NASCUS President and CEO, Lucy Ito’s Statement on NCUA Member Business Lending Rule

September 27, 2021   

NASCUS President and CEO, Lucy Ito’s Statement on NCUA Member Business Lending Rule 

ARLINGTON, Va. — NASCUS President and CEO Lucy Ito provided a statement today in regard to the NCUA Board’s Member Business Lending (MBL) rule—known as its commercial lending rule in current day parlance. 

NASCUS welcomes the National Credit Union Administration (NCUA) Board’s approval of the revised, state-specific Oregon MBL rule last week which will exempt Oregon state-chartered credit unions from Part 723 of NCUA’s rules.  NASCUS further commends the Division of Financial Regulation in the Oregon Department of Consumer and Business Services for undertaking a comprehensive review of its member business lending rule.   

With five years having passed since NCUA finalized Part 723, NASCUS takes this opportunity to make a few observations on the consequences of the 2016 rule and to invite future dialogue with NCUA on the future of credit union commercial lending rules in the context of a dynamic dual charter paradigm.  

From the modern inception of NCUA’s MBL (now commercial lending) rule, Part 723 has provided a path for states to implement a divergent, yet sound, rule governing commercial lending. In the intervening years between 1998 and 2016, several states took advantage of that power—to the betterment of the entire credit union system. And those states did so without detrimental effect on the Share Insurance Fund (SIF). Indeed, in finalizing the 2016 rule, NCUA cited no shortcomings or enhanced risk in states that had adopted state-specific MBL rules. 

Furthermore, under the previous rule, states both with and without state-specific rules led the way in removing the MBL personal guarantee requirement as a regulatory mandate, permitting loan-to-value (LTV) flexibility, and introducing the concept of viewing MBL through the prism of commercial lending terminology. NCUA emulated states on all these fronts several years after states had evolved these changes.   

In a rule meant to be principles-based, NCUA chose an unnecessarily prescriptive approach to managing the dual chartering strength of the credit union system. Rather than focusing on whether a state-specific rule increased risk to the SIF in an unacceptable manner, the “no less restrictive” limitation on state rules instead has foreclosed, for practical purposes, the historical avenue by which the regulatory framework for commercial lending was advanced. This was and remains unfortunate. At a time when the agency is, appropriately, considering innovative approaches to accommodate digital assets and fintechs, revisiting innovation in the regulation and supervision of commercial lending would be congruent with NCUA’s laudable future-focused posture. 

NASCUS looks forward to conferring with NCUA on possible amendments to Part 723 and other rules.  Together, state regulators and NCUA can assure the future vibrancy and health of the credit union system by fostering regulatory diversity and competition between charters and regulators while maintaining safety and soundness. 


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