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	NAFCU Chair Lussier told the Senate Banking Committee that his credit union would provide more member business loans, but the current cap prevents that. – Tkatch photos

June 17, 2011 – Raising credit unions' member business loan cap would stimulate jobs by allowing credit unions to provide capital to small businesses that banks won't help, NAFCU Chair Mike Lussier told the Senate Banking Committee Thursday.

Lussier, president and CEO of Webster First FCU in Worcester, Mass., said credit unions have played a critical role in the economic recovery. "Many credit unions have capital to lend to small businesses across the country and are in a position to further assist in recovery efforts," he added. But many cannot because of the current cap, set at 12.25 percent of total assets.

Webster First, for example, has been at the 12.25 percent-of-assets cap for more than a year. Its business-loan offerings are diverse, including real estate loans, lines of credit, small business equipment loans, auto and truck loans and some floor-plan loans for small stores. "Unfortunately, we cannot handle all the requests we receive due to this cap," he said. "We are maxed out."

Ironically, bankers in the hearing both complained about credit unions' lower loan rates – it's because of the tax exemption, they said – at the same time they suggested that credit unions give loans banks would not due to the risk.

But Lussier – who responded at one point that his largest MBL is $3 million, but that most range from $25,000 to $250,000 – testified that his credit union's commercial losses have been "minimal," a result he attributes to "a sincere and devoted membership."

Lussier (left) is welcomed by Senate Banking Chairman Tim Johnson, D-S.D.

Lussier said his credit union has come to the aid of members who own multi-family units in refinancing their existing mortgages from other institutions, which won't help because they fear a continued decline in real estate values. "Many of these property owners have plenty of cash, net worth and positive cash flow, but the banks they approached for financing declined," he said.

He also noted one member who used a credit union loan to finance the purchase of an older gas service station from his parents. That member was able to upgrade the pumps, add computer services and revamp the store. "He recently sold the property for a substantial profit and has now acquired other properties to expand his business," Lussier said. "As the committee knows, business expansion means job creation."

S. 509, introduced by Sen. Mark Udall, D-Colo., to permit a cap lift to 27.5 percent for eligible credit unions, "is a well-thought-out solution that includes important provisions to ensure that safety-and-soundness concerns are addressed," he testified.

As for tax matters, Lussier noted more than 2,000 banks benefit under subchapter S of the tax code; this allows them to avoid tax on profits at the corporate level. "There are major differences between credit unions and banks," he said. "We run on volunteerism and (under) more regulatory restraints."