The National Credit Union Administration board today voted to finalize significantly looser limits on business lending by credit unions. Among other things, the final rule exempts participations in loans to non-members from the statutory 12.25 percent member business lending cap. It also eliminates explicit loan-to-value requirements, aggregate limits on construction and development loans and the requirement of a personal guarantee.
“We’re dismayed that NCUA continues to act as a cheerleader for the industry it’s charged with supervising,” ABA President and CEO Rob Nichols said. “This latest overreach comes on the heels of NCUA’s field of membership proposal and a promised plan for credit unions to accept investor capital, which would further the evolution of credit unions into tax-exempt banks able to serve anyone who walks through the doors with no regard for a ‘common bond.’”
Even NCUA staff acknowledged in their memo to the agency’s board that “the final rule represents a significant change in regulatory approach.” Nichols echoed this concern, noting that “today’s action would encourage credit unions to divert their member resources to finance commercial businesses, which will lead to safety and soundness concerns.”
Hundreds of bankers responded to ABA and state association appeals to send comment letters expressing opposition and concern about the proposal. In its own letter last August, ABA warned that 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. For more information, contact ABA’s Brittany Kleinpaste.