While credit union member business loans (MBL) have experienced strong growth over the past year, significant challenges remain.
A group of credit union lenders addressed MBL opportunities and challenges Tuesday during a roundtable discussion at the CUNA Lending Council Conference in Fort Lauderdale, Fla.
Credit union MBLs have grown 12% during the past 12 months, and the number of credit unions offering MBLs grew to nearly 2,300 as of year-end 2014, reported session moderator Bob Stowell, senior vice president/chief strategy officer for US Federal Credit Union in Burnsville, Minn.
But he cited several MBL issues credit unions face, including:
►MBL caps. Nearly 500 credit unions have reached or are approaching their MBL cap of 12.25% of assets, hindering their ability to serve members.
Growing MBL balances put pressure on many credit unions to either limit their business lending or use loan participations.
Most disturbing, Stowell says, is that the MBL cap is a barrier to entry into offering business services: “It’s causing credit unions to not get into MBLs. This is a significant issue.”
Stowell believes consumers would benefit from legislation raising the MBL cap from 12.25% of assets to 27.5%.
“We need to get the word out regarding MBLs,” Stowell said, “and publicize the ways MBLs benefit consumers. We can get legislation introduced, but we need to push it forward.”
►NCUA proposed rule 723, which would change some of the agency’s MBL rules. Lenders must be prepared for this, especially regarding their MBL policies, Stowell says.
“Be pristine about your policies,” he advised. “Policies need to be crystal clear regarding concentration limits and so on. The better and more specific your policies are, the better your exam will go.”
►Competition. “It’s not just banks,” Stowell said. “There are other disruptors,” including online lenders such as OnDeck Capital, Kabbage, Lending Club, and Prosper.
Read more CUNA Lending Council Conference coverage.