Debate on Credit Union Lending Bill Heats Up

April 17, 2012

The Small Business Lending Enhancement Act (S. 2231) would, if enacted, make it easier for small businesses to obtain the financing they need to expand their businesses, hire new employees and maintain sustainable economic growth.

S. 2231 would raise the current, arbitrary credit union member business lending cap from 12.25 percent to 27.5 percent of the total assets of the credit union, reportedly injecting billions of dollars in new capital into the economy and creating an estimated 140,000 new jobs in the first year alone, all at no cost to the taxpayer.

Access to capital remains a top priority for America’s entrepreneurs and small-business community. Senator Mark Udall (D-Colo.), who sponsored the bill said, “[t]here’s just too many stories of business people who can’t get a loan from a bank who find their credit union is willing to help them out, to ignore this opportunity.”

Thirty percent of small-business respondents to NSBA’s 2011 Year-End Economic Report said they were unable to obtain adequate financing.  According to the U.S. Federal Reserve’s January 2012 Quarterly Senior Loan Officer Opinion Survey, over the previous three months, only 1.9 percent of domestic banks eased credit conditions “somewhat” for small firms, compared to 12.5 percent for larger firms.

Despite the potential benefits, S. 2231 is not without significant opposition.  The banking industry is staunchly opposed to this bill, claiming that it would effectively displace lending by tax-paying community banks and ultimately only benefits a small portion of credit unions. Opposition is not limited to the private sector as Members from both sides of the aisle have expressed their concerns.

“I think it would be a big mistake and devastating to community banks across the country,” said Sen. Richard Burr (R-N.C.).

Tim Johnson (D-S.D.), Chairman of the Senate Banking Committee, said “[f]rom the testimony of the witnesses at the Banking Committee hearing and the ongoing conversations over the past months, it is clear there is no consensus. If the Senate chooses to move forward on this issue, I urge the Senate to move forward carefully.”

As of now, it is anyone’s guess when this bill will be called up for a vote. However, NSBA will continue to urge lawmakers to support the provision.

Please take a few moments today and urge your Senators to support the legislation.