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American Bankers Association provies list of reasons to keep business union lending cap

A representative from the American Bankers Association recently provided senators with a list of reasons why they should not allow credit unions to take on more business lending.

Testifying before the Senate Banking, Housing and Urban Affairs Committee, ABA Chairman Stephen Wilson discouraged a proposal to lift the current member business lending cap and said the move would effectively turn credit unions into tax-exempt banks.

“There is a limitation on business lending, because credit unions are tax exempt and this tax exemption is meant to be targeted at people of small means,” Wilson said in his testimony, TNBankers.org reports.

During the hearing, Wilson also said that the measure would lead credit unions to reduce their non-housing-related consumer loans and focus on business lending. Furthermore, Wilson said, the measure does not require credit unions to notify members that they could see a reduction in consumer loans or require members to approve an expansion in business lending.

The bill, Wilson said during his testimony, “is nothing less than legislation that would allow a credit union to look and act just like a bank, without the obligation to pay taxes or have bank-like regulatory requirements,” according to TNBankers.org.

The bill, introduced by Sen. Mark Udall (D-Colo.), would raise the member business-lending cap from 12.25 percent to 27.5 percent. Identical legislation has been introduced in the House by Rep. Ed Royce (R-Calif.).

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