Statement on Udall Amendment to HR 5297 - Increase of Credit Union Lending Cap

SACRAMENTO - Rod Brown, president & CEO of the California Bankers Association, released the following statement today regarding Senator Mark Udall’s amendment to H.R. 5297:

"CBA opposes the proposed amendment to H.R. 5297 by Senator Mark Udall to increase the credit union business lending cap from 12.25 to 27.5 per cent, more than double the amount permitted under current law, because we believe that it will significantly increase the competitive inequities against traditional banks and it fails to impose the necessary safety and soundness requirements on credit unions to manage the increased risks created by the expanded lending powers.

"Credit unions were specifically created to serve people of modest means, and because of this enjoy a number of substantial tax, statutory and regulatory benefits. However, a fundamental change has occurred within the credit union industry over the years that has created two very distinct and different types of credit unions. One group consists of traditional credit unions that continue to embody Congress’ original charge that they serve “people of small means.” This group is not the focus of the proposed amendment to H.R. 5297 by Senator Udall.

"The proposed amendment to H.R. 5297 seeks to benefit the second group, composed of diversified conglomerate credit unions that operate in almost every respect like commercial banks by offering commercial products and service businesses and corporations. Bank-like credit unions compete openly with traditional banks for customers offering the same types of commercial bank products and services but they do so with a very strong competitive advantage over traditional banks. Bank-like credit unions are not subject to the same supervisory and oversight examination by regulators, business tax obligations or community reinvestment requirements that commercial banks must assume. These disparities have created huge competitive inequities in the local marketplace for traditional banks. We believe the proposed amendment to H.R. 5297 will allow bank-like credit unions to stray further from their traditional mission and it will continue to increase the competitive equities for traditional banks.

"The proposed amendment allows bank-like credit unions to expand their business lending authority without a corresponding increase in regulatory supervision and oversight to manage the increased risks. As a result, we believe the proposal presents a significant threat to the long-term safety and soundness of the credit unions that use the expanded powers as well as their credit union members and the public at large."

About the CBA
Established more than 119 years ago, the California Bankers Association (CBA) is one of the largest state banking trade associations in the country. CBA leads the way in developing relevant educational and legislative solutions to some of California’s more pressing financial and banking issues, including adult financial empowerment, identity theft, financial privacy, and financial elder abuse. CBA’s membership includes more than 200 of California’s commercial, industrial and community banks and savings associations. For more information, visit www.calbankers.com.

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