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Credit unions push expansion of commercial lending authority

S. 509 was introduced by Colorado Sen. Mark Udall (D-Colo.) and would more than double the business-lending authority of credit unions from its current cap of 12.25 percent of credit union assets to 27.5 percent.

The bill would require that a credit union obtain approval from the National Credit Union Administration before it could increase its commercial lending activities. A similar bill is pending in the House of Representatives.

At a hearing last Thursday, ABA Chairman Steve Wilson testified that the pending legislation would effectively turn credit unions into tax-exempt banks, without the same regulatory requirements. Wilson is chairman and CEO of LCNB National Bank in Lebanon, Ohio.

“Make no mistake about it, S. 509 is nothing less than legislation that would allow a credit union to look and act just like a bank, without the obligation to pay taxes or have bank-like regulatory requirements, such as the Community Reinvestment Act, applied to them,” he testified.

State and federal credit unions do not pay federal income taxes, and federal credit unions – like Tinker Federal Credit Union, the state's largest credit union – pay no state income taxes. Tinker pays only personal and real property tax in Oklahoma.

“Credit unions were created, and given a tax-exempt status, to serve people of limited or modest means,” said OBA President and CEO Roger Beverage. “This bill is anything but related to that original purpose and will only serve to intensify competition for quality loans between Oklahoma banks and credit unions. And – given the tax benefits that credit unions enjoy – it puts Oklahoma banks at a tremendous competitive disadvantage.

“I really don't see what's so hard about this. If you're going to increase the ability of credit unions to be more like banks on the one hand, it's only logical to tie such an expansion to the taxation issue. Otherwise it makes no sense, given the state of the economy, to further disenfranchise the very banks that are the solution to the nation's economic recovery. It's just nuts.”

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