• Credit Union Expansion of Business Lending
  • April 18, 2017 | Author: Christopher R. Rahl
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • In March of 2016, the National Credit Union Administration (NCUA) published a final rule intended to modernize its member business loan (MBL) rules. The final rule shifted the NCUA's prior, very restrictive approach to MBLs, to broad principles intended to provide greater flexibility and autonomy for federal credit unions and federally-insured state credit unions to provide business loans to its members. Before this change, credit unions were not permitted to make any MBL that would cause the total amount of all MBLs to exceed the lesser of 1.75 times the credit union's net worth or 1.75 times the minimum net worth under the Federal Credit Union Act (FCU Act) for the credit union to remain well capitalized. The NCUA's final rule became effective on January 1, 2017 and permits credit unions to purchase business loans or participations in business loan pools outside of the 1.75 asset/net worth caps if the loans were originated by other lenders (including other credit unions) and are not to members of the purchasing credit union. Prior to the final rule's effective date, the Independent Community Bankers Association (ICBA) filed suit in the United States District Court for the Eastern District of Virginia, challenging the NCUA's authority to implement the final rule. The lawsuit contended that the final rule violated the provisions of the FCU Act and furthered the unfair competitive advantage that tax-exempt credit unions have over banks. The ICBA's suit was dismissed on January 24, 2017, leaving the NCUA's final rule intact. Expanded credit union business lending activities are likely. Please contact Christopher Rahl for questions concerning this topic.