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Last Day to Submit Your Comment on MBL to NCUA; Cornerstone Urges Modernization
Monday, August 31, 2015 7:00 AM

Today is the final day to submit your comment letter for the National Credit Union Association's proposed rule on member business loans (MBL). The Cornerstone Credit Union League has submitted its comment letter to NCUA, and credit unions can use it as a guide in crafting their letters today.

In the letter, Cornerstone SVP Regulatory Compliance Suzanne Yashewski expresses appreciation for NCUA's efforts to ease regulatory burdens, but reminds them that modernizing regulatory requirements will permit credit unions who are struggling under burdensome regulations to better serve members and the community.

Yashewski writes that Cornerstone supports NCUA's proposed shift from a prescriptive member business lending regulation to a principles-based regulation that provides additional flexibility to credit unions.

"Lending for business purposes is fully consistent with credit unions' mission to promote thrift and provide access to credit," Yashewski writes. "Small businesses rely on credit unions for access to loans; credit unions are serving a segment of the community that banks have ignored. In fact, small business lending is the fastest growing segment for credit unions. Many aspects of the proposal would remove unnecessary barriers to credit union small business lending and enable credit unions to better meet the lending needs of their small business members."

In summary, specific items addressed in the Cornerstone comment include:

  • MBL Cap
    Cornerstone supports the proposed change to the MBL cap calculation. Yashewski warns NCUA, "Don't be misled by the bankers' comments erroneously claiming that the proposal increases the MBL cap from 12.25% to 17.5% in violation of the Federal Credit Union Act ["FCUA"]. As written, the proposal is fully consistent with the limitations specifically expressed in the FCUA. '12.25%' is not mentioned in the FCUA section concerning the limitation on MBLs."
  • Elimination of Waivers
    Cornerstone strongly supports the elimination of all prescriptive requirements necessitating waivers. However, Yashewski notes, "The proposed rule retains the requirement regarding the limitation on the aggregate dollar amount of commercial loans to any one borrower or group of associated borrowers at 15% of net worth or $100,000, whichever is greater. We recommend that NCUA eliminate this provision as yet another unnecessary prescriptive requirement.
  • Small Credit Union Exemption
    Cornerstone supports an exemption for credit unions that hold a de minimis number and amount of commercial loans. "The proposal takes a step in the right direction by exempting a credit union from the risk management policy and infrastructure requirements if the credit union has both assets less than $250 million and total commercial loans less than 15% of net worth," writes Yashewski. "[W]e suggest making the exemption available to all credit unions through a de minimis commercial loan exemption. The asset threshold is not necessary, and such a change would provide regulatory relief to larger credit unions as well."
  • Definitions
    Cornerstone generally supports the proposed new definitions, including the new definition of "commercial loan," which will help clarify which loans are subject to the MBL cap and which loans are commercial loans that invoke safety and soundness provisions.
  • Collateral and Security
    Cornerstone supports eliminating the personal guarantee requirement. Under the proposed rule, a credit union would be able to make a loan without a personal guarantee when it is reasonably prudent. Guidance on factors to be considered here would assist credit unions in better understanding what an examiner may deem prudent.
  • Construction and Development Loans
    Cornerstone supports the proposed amendments to the construction and development loan requirements.
  • State-Chartered Credit Unions
    Cornerstone strongly supports the dual chartering system and encourages NCUA to provide states with flexibility to adopt rules appropriate to their region. Therefore, we support "Option C" in the proposal which would grandfather existing state MBL rules and would permit other state supervisory authorities to submit their own state rules for consideration.

Review this comment letter in its entirety: Proposed Amendments to Part 723, Member Business Loans (MBLs)

It's critical for credit unions to voice their individual concerns and observations with regulatory proposals. You can get help writing your comment from Cornerstone's Compliance Comment Call web page or contacting Cornerstone SVP Regulatory Compliance Counsel Suzanne Yashewski at 512-853-8516, 800-442-5762, Ext. 8516, or syashewski@cornerstoneleague.coop.