WASHINGTON – The banking lobby was irate last week over NCUA’s announcement that 1,000 credit unions are immediately eligible for low-income status and thus exempt from the congressionally mandated cap on member business loans.
"NCUA has taken advantage of a natural disaster to sidestep and leapfrog Congress again, by being a cheerleader for credit unions rather than a strong regulator," said Don Childears, president of the Colorado Bankers Association, of the maneuver coupled with drought disaster relief. "NCUA used a temporary drought to make a permanent change that skirts a congressional limit by allowing unlimited tax-subsidized lending."
The NCUA moves comes as legislation that would lift the 12.25% of assets cap on MBLs has been stalled in Congress for the past decade and has diminished chances of passing this year.
“The NCUA’s decree granting unlimited member business lending authority to more than 1,000 tax-exempt credit unions goes against the will of Congress and any rational regulatory policy authority,” said the Independent Community Bankers of America. “Lawmakers set reasonable statutory caps on business lending by credit unions because these tax-subsidized institutions were established to serve people of modest means with a common bond.”
“The administration and NCUA appear to be exploiting the nation’s drought conditions to rationalize these designations—despite the fact that less than half of these credit unions are in states with extreme drought conditions,” said the ICBA. “Highly controversial legislation to expand business-lending authority has failed to advance in Congress for a decade, but the credit union regulator has thumbed its nose at the legislative branch in favor of its own aggressive actions to dramatically expand the tax-exempt credit unions’ powers.”
NCUA, which has qualified 1,200 credit unions for its low-income designation, has merely notified an additional 1,000 credit unions that its field of membership, which may include inner cities and lowly paid enlisted military personnel, are eligible for the designation now. The designation allows credit unions to accept non-member deposits and exempts them from a variety of rules, including the cap on member business loans.