It’s odd that the credit union industry is using the ongoing global pandemic to make a desperate push for expanded business lending authority and broader “common bonds.” When Congress gave credit unions the tools weeks ago to make forgivable loans to struggling small businesses through the Paycheck Protection Program, they weren’t interested.
Through the end of June, less than two percent of PPP funds were distributed by credit unions, even though such loans don’t count against the existing business lending cap.
When the Paycheck Protection Program was rolled out in early April, Congress gave credit unions every opportunity to participate. But rather than stepping up and using the PPP to help small businesses, large credit unions are lobbying for additional lending authority and capacity they don’t need.
If large credit unions would stick to their original mission and purpose, the public would be well served. Sadly, that’s not the case. Worse, the entity that’s pushing the boundaries on their behalf is the government agency that is supposed to oversee them: The National Credit Union Administration.
The NCUA, in its unrelenting zeal to promote credit unions rather than govern them, has dusted off its wish list for credit union growth and expansion and is trying to attach its gifts to bills and regulations under the pretense that these issues are suddenly related to the pandemic.
If the NCUA gets its way, it will:
EXPAND MARKETS FOR CREDIT UNION GROWTH. Currently, business loans that lack government backing can make up only 12.25 percent of most credit unions’ balance sheets. But during the pandemic recovery period, the NCUA wants to raise that cap to 20 percent — something for which the industry has long lobbied. This proposal steers credit unions further away from their mission of helping people of “small means” and further into the province of commercial banking. Oddly, it also pushes them into an area of lending — to businesses — where most credit unions don’t want to go.
REACH FURTHER BEYOND THE CREDIT UNION MISSION. Other than residential mortgages, credit unions are limited in offering loan terms longer than 15 years. The NCUA wants to permanently double the federal credit union loan maturity limit to 30 years, further expanding the potential to grow their business lending markets long after the pandemic has eased.
MAKE “COMMON BOND” REQUIREMENTS MORE MEANINGLESS. NCUA is pushing to extend opportunities for credit unions to expand into new membership bases, continuing to make the idea of a “common bond” a dead letter.
CONTINUE TO MOVE AWAY FROM GEOGRAPHICAL REQUIREMENTS. Current regulations require a credit union with more than one “common bond” among members to offer its services in “reasonable proximity” to a new target group. The NCUA says this requirement is now outdated. It wants greater “flexibility.”
As the credit union industry continues to evolve, driven by the market expansion needs of its larger members, the cooperative principles that have guided its operations for decades have been rapidly reduced to meaningless promotional slogans. The “common bond” that guides them now is the hunger for market share – with higher risks, fewer restraints, and still no taxes to pay.
If their push to enhance business lending were truly sincere, we would have seen evidence by now. They had their chance with PPP, and to this point, they’ve walked right past it.