started at $500K.
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