ABA warns credit union lending bill would negate existing safeguards

Legislation to make it easier for credit unions to underwrite large-scale commercial real estate development projects undermines their congressionally mandated mission to serve people of modest means in underserved areas, the American Bankers Association said last week in a letter to the bill’s sponsors. The Member Business Loan Expansion Act, sponsored by Reps. Vicente Gonzalez (D-Texas) and Brian Fitzpatrick (R-Pa.), would double the current exemption for small loans and expand credit union access to low-cost sources of funds for business loans.

ABA noted that the limits set in existing laws such as the Credit Union Member Access Act were intended to prevent the credit union tax subsidy from being used to support commercial rather than consumer lending. While CUMAA’s relaxed membership rules led to substantial growth in credit union membership and assets, it did at least place some restrictions on credit union business lending, the association said.

“Likewise, the small loan exemption was tailored to ensure that credit unions have sufficient lending authority to meet the credit needs of their members, without allowing them to stray from their congressionally mandated mission of serving people of modest means,” ABA said. “This proposed legislation threatens to undermine those carefully crafted guardrails.”