ABA today registered its opposition to the National Credit Union Administration’s aggressive proposal to expand business lending by credit unions. ABA noted that the proposal would allow CUs to circumvent caps on business lending imposed by Congress while simultaneously weakening the safety and soundness of credit unions.
In particular, NCUA would evade the statutory 12.25 percent cap on member business loans by excluding non-member business loans and loan participations among credit unions from its business loan limits. “If Congress intended to allow the NCUA Board to exclude forms of business loans from the MBL cap, it would have articulated this in Section 107A of the FCU Act — but it did not,” ABA said. “NCUA is overstepping its authorities in excluding NMBLs from the MBL cap.”
By allowing an aggressive expansion of business lending among credit unions, ABA warned, NCUA would elevate the risk of failures and share insurance fund losses — both due to credit unions inexperienced with making commercial loans and to NCUA’s unproven ability to supervise these loans. “At least five credit unions since 2010 have failed at the hands of poorly run business loan programs, accounting for a quarter of all losses to the insurance fund during that period,” ABA added. “Losses could quickly multiply under this proposed rule.”