Member Business Lending

On June 18, 2015, the NCUA Board unanimously approved a proposal to Part 723 of NCUA's Rules and Regulations regarding the ability of federally-insured credit unions to make Member Business Loans (MBLs). The proposal would remove the prescriptive underwriting criteria and personal guarantee requirements of the current regulation, thereby eliminating the current waiver process. Instead, the proposal would allow credit unions to implement a principle-based risk management policy related to its commercial and business lending activities. In particular, this proposal would, among other things, remove or modify the following prescriptive limits and definitions:

  • The requirement for a personal guarantee
  • The 80 percent limit on Loan-to-Value ratios
  • The limit on unsecured MBLs
  • The requirement that staff have 2 years of direct experience
  • Detailed limits on construction and development loans
  • The restrictive definition of "associated borrower"
  • The 15 percent of net worth limit on loans to one borrower, which will now increase to 25 percent if the additional 10 percent is supported by readily marketable collateral

This proposal would comprehensively overhaul the way that NCUA approaches commercial lending, from both a regulatory and supervisory perspective. Currently, Part 723 considers commercial lending as synonymous with the member business lending definition under the Federal Credit Union Act (FCU Act). This proposal, however, would expand Part 723's scope to apply to commercial loans as newly defined under the proposal. The proposal would also delineate which loans are subject to the statutory MBL cap and those which are subject to the proposed safety and soundness policy and infrastructure requirements. 

Legislation has, again, been introduced in the 114th Congress that would provide relief from the credit union member business lending cap.  NAFCU will continue to pursue support and passage of legislation to increase or remove the arbitrary business lending cap that currently applies to credit unions. MBL related measures introduced so far in the 114th Congress include:

  • H.R. 1133: Introduced March 2, 2015 by Chairman of the House Veterans Affairs Committee, Rep. Jeff Miller (R-FL). The bill would exempt loans made to "veterans" (including anyone who served on active duty, and who was discharged or released under conditions other than dishonorable) from the member business lending (MBL) cap. This legislation would help to ensure that veterans have more resources to aid their success after their service.
  • The "Credit Union Small Business Jobs Creation Act" (H.R. 1188): Re-introduced on March 2, 2015 by Reps. Ed Royce (R-CA) and Greg Meeks (D-NY). The bill would lift the arbitrary member business lending cap from 12.25 to 27.5% of total assets. Under the bill, credit unions would need to meet the following criteria to be deemed eligible:
    • Must be considered well capitalized [currently 7% net worth ratio]
    • Must have at least 5 years of member business lending experience
    • Must be at or above 80 % of the current 12.25% cap for at least 1 year prior to applying
    • Must be able to demonstrate sound underwriting and servicing based on historical performance and strong leadership management 

NAFCU is working on getting similar legislation introduced in the Senate.

  • The "Credit Union Residential Loan Parity Act" (H.R. 1422): On March 18, 2015, Reps. Ed Royce (R-CA) and Jared Huffman (D-CA) introduced legislation to exempt certain residential loans from credit unions' federal statutory cap on member business lending.  The bill would exempt loans for non-owner-occupied, one- to four-unit dwellings from credit unions' statutory MBL cap, making it possible for credit unions to lend more to small businesses without running up against the current cap.
  • In May 2015, Senator Ron Wyden (D-OR) introduced legislation similar to H.R. 1422 that would also exclude loans for the purchase of one-to-four unit, non-owner-occupied buildings from the MBL cap.

NAFCU's Position on Member Business Lending

While recovery from the financial crisis remains fragile, credit unions have the capital to help America's small businesses thrive. However, due to the outdated member business lending cap, their ability to help stimulate the economy by providing credit to small businesses is hampered. Removing or modifying the credit union member business lending cap would help provide economic stimulus without costing the taxpayer a dime. In addition, it is worth noting that officials at the Treasury Department and the NCUA have expressed support for lifting the MBL cap. Several outside groups from all sides of the political spectrum have also endorsed the legislation including the Consumer Federation of America (CFA) and Americans for Tax Reform (ATR).

NAFCU has a strong history of supporting credit union member business lending and has testified before the Senate Banking and House Financial Services Committees on the importance of this issue. NAFCU would also support alternatives to a straight member business lending cap lift such as raising the minimum loan amount that would count against the member business lending cap. 

We are committed to pursuing all legislative avenues to maximize the possibility of this issue being considered moving forward. 

Issue Background Information

When Congress passed the Credit Union Membership Access Act (CUMAA) (P.L.105-219) in 1998, they put into place restrictions on the ability of credit unions to offer member business loans. Congress codified the definition of a member business loan and limited a credit union's member business lending to the lesser of either 1.75 times the net worth of a well-capitalized credit union or 12.25 percent of total assets. Also pursuant to section 203 of CUMAA, Congress mandated that the Treasury Department study the issue of credit unions and member business lending.

A January 2001 study by the Treasury Department and a 2011 study commissioned by the Small Business Administration's Office of Advocacy, both found that bank lending was largely unaffected by changes in the credit unions' business lending, and that credit unions have the ability to offset declines in bank business lending during a recession.

Recent Media Outreach

NAFCU has stayed at the forefront of this issue and continued to champion credit unions in major media nationwide.

Bankers Vow 'Vigorous' Opposition to Expanded MBL; NAFCU Responds (, June 23, 2015)

NAFCU Statement In Response ICBA's MBL Attack (June 22, 2015) 

Trade Associations Weigh In On MBL Proposal (, June 18, 2015)

NCUA Proposes Drastic MBL Regulation Changes (Credit Union Times, June 18, 2015)

NAFCU Statement on NCUA Board Proposal To Eliminate MBL Waiver Process (June 18, 2015) 

NAFCU Applauds Reps. Royce and Huffman Introduction of H.R. 1422, the "Credit Union Residential Loan Parity Act" (March 18, 2015)

Credit unions mean business (The Hill, March 11, 2015) 

MBL Relief Bill Introduced (Again) in Congress (, March 2, 2015)

MBL Bill Reintroduced (Credit Union Times, March 2, 2015)

NAFCU Hails Rep. Miller's Reintroduction of Legislation Excluding Veterans' Loans From MBL Cap (March 2, 2015)  

NAFCU Applauds Reps. Royce, Meeks Reintroduction of the 'Credit Union Small Business Jobs Creation Act of 2015' (March 2, 2015)  

NAFCU, SBA Agreement Aims to Expand Small Biz Loans (, February 26, 2015) 

Small Business Administration and National Association of Federal Credit Unions Join Forces to Solve the Entrepreneurial Credit Crunch (Yahoo! News, February 25, 2015) 

Small Business Administration and National Association of Federal Credit Unions Join Forces to Solve the Entrepreneurial Credit Crunch (MarketWatch, February  25, 2015) 

SBA Creates Another CU Alliance (Credit Union Times, February 25, 2015)  

SBA, NAFCU Signs MOU To Encourage Loans To Entrepreneurs (Credit Union Journal, February 25, 2015) 

Recent Policy Letters

Read recent letters from NAFCU to members of Congress on member business lending issues that affect credit unions and their members.

3-2-2015 NAFCU Letter in Support of the Credit Union Small Business Jobs Creation Act of 2015 (H.R. 1188)

5-12-2014 NAFCU's Letter to the House in Support of Member Business Lending (H.R. 688)

5-12-2014 NAFCU's Letter to the Senate in Support of Member Business Lending (S. 968)

6-15-2013 NAFCU letter regarding MBL

6-6-2013 NAFCU letter to Small Business

View all NAFCU Policy Letters

Recent Regulatory Comment Letters

March 5, 2014 - MBL amendments and improvements letter to NCUA

View all of NAFCU's Regulatory Comment Letters

Updated July 2015