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Banks circle wagons around biz loans

By Marcie Geffner · Bankrate.com
Wednesday, August 8, 2012
Posted: 6 am ET

Should credit unions be allowed to make more loans to small businesses?

That's the question behind a battle being waged in Washington, D.C., between credit unions and commercial banks.

In one camp, the Independent Community Bankers of America, or ICBA, which represents small and midsized U.S. banks, has started a petition to oppose federal legislation that would allow credit unions to expand their business lending, a goal the bankers' group describes as "counterproductive" and a "power grab" by its competitors.

The petition has attracted more than 13,000 signatures.

ICBA CEO Camden Fine said in a statement that increased business lending by credit unions would widen government budget deficits because credit unions are tax-exempt financial institutions.

"Expanding the business-lending authority for taxpayer-subsidized credit unions -- at the expense of taxpayers -- would widen budget deficits at the federal, state and local levels," he said.

In the other camp, the bill's sponsor, U.S. Sen. Mark Udall, D-Colo., says the legislation fills a credit gap for small businesses that cannot obtain modest loans from commercial banks.

The Credit Union National Association, or CUNA, which represents credit unions of all sizes, points out that the average credit union business loan is only $219,000 and that banks have been tightening the availability of credit to small businesses.

In a summary on its website, CUNA said, "Credit unions have a strong history of better lending, and will do better than the banks' failed efforts to help small businesses, all without any cost to the taxpayer."

Follow me on Twitter: @marciegeff

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2 Comments
Business Money Today
August 08, 2012 at 9:31 am

Not sure why banks even care if credit unions provide business loans as banks are not doing it anyways.