The issue that surrounds raising the member business loan cap (from 12.25% to 27.5% of the credit union’s assets) should not be about banks versus credit unions; it’s about repairing a crumbling economy, creating jobs and building communities, says Marcus Schaefer, President/CEO of Truliant Federal Credit Union ($1.5 billion, Winston-Salem, NC).
Instead of ongoing in-fighting, the issue should focus on providing the hometown, small business owner with the resources and support to preserve and create jobs, put more people back to work and save families from losing their home.
Unfortunately instead it’s become a tired old tune of banks versus credit unions--the “us” against “them” fight that seems to never be resolved because lobbyists have told the banking industry that if they “allow” credit unions to make more business loans they will essentially lose, Schaefer says.
He adds that community bank and credit union in-fighting is exactly what the large, multi-national banks want. Allow big banks to continue to dominate the market, while community based financial institutions squabble, he says.
“This is about political rhetoric,” he explains. “Community bankers are being drawn into this argument by the trade associations. Essentially the trade associations are telling the banks that we all have a common enemy, which are the credit unions--let’s collectively go after them to save our industry.”
However, Schaefer says that he’s had numerous private conversations with community bank presidents and CEOs surrounding a variety of “bank versus credit union” type arguments and he says that essentially everyone has the same ultimate goal of helping community businesses.
Credit unions and community banks could demonstrate how working toward a common goal would be mutually beneficial if only they could ignore the political chatter, Schaefer says.
“Who is the enemy?” Schaefer challenges. “It’s not the credit unions that caused the huge financial crisis, it's the large banks that were bailed out. Large banks do plenty of business lending and are out there making a lot of small business loans.”
“If you look at it logically, we (community banks and credit unions) really have a common cause against large banks. Our community banks are absolutely devastated, barely keeping up with TARP payments, some have gone under. All in deep trouble, but not because of the credit union industry.”
“My message to community banks and credit unions is that this is about community based financial institutions being able to compete in the marketplace,” Schaefer says. “Competition is healthy, however instead we are nipping at each other when we should be bonding together to work against the big entity. In the end the big banks are still walking away with the business while we are fighting.”
He says that there is, “a lot of pie out there” and if community banks and credit unions could work together and just take away 5% of big bank business, community banks, credit unions and business owners will all win.
John Radebaugh, President/CEO of the North Carolina Credit Union League believes that a resolution may be in the works and seems to be optimistic an agreement will be reached. He says it may come down to a compromise that will possibly allow both parties (community banks and credit unions) to eventually move forward.
“It’s become a political issue, unfortunately,” Radebaugh says. “Because the bankers are adamantly opposed to the member business loan cap increase, we have to find a vehicle that the bankers want, which will pave the way for a more open discussion surrounding the member business loan increase.”
According to the Credit Union National Association (CUNA), if credit unions were granted the freedom to make more business loans, 140,000 new jobs would be created within the first year at no cost to taxpayers.
Both Schaefer and Radebaugh believe that by inviting business owners to meet with lawmakers, the message will eventually be heard. “It’s vital that credit unions keep in contact with their legislatures, especially with small business owners, Radebaugh says. “We’ve been successful at getting business owners to meet with lawmakers, demonstrating that this isn’t the credit union that is asking, but instead it’s small business owners who are in need of more capital. They’ve come to credit unions and want to do business with credit unions.”
Schaefer says that it’s vital for credit union executives to get to know their members of Congress and Senators. “Put your small business member in front of them so they can see the direct impact of having access to a business loan. For example, one of our business members was able to hire back 50 people because of an SBA loan we were able to grant. Those are the stories that need to be told and kind of members that representatives in Congress should meet.”
Mike Kelley, owner of Kelley Properties is one of several Truliant FCU members ready to tell his story. “Timing is critical in this business. Retailers can pick any market and immediacy is the key. At Truliant, the process is very streamlined, and because of that, the Credit Union allowed me to secure land and deal quickly, which puts people to work in our local community. Truliant offers a very hands-on relationship that just doesn’t exist at other commercial lending institutions.”
A business loan from Truliant helped Kelley Properties develop commercial properties for retailers in the community, which created an estimated 450 jobs.
"I tried all of the big banks, literally all of them, and was shocked and surprised that I got turned down," McCarthy explained in a recent Reuter’s article. "The big banks didn't want to lend a little money; they wanted to lend a lot of money." McCarthy was able to purchase four Baskin Robbins stores thanks to a $300,000 loan from Mountain America Credit Union.
The Denver Post reports that the NCUA notified 1,001 federal credit unions last week that they were automatically eligible for low-income designation, which would allow those credit unions to make member business loans without the cap restriction. According to the NCUA’s letter, 470 credit unions reside in states that have been afflicted by severe drought conditions.
That means that the business loan cap has been raised for specific credit unions like New Mexico Correctional Employees Federal Credit Union ($1.7 million, Santa Fe, NM), Mapleton Public Schools Federal Credit Union ($2 million, Denver, CO) and Fitzsimons Federal Credit Union ($160 million, Aurora, CO). The NCUA reports that the cap lift could generate up to $500 million in short-term business loans and provide more access to capital for small businesses.
Unfortunately, true to form the announcement provided ground for the bank versus credit union slugfest to continue.
"NCUA has taken advantage of a natural disaster to sidestep and leapfrog Congress again, by being a cheerleader for credit unions rather than a strong regulator," Don Childears, president of the Colorado Bankers Association told The Post. "NCUA used a temporary drought to make a permanent change that skirts a congressional limit by allowing unlimited tax-subsidized lending."
However NCUA chairwoman, Debbie Matz said that the move only cuts through the red tape, providing access to much needed capital for small business, which ultimately should lead to jobs.
Community based financial institutions, consumers, credit union members, and business owners should come together for a common cause of helping America get back to work. Find a credit union and inquire what you can do to help more companies within your community today.By Gina Ragusa