WASHINGTON—Credit union trade associations have reacted positively to the approval of NCUA’s final MBL rule, with NAFCU and CUNA hailing the reg as a big victory for credit unions, while NASCUS saying it will remain to be seen if the “proof is in the pudding.”
The NCUA board unanimously approved a final MBL rule Thursday during its open board meeting.
Stressing the importance of the final rule eliminating the member business lending waiver process and allowing credit unions to decide for themselves if a borrower should be exempt from a personal guarantee, NAFCU President and CEO Dan Berger said the trade association and its members “appreciate NCUA heeding our call to allow credit unions the flexibility to serve the small businesses within their communities. Removing the waiver process not only eases regulatory red tape, but it also provides credit unions the independence to safely and soundly address the needs of their small-business members. Today’s action ensures that credit unions can better meet the capital and liquidity needs of our nation’s small businesses, which are struggling to find such access from other lenders.”
By eliminating the waiver process, the final rule will allow credit unions to independently develop commercial underwriting standards commensurate with their own risk appetite.
NAFCU said it continues to advocate for broader changes in the MBL rules through legislation that would allow an exemption from the MBL cap for more credit unions.
CUNA was also positive in its assessment.
“Expanding credit union member business lending to empower credit unions with greater flexibility and autonomy in offering commercial loans is a major victory for America’s small businesses and job creators,” said CUNA president and CEO Jim Nussle. “We thank the NCUA for removing nearly all requirements on member business lending that are not included in the Federal Credit Union Act. CUNA worked closely with the agency to ensure the personal guarantee waiver would be effective 60 days after publication and we will continue to work with the agency to comment on guidance for the benefit of all credit unions.”
NASCUS President and CEO Lucy Ito said that as adopted, the spirit of the rule permits state innovation in adopting their own business lending rules.
“But the proof is in the pudding -- our concern is that the ultimate interpretation of the rule stays consistent with the intention expressed at the table today during the NCUA board’s discussion,” Ito said.
“In any event, allowing states to adopt their own state-specific MBL rules in the future is a key provision that NASCUS sought in the final rule,” continued Ito. “We also recommended that boards of credit unions offering business loans be required to approve a comprehensive, written commercial loan policy – which the board also included in the final rule.”
Ito said NASCU believes it is crucial that any financial institution engaging in commercial lending understand the nature of the differences between consumer and commercial credit.
“Now, the emphasis turns to engaging the credit union system about this new, ‘principles-based’ approach to commercial lending. NASCUS will be working with the state system to ensure that state regulators and federally insured, state-chartered credit unions are well-prepared to embrace this new approach,” said Ito.