Credit unions stand ready to support small business with increased access to capital, but the current environment makes this difficult, the Credit Union National Association (CUNA) wrote to members of Congress Thursday morning. In a letter addressed to Reps. Scott Garrett (R-N.J.) and Carolyn Maloney (D-N.Y.), CUNA President/CEO Jim Nussle said that in order for the economy to recover, small businesses need access to credit.
“Credit unions across the country want to be a greater resource to help consumers, and our members stand ready to support small businesses with increased access to capital,” he wrote. “In order to do so, Congress needs to remove the arbitrary barriers that severely restrict the ability of credit unions to provide loans to small businesses, namely the statutory lending limits and a disparity in the treatment of certain residential loans.”
Garrett and Maloney are the chair and ranking member, respectively, of the House Financial Services subcommittee on capital markets and government sponsored enterprises. The subcommittee conducted a hearing Thursday on the fourth anniversary of the Jumpstart Our Business Startups (JOBS) Act.
As the subcommittee considered issues surrounding small businesses and job growth, CUNA encouraged it to support two pieces of legislation: the Credit Union Small Business Job Creation Act (H.R. 1188) and the Credit Union Residential Loan Parity Act (H.R. 1422).
H.R. 1188, introduced by Reps. Ed Royce (R-Calif.) and Gregory Meeks (D-N.Y.), would raise the cap on credit union business lending to 27.5% of assets, above the 12.25% required by current statute.
“The current cap severely restricts the ability of credit unions to provide loans to small businesses at a time when small businesses are finding it increasingly difficult to obtain credit from other types of financial institutions, especially larger banks,” Nussle wrote. “A Small Business Administration report showed that 80 percent of lending created by increasing the cap would be new lending. In other words, credit unions are offering small business loans that large banks simply will not provide.”
H.R. 1422, introduced by Royce and Rep. Jared Huffman (D-Calif.), would amend the Federal Credit Union Act to exempt loans to purchase one- to four-unit non-owner occupied residential dwellings from the member business lending cap.
Currently, similar bank loans counts as residential loans, but when a credit union makes the loan it is classified as a business loan.
“Enactment of this legislation would not only correct this disparity but it would also enable credit unions to provide additional credit to borrowers seeking to purchase residential units, including low-income rental units,” Nussle wrote. “If this important legislation were enacted, credit unions would be better able to meet the needs of their members and affordable rental housing would become available for more Americans.”
Both bills have been referred to the House Financial Services Committee.