WASHINGTON — Although they stood united in an effort to delay pending interchange rules, bankers and credit unions once again turned against each other Thursday, this time over a bill to expand business lending.
Lawmakers have re-launched an effort to increase credit unions' business-lending cap beyond the current limit of 12.25% of a credit union's assets.
A bill reintroduced in March by Sen. Mark Udall, D-Colo., would allow a credit union to apply with the National Credit Union Administration to make business loans up to 27.5% of its assets, and a similar bill is pending in the House.
At a Senate Banking Committee hearing on Thursday, credit union executives said the legislation would benefit the economy.
"This bill will not only help credit unions, but more importantly it will help America's small businesses," said Michael Lussier, the president and chief executive officer of Webster First Federal Credit Union in Worcester, Mass., and the chairman of the National Association of Federal Credit Unions.
But for banks, long opposed to credit unions' tax-exempt status, the bill is a non-starter. They said expanding credit unions' business-loan cap, which would intensify competition between the industries, is not consistent with credit unions' core mission of serving "people of modest means."
"Tax exemption is meant to be targeted to people with small means, not real estate developers," said Stephen Wilson, the chairman and chief executive officer of LCNB National Bank in Lebanon, Ohio, and the chairman of the American Bankers Association.
Deborah Matz, the chairman of the NCUA, testified that the current business-loan cap is "artificially low." She argued that the current limit impedes credit unions — which must focus lending efforts on home mortgages — from diversifying their portfolios.
"I view" a higher cap "as a safety and soundness benefit, not as increasing the risk," she said.
But Noah Wilcox, president and chief executive officer of Grand Rapids State Bank in Grand Rapids, Minn., said increasing the business-loan capability without addressing credit unions' tax status gives them an unfair advantage.
"Credit union business lending is an immediate threat to my bank," he said.
