NCUA News Release

Revisions to Member Business Lending Regulation Adopted

September 24, 2003, Alexandria, Va. – In its open monthly meeting, the National Credit Union Administration (NCUA) Board voted unanimously to issue revisions to the agency’s member business lending rule for federally insured credit unions.

The revised rule comes after agency leadership formed an internal working group on member business lending and directed staff to review the last several years of experience under NCUA’s rule and comparable state rules. A proposed rule was introduced by the NCUA Board at its March 27 meeting and was published in the Federal Register for a 60-day public comment period.

“The Board’s action today in revising NCUA’s member business lending regulations is a timely and necessary update which will result in more start-up entrepreneurial capital being available for small business in America and greater safety and soundness diversification in the lending portfolios of America’s credit unions,” said NCUA Chairman Dennis Dollar. “This is a well balanced regulation which clearly recognizes the statutory restrictions on member business lending by credit unions but empowers financially strong credit unions with solid underwriting standards in place to reach out to more budding entrepreneurs in their fields of membership. If our Access Across America initiative is to truly make a lasting impact in many of the underserved communities being adopted by credit unions nationwide, we need to see the job-producing spirit of small business to be stimulated by increased access to available credit.”

“Today’s action will significantly enhance greater access to start-up capital and affordable credit options for America’s credit union members’ small businesses,” said Vice Chair JoAnn Johnson, who initiated the internal working group which studied the business lending regulations. “Since my appointment at NCUA, I have maintained a keen focus on improving the member business lending regulation. I am extremely pleased with this final rule.

“As the President’s plan for jobs and sustained economic growth will benefit small business owners across the country, this final member business lending rule will better position credit unions to serve their business members and play an important role in the President’s strategy to strengthen small businesses,” said Johnson.

“Working to improve the federal rule on member business lending was one of my first major initiatives at NCUA,” said Board Member Deborah Matz, whose review of state rules resulted in several changes to the federal rule. “This rule will level the playing field between federal and state credit unions, provide needed capital for millions of small businesses, and enable more credit unions to offer a new service to reach more people in their field of membership.”

Matz suggested that “business loans can diversify credit unions’ assets and meet the needs of millions of members.” However, she cautioned that “business loans are not for every credit union. We spell this out in the preamble to the final rule… I am confident this final rule ensures that proper safeguards will be in place for all credit unions making business loans – federal and state charters alike.”

The revised member business lending rule:

More detailed information on the member business lending rule and the full statements of Board members Johnson and Matz are available at www.ncua.gov. The new rule becomes effective 30 days after publication in the Federal Register.

The National Credit Union Administration, governed by a three-member Board appointed by the President and confirmed by the Senate, is the independent federal agency which regulates, charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the savings of more than 80 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.