At a House Small Business subcommittee hearing yesterday, two credit union CEOs from institutions with about $2 billion in assets (larger than almost 95% of banks) testified regarding raising the credit union member business lending cap. These credit unions represent the few overly aggressive credit unions wishing to take advantage of their tax-exempt status and move further from their mandated mission of helping those of modest means.
These CEOs do not represent the majority of credit unions. Over 71% of credit unions do not make any business loans, and of those who do, most are not near the lending cap.
Further, their testimonies indicate that these credit unions are interested in making larger commercial loans ranging from $0.5 million to $3.8 million, not loans to small businesses.
Credit unions may already make business loans less than $50,000 without it counting towards their business lending cap. In addition, Small Business Administration guaranteed loans, many guaranteed at 85% of a loan amount, do not count towards the existing cap.
S. 2231 and H.R. 1418 will add to the federal deficit and disadvantage community banks. These bills will permit a few credit unions to cherrypick existing business loan customers from community banks—who pay taxes.
Ultimately, these bills would allow credit unions to look and act like banks without the obligation to pay taxes or have bank-like regulatory requirements, such as the Community Reinvestment Act, applied to them.
If some credit unions have outgrown their charter, they should switch to a bank charter.
Read more about the hearing.
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