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June 28, 2010
Action Alert: Senator Udall Offers Amendment to Raise Credit Union Business Lending Cap
WASHINGTON
– Senator Mark Udall (D – CO) offered an amendment (SA 4443) that would lift the member business lending (MBL) cap for credit unions to 27.5 percent of their total assets from the current limit of 12.25 percent of assets. Udall is seeking to attach this amendment to an
AmBA
supported bill (H.R. 5297), the Small Business Lending Fund Act. H.R. 5297 proposes to create a $30 billion fund to provide capital for banks with assets under $10 billion to increase their small-business lending. Sen. Udall’s amendment is nearly identical to legislative language proposed by the Treasury Department on May 25th that would permit well-capitalized credit unions with at least a five-year history of making business loans to increase their business lending authority to 27.5 percent of assets.
AmBA
strongly opposes the Udall amendment. Please send a letter to your senators opposing the Udall amendment and also ask your employees to do so. Click here to send letter.
June 17, 2010
Small-Loan Proposal Would Reinforce CUs’ Original Purpose
The National Credit Union Administration’s proposal to enable federal credit unions to offer short-term, small-amount loans as a viable alternative to payday loans would point credit unions back toward their basic charter purpose -- which many have largely abandoned -- of serving people of small means,
AmBA
said in a comment letter.
AmBA
pointed out that, according to NCUA data, only 532 federal credit unions offered micro consumer loans in 2009 and only 279 -- 5.9 percent of all federal credit unions -- offered payday loans.
AmBA
, while supporting the proposal, emphasized that the NCUA should have realistic expectations about the short-term, small-amount loan program. “AmBA recommends that the NCUA Board conduct consumer research to determine which features of the product are important to potential payday borrowers and survey [credit unions] that are currently offering payday loans to determine their experience with [such loans],” the association said.
NCUA: Deposits in Problem Credit Unions Rose in May
NCUA reported that the number of problem credit unions (slide 8) fell in May by 6 to 351 credit unions. However, the percentage of insured shares (deposits) in problem credit unions rose by 29 basis points in April to 6.23 percent (slide 9). NCUA reported that problem credit unions held $45.3 billion in shares (deposits). Assets in problem credit unions increased by $2.4 billion in May to $51.6 billion (slide 10). Three credit unions failed in May, yielding a year-to-date total of 15 credit union failures (slide 15).
June 2, 2010
AmBA Urges NCUA to Seek More Balance in Proposed Merger Rules
The National Credit Union Administration should seek a more balanced and consistent approach between mergers within the credit union system and those with partners in the broader financial regulatory framework,
AmBA
said Friday in a comment letter.
The association was commenting on the NCUA’s proposed rules that are intended to clarify federal credit union directors’ fiduciary duties; establish procedures for credit unions merging into banks; and also modify existing procedures for their conversions to mutual savings banks and mergers with other credit unions.
“[T]he proposed rules create an elaborate and difficult set of procedures that actively discourages and places at financial peril any credit union board of directors that would consider exiting the credit union system,”
AmBA
said. The association emphasized that the rules are not the work of a fair and impartial regulator.
Instead, they reflect “a deep-seated bias against institutions that may choose to leave the credit union system,”
AmBA
said. The NCUA should “balance the merger requirements to have both types of transactions subject to similar rules. There is no justification for imposing such a higher degree of burden of those wishing to merge with noncredit union partners.” Read the letter. For more information, contact
AmBA
's Dawn Causey.
May 28, 2010
Treasury Would Support Raising Biz-Lending Cap for Some CUs
The Treasury Department would support increasing the member business-lending cap for certain well-qualified credit unions from 12.25 percent to up to 27.5 percent of total assets, Secretary Timothy Geithner said Tuesday in a letter to House Financial Services Committee Chairman Barney Frank (D-Mass.). Geithner said the cap could be raised for credit unions that have been near the 12.25 percent limit for four consecutive quarters; are well capitalized; have no less than five years of experience underwriting and servicing member business loans; have strong policies and experience managing such loans; and satisfy other standards that the national Credit Union Administration has established to maintain safety and soundness. "We would suggest that member business-loan growth for eligible credit unions be limited to no more than 30 percent annually," he said. "[T]he NCUA [also] should be given the authority to set rules creating intermediate business-loan limits and to require approval before any credit union can move to the next higher limit." Geithner attached to the letter legislative language reflecting Treasury's approach.
AmBA
and the state bankers associations have long maintained that expanding credit unions' already broad business-lending authority would substantially increase their risk exposure and enable them to stray even further from their traditional mission of serving consumers -- especially those of modest means. "For some individual businesses, they will get a tax subsidized loan and in their narrow perspective that will be beneficial," AmBA President and CEO Ed Yingling said in a Wall Street Journal article. But he added that with a massive federal deficit, tax-exempt loan activity that will benefit a few businesses would be unhealthy for taxpayers as a whole.
NCUA: Line of Credit to Mortgage Company Does Not Qualify for Business Loan Exception
In a legal opinion letter, NCUA ruled that a line of credit provided by a credit union to a mortgage company is not entitled to an exception from the agency’s member business loan (MBL) rules. Lawyers for an unnamed credit union had asked the agency for a legal opinion hoping that because the mortgage company will be assigning liens on one-to-four family dwellings that the line of credit would qualify under an exception from the MBL rule. “The [credit union] is lending to the company and this exception applies where the dwelling is the primary residence of the borrower,” NCUA wrote. The proposed line of credit does not qualify for the MBL exception which excludes loans fully secured by a lien on a one-to-four family dwelling that is the borrower’s primary residence. “The term ‘borrower’ in the exception refers to the MBL borrower… Even if the company’s homebuyers are [credit union] members, they are not borrowers under the MBL, but a separate loan agreement with the company,” said NCUA. NCUA further noted that the homebuyers are not obligated to repay the business loan.
FTC: Privately Insured Depositories Must Disclose that Funds Are Nor Federally Insured
The Federal Trade Commission approved a final rule requiring depository institutions that lack federal deposit insurance to disclose that information to consumers. There are currently almost 170 privately-insured credit unions. The requirement was a part of the Federal Deposit Insurance Corporation Improvement Act, which directed FTC to write disclosure regulations. Among other things, FTC’s rules require institutions without federal deposit insurance to disclose that they are not federally insured and that the federal government does not guarantee consumers will get their money back if the institution fails. These disclosures must be made on account statements, in advertising, and inside branches at deposit windows. NCUA Chairman Debbie Matz applauded the decision saying: “In these uncertain and difficult economic times, consumers should know more about how their money is insured, and should know that the federal deposit insurance provided by the National Credit Union Share Insurance Fund is the best option for credit union members."
May 27, 2010
Treasury Would Support Raising Biz-Lending Cap for Some CUs
The Treasury Department would support increasing the member business-lending cap for certain well-qualified credit unions from 12.25 percent to up to 27.5 percent of total assets, agency Secretary Timothy Geithner said Tuesday in a letter to House Financial Services Committee Chairman Barney Frank (D-Mass.).
Geithner said the cap could be raised for credit unions that have been near the 12.25 percent limit for four consecutive quarters; are well capitalized; have no less than five years of experience underwriting and servicing member business loans; have strong policies and experience managing such loans; and satisfy other standards that the national Credit Union Administration has established to maintain safety and soundness.
"We would suggest that member business-loan growth for eligible credit unions be limited to no more than 30 percent annually," he said. "[T]he NCUA [also] should be given the authority to set rules creating intermediate business-loan limits and to require approval before any credit union can move to the next higher limit." Geithner attached to the letter legislative language reflecting Treasury's approach.
AmBA
and the state bankers associations have long maintained that expanding credit unions' already broad business-lending authority would substantially increase their risk exposure and enable them to stray even further from their traditional mission of serving consumers -- especially those of modest means.
Raising the cap also would benefit only a handful of mostly large, aggressive, growth-oriented credit unions that have abandoned their mission of serving small-means consumers. In fact, only 37 of the nearly 7,600 credit unions, or about one-half of one percent, are at or near their congressionally mandated 12.25 percent lending cap.
"For some individual businesses, they will get a tax subsidized loan and in their narrow perspective that will be beneficial," AmBA President and CEO Ed Yingling said in a Wall Street Journal article today. But he added that with a massive federal deficit, tax-exempt loan activity that will benefit a few businesses would be unhealthy for taxpayers as a whole. Read the letter. For more information, contact
AmBA
's Keith Leggett
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