WASHINGTON (6/17/15)--For nearly 100 years, credit unions have provided credit in good times and bad to their members, including those who own small businesses. Credit unions’ support included providing small business loans during the recent financial crisis when banks dropped the business lending ball. But credit unions’ ability to support those members is jeopardized unless the U.S. Congress passes H.R. 1188, the Credit Union Small Business Jobs Act, CUNA told a key House subcommittee Tuesday.
The House Financial Services subcommittee on capital markets and government-sponsored enterprises subcommittee held a hearing Tuesday on “Legislative Proposals to Modernize Business Development Companies and Expand Investment Opportunities, H.R. 2187, the Fair Investment Opportunities for Professional Experts Act and the Small Business Credit Availability Act."
In a letter submitted for the hearing record, CUNA President/CEO Jim Nussle urged the subcommittee to bear in mind the role credit unions play in our nation’s economy, in good times and bad.” The letter was addressed to subcommittee Chair Scott Garrett (R-N.J.) and subcommittee ranking member Carolyn Maloney (D-N.Y.).
Nussle’s letter included a chart comparing credit union loans to those made by banks during the Great Recession. “Credit unions were there for small businesses” when banks pulled back their business lending, “but if the Credit Union Small Business Jobs Act (H.R. 1188) is not enacted, the credit unions with experience and capacity to help small businesses will not be able to be there during the next crisis,” he wrote.
H.R. 1188 would enable well-capitalized credit unions with demonstrated success in member business lending (MBL) to more fully meet small businesses’ credit needs by increasing the statutory credit union MBL cap to 27.5% of total assets, said Nussle.
“In 1998, credit unions were subjected to an arbitrary cap on business lending that constrains our members to 12.25% of total assets. Specifically, the cap was imposed on credit unions as part of a must-pass piece of legislation that would have severely limited consumer access to the credit union system,” Nussle wrote, referring to the Credit Union Membership Access Act. Now, many credit unions are rapidly approaching the cap. Others don’t engage in business lending because their investment likely wouldn’t be returned before cap’s impacts are felt.
Ensuring small business members have access to the capital they need is a priority for credit unions and central to the mission Congress bestowed on credit unions nearly 100 years ago, he said.
“Credit unions understand that in order for the economy to fully recover, small businesses need access to affordable credit as well as a variety of sources of equity to develop healthy capital structures to help their business grow and create jobs. Credit unions have capital to lend, a history of prudent and safe small business lending, and a mission to help provide access to credit to their members—including their small business-owning members,” he said.
Raising the cap could result in an additional $16 billion loaned to small businesses in the first year, helping them to create more than 150,000 jobs.