The Federal Credit Union Act provides an exemption from the member business loan (MBL) aggregate cap of 12.25 percent of assets to an insured credit union chartered for the purpose of making member business loans to its members, as determined by the NCUA Board.
According to the document, new federal credit unions, new federally insured state credit unions (FISCUs), FISCUs converting to a federal charter, federal charters converting to a FISCU, and all credit unions considering a spin-off of their field of membership may be eligible for this exemption of being chartered for the purpose of making business loans to its members.
To qualify, the insured credit union must
- submit plans showing one or more discrete groups within its field of membership with unique commercial or business financing needs;
- demonstrate a commitment to investing in the infrastructure to safely originate, service, and administer the anticipated business loan volume; and
- ensure that management meets the experience and governance requirements currently outlined in NCUA's regulations.
While I understand how a de novo could be chartered for the purpose of making business loans, I find it troubling that a credit union, which flips its charter from a state to federal charter or vice-a-versa, could all of a sudden become chartered for the purpose of making member business loans. These credit unions are ongoing institutions. Their purpose has not changed.
It seems to me that the National Credit Union Administration is allowing existing credit unions to game the system so as to evade the member business loan cap of 12.25 percent of assets.
Read the document.
Gaming the system?
ReplyDeleteYes.
On many things.
And congress let’s them.
Go back to 1999 when the NCUA amended the FCU Bylaws. It permitted FCUs to add business loans as one of its purposes. This was done to meet the CUMAA requirement.
ReplyDeletePlease don't tell me that when banks change charters they do not get everything the new charter allows even if that power has recently been added.
Sorry. When a CU changes charters, it changes corporations. The new corporation gets the powers of the charter at the time of corporate creation.
If not so hard, every FCU should do a reverse merger into a new FCU. But NCUA would stop that from happening.
You didn’t read the piece.
DeleteThey’re doing it to evade a statutory requirement.