WASHINGTON – The banking lobby is irate over NCUA’s exemptions for more than 550 credit unions from the congressional member business loan cap just as Congress is poised to once again defeat the credit unions’ efforts to raise the cap.
“The regulator’s move was basically obscene in their completely ignoring the will of Congress,” said Paul Merski, executive vice president of the Independent Community Bankers of America, which has succeeded for over a decade in convincing Congress to hold the MBL cap at 12.25% of assets.
The banking lobbyist was referring to NCUA’s move over the past month to approve 553 credit unions, including some of the biggest in the country, for low-income status, thereby exempting them from the MBL cap and other regulations.
Among the credit unions approved as low-income are some of the biggest in the country, incuding billion-dollar credit unions: Michigan State University FCU; American Heritage FCU; Polish & Slavic FCU; Kern Schools FCU; GTE FCU; Local Government Employees FCU; Tyndall FCU; and Barksdale FCU.
The NCUA move, insisted ICBA’s Merski, will have the unintended effect of erasing any last chances of the MBL bill passing this year—for a sixth straight Congress. “I think the credit union industry may have shot themselves in the foot by end-running Congress,” he told the Credit Union Journal, suggesting that NCUA’s approval of 1,700 credit unions for low-income status (1,200 credit unions already earned the designation) will eliminate any argument that an increase in the MBL cap is urgent. “Now there’s no room for the bill,” said Merski.
Moreover, the bankers are confident the expanded powers for some of the nation’s biggest credit unions will effectively put the industry’s tax exemption before Congress—or at least that’s what they hope. “They’re one step closer to being taxed,” said ICBA’s Merski.
“NCUA’s action will ultimately cause credit unions to lose their tax exemption,” said Keith Leggett, executive vice president for the American Bankers Association.
NCUA said its low-income expansions, part of a broader White House initiative announced last month to expand assistance in drought-stricken areas, was legal. "In implementing the LICU-eligibility initiative, NCUA followed the law and the agency's rules,” said John Fairbanks, public affairs specialist for the agency. “The initiative implements a 2008 rule under which NCUA identifies credit unions that meet the definition of a low-income credit union, notifies them of their eligibility, and then eligible credit unions opt in, if they choose.”