MBL: If Banks Win, CUs Lose
All CUs would benefit from an increase in the member business lending cap.
The credit union movement has been working on getting the member business lending [MBL] cap raised from 12.25% of assets for about 10 years now.
With Senate Majority Leader Harry Reid recently standing on the Senate floor and calling for a vote on S-2231, which would raise the cap to 27.5% of assets, we are closer than we have ever been to getting a vote on this proposal.
With credit union and bank action alerts and emails revving up around this issue, some of you may be wondering why this issue is important to your credit union.
There are a variety of reasons why it’s vitally important for all credit unions to engage staff and members around business lending:
History reminds us it's wise
Over the past 30 or so years, credit unions have periodically engaged with members of Congress on issues of importance.
Two of the bigger initiatives were the push to allow credit unions to offer share draft accounts and, of course, the huge battle around HR 1151, the Credit Union Membership Access Act, in 1998.
In both of these cases there were credit unions that had no plans to offer share drafts and no plans to move beyond a single-sponsor charter. Some of these credit unions not only did not engage on these issues, a few actively opposed the credit union grassroots response.
How do those decisions look in retrospect? And perhaps more to the point, how many credit unions out there today are single-sponsor and do not offer share drafts?
Consumer preferences change
These past battles remind us that times change and so do consumer preferences. If you talk to most credit unions today that offer member business lending, they'll tell you they started the program because members asked for business services.
With more technology tools available all the time, the barriers to starting a small business are falling. With a tech-savvy generation of young Americans entering the workforce, the demand for business services will likely only increase in the future.
Supporting lifting the MBL cap now may well help your credit union offer a service your members may begin asking for in the future.
It's the cooperative thing to do
Credit unions are strongest when they work together as a team. But teamwork involves give and take.
Although credit unions are the same in structure and purpose, it's also true they’re different in many ways. There are community-chartered credit unions, state-chartered credit unions, credit unions that serve military populations or government employees ... and so on.
If credit unions neglect the wider movement and only work for their own individual best interests on legislative issues, it will be exceptionally difficult for credit unions to be successful in the future. So engaging on S-2231, even if your credit union has no plans to offer business loans, is the right thing to do for the movement.
If banks win, credit unions lose
Banks have been vigorous and vocal in their opposition to S-2231 and the overall MBL issue. (Surprise!) Credit unions have other issues that one day we hope will be front and center on the legislative agenda, including supplemental capital and exam reform.
We cannot live with the results of the bankers’ way of thinking and we can’t let the noise of their opinions drown us out when the page is turned from MBL onto other issues.
Credit unions need to chart their own future—and not let the banking community do it for us. A win on MBL helps us do that.
JOHN RADEBAUGH is president/CEO of the North Carolina Credit Union League.