Policy Documents

Research & Commentary: Credit Union Member Business Lending and Bill S. 2231

April 25, 2012

The U.S. Senate is considering a bill that would lift—but not eliminate—the current cap on credit unions’ ability to lend to businesses. Credit unions have made business loans since they began in the United States during the nineteenth century, but since 1998 they have been limited to lending 12.5 percent of their assets to member businesses. The bill by Sen. Mark Udall (D-CO) and Sen. Rand Paul (R-KY) would raise the cap to 27.5 percent.

Opponents of the bill contend it would not necessarily expand lending capacity, would hurt banking interests, might destabilize credit unions, and violates the historical purpose of credit unions.

Supporters of the proposal say raising the cap on credit union member business loans would open up new avenues of credit to small business where traditional banks have been unwilling to invest. According to the Small Business Administration, credit unions often lend to types of businesses that can’t get bank loans. The Credit Union National Association estimates the proposed loosening of restrictions on member business lending could spur creation of more than 108,000 new jobs. Proponents also say increased member business lending won’t hurt major banks: With those banks already controlling about 95 percent of the depository institution services market, they are unlikely to sustain a mortal wound if a burdensome regulation on their competition is lifted.

The following articles examine credit union member business lending, the proposed changes to the lending cap, and the proposal’s possible effect on the nation’s credit markets.


Banks, Credit Unions at Odds over Bill that Would Raise Lending Cap
Richard Craver of the Winston-Salem Journal examines the debate over the Small Business Lending Enhancement Act and the positions of both credit union supporters and banking opponents.

Conservatives Should Flock to Support New Congressional Bill
In an op-ed piece published in Fox and Hounds, a California business and political blog, Heartland Institute Vice President Eli Lehrer discusses the Small Business Lending Enhancement Act, which would lift the cap on the percentage of assets credit unions may lend to businesses, from 12.25 percent to 27.5.

Free-Market Groups Urge Senate to Consider Credit Union Deregulation
In a coalition letter, The Heartland Institute and 10 other free-market organizations ask members of Congress, including Sen. Harry Reid and Sen. Mitch McConnell, to loosen regulatory constraints on the amount of loans credit unions can make to business members.

Another Fight Brews over Member Business Lending
The Credit Union Times discusses recent developments in legislation that would lift caps on credit union member business lending.

Easing of Credit Union Restrictions Could Create 100,000 Jobs
Writing in The Heartlander digital magazine, Eli Lehrer explains the possible effects of an increase in the cap on member business lending.

Can Credit Unions Fill the Gap in Small Business Lending?
Out of the Storm News covers the debate over credit union member business lending and looks into whether member business lending can fill the gap in small business lending.

Can Credit Union Member Business Loans Meet the Need for More Credit to Small Businesses?
Katherine E. Howell-Best of the North Carolina Banking Institute examines whether credit unions can effectively serve the small business market through their member business lending products.

Cheney to Congress: CUs Will Help Those Ignored by Banks
Credit Union National Association President/CEO Bill Cheney argues in a letter to Congress that increasing the lending cap for credit unions would allow them to provide small businesses access to much-needed credit without putting taxpayer funds at risk.

Lawmakers Push to Allow Credit Unions to Give More Business Loans
Writing in FIRE Policy News, Jennifer G. Hickey reports on the push for credit unions to expand member business lending and the opposition from the banking industry.

ABA Issues: Credit Union Regulation
The American Bankers Association discusses the banking industry’s opposition to expanded member business lending, arguing that additional regulation is needed if credit unions are to expand their services.

A Brief History of Member Business Lending and Credit Unions
Elliott Kashner of Credit Union Strategy & Performance examines the history of small business lending and credit unions and the discusses possibilities for policy change.