R Street welcomes bill to loosen small business lending rules
WASHINGTON (May 16, 2013) – The R Street Institute applauds today’s reintroduction by Sen. Mark Udall, D-Colo., of legislation that would make it easier for small businesses to obtain credit through the nation’s credit union system.
Dubbed the Small Business Lending Enhancement Act of 2013, the measure would loosen rules imposed on credit unions in 1998, following heavy lobbying from the banking industry, that limit how much they can loan to business members.
Udall’s bill would raise the member business lending cap to 27.5 percent of a credit union’s assets from the current 12.25 percent. To qualify for the higher cap, a credit union must be classified as well-capitalized, demonstrate five years of experience underwriting member business loans and must have exceeded 80 percent of its current cap for each of the last four quarters.
“The current cap is arbitrary, does nothing to enhance credit union solvency, limits competition among lenders and leaves many small businesses underserved,” R Street Senior Fellow R.J. Lehmann said. “Credit unions long have served as a source of lending for businesses who couldn’t find it elsewhere. As we at R Street demonstrated in a report last year, raising the cap offers a path to free up to $13 billion in capital and spur creation of as many as 140,000 jobs.”
Udall previously sponsored similar legislation in the 112th Congress. A companion bill, H.R. 688, the Credit Union Small Business Jobs Creation Act, was introduced earlier this year by Rep. Ed Royce, R-Calif., and Rep. Rep. Carolyn McCarthy, D-N.Y.
