WASHINGTON—The American Bankers Association wasted little time Thursday in blasting NCUA’s new member business lending rule, stating again that the agency is a “rogue” cheerleader for credit unions and calling into question the CU tax exemption.
The NCUA board Thursday unanimously passed a new MBL rule that dramatically reworks the exiting MBL rule that had been in place since 2003.
“We’re dismayed that NCUA continues to act as a cheerleader for the industry it’s charged with supervising,” said ABA president and CEO Rob Nichols in a release. “Changing the way the business lending cap is calculated and providing a means to exponentially expand credit union business lending by selling off slices of loans is not regulatory relief – it is charter enhancement, plain and simple. Enabling a risky loan syndication program that will allow the credit union industry to have a much higher concentration in business loans is a sharp departure from the industry’s mission to serve people of modest means.”
Nichols contended that NCUA’s action Thursday would encourage credit unions to divert their member resources to finance commercial businesses, “which will lead to safety and soundness concerns. Every new business loan generated through this proposal represents lost federal tax revenue, and would likewise harm already strapped state coffers. 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.’”
Nichols asserted that NCUA is in the business of promoting the “explosive growth” of the credit union industry, rather than regulating it. He said the ABA will be urging lawmakers to take a close look at what this “tax-advantaged industry” has become.
The ABA sent letters to Congress following the MBL proposal and the proposed new field of membership guidelines questioning the agency’s judgement and actions on each, and then raising the issue of the CU tax exemption.
“This rogue agency has already gone well beyond what’s appropriate by facilitating a tax exemption that currently stands at $27 billion, but will grow exponentially as NCUA continues to act as a legislative body to broaden membership, business lending, investment capital and low-income designations in ways that are beyond belief,” Nichols stated. “Time after time, NCUA ignores the limits that Congress has placed and pursues changes that cater to credit unions with little regard to the risks posed by their actions or the consequences for taxpayers that must bear the ultimate cost to subsidize this industry.”
Prior to the NCUA board vote, NCUA Vice Chairman Rick Metsger made reference to many of the statements made by banks about credit union business lending, calling “the hypocrisy mind boggling.”
Metsger noted that the first credit union in the U.S., St. Mary’s Bank, was chartered to offer loans to neighborhood businesses. He said credit union business lending comprises 1.4% of all business loans in the U.S., that the average size of a member business loan is $217,000, and that only 36% of credit unions offer MBLs.
“There is also no significant difference between banks and credit unions on charge-offs with business loans,” said Metsger.