I 

112TH CONGRESS 

1ST SESSION H. R. 1418 

To amend the Federal Credit Union Act to provide certain credit unions 

with the authority to make additional member business loans, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 7, 2011 

Mr. ROYCE (for himself, Mrs. MCCARTHY of New York, Mr. JOHNSON of 

Georgia, Mr. PETERS, and Mr. CARNAHAN) introduced the following bill; 

which was referred to the Committee on Financial Services 

A BILL 

To amend the Federal Credit Union Act to provide certain 

credit unions with the authority to make additional member business loans, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Lend5 ing Enhancement Act of 2011’’. 

6 SEC. 2. LIMITS ON MEMBER BUSINESS LOANS. 

7 (a) IN GENERAL.— 

8 (1) REVISED LIMITATION AND CRITERIA.—Ef9 fective 6 months after the date of enactment of this 


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1 Act, section 107A(a) of the Federal Credit Union 

2 Act (12 U.S.C. 1757a(a)) is amended to read as fol3 lows: 

4 ‘‘(a) LIMITATION.— 

5 ‘‘(1) IN GENERAL.—Except as provided in para6 graph (2), an insured credit union may not make 

7 any member business loan that would result in the 

8 total amount of such loans outstanding at that cred9 it union at any one time to be equal to more than 

10 the lesser of— 

11 ‘‘(A) 1.75 times the actual net worth of 

12 the credit union; or 

13 ‘‘(B) 12.25 percent of the total assets of 

14 the credit union. 

15 ‘‘(2) ADDITIONAL AUTHORITY.—The Board 

16 may approve an application by an insured credit 

17 union upon a finding that the credit union meets the 

18 criteria under this paragraph to make 1 or more 

19 member business loans that would result in a total 

20 amount of such loans outstanding at any one time 

21 of not more than 27.5 percent of the total assets of 

22 the credit union, if the credit union— 

23 ‘‘(A) had member business loans out24 standing at the end of each of the 4 consecutive 

25 quarters immediately preceding the date of the 


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1 application, in a total amount of not less than 

2 80 percent of the applicable limitation under 

3 paragraph (1); 

4 ‘‘(B) is well capitalized, as defined in sec5 tion 216(c)(1)(A); 

6 ‘‘(C) can demonstrate at least 5 years of 

7 experience of sound underwriting and servicing 

8 of member business loans; 

9 ‘‘(D) has the requisite policies and experi10 ence in managing member business loans; and 

11 ‘‘(E) has satisfied other standards that the 

12 Board determines are necessary to maintain the 

13 safety and soundness of the insured credit 

14 union. 

15 ‘‘(3) EFFECT OF NOT BEING WELL CAPITAL16 IZED.—An insured credit union that has made mem17 ber business loans under an authorization under 

18 paragraph (2) and that is not, as of its most recent 

19 quarterly call report, well capitalized, may not make 

20 any member business loans, until such time as the 

21 credit union becomes well capitalized, as reflected in 

22 a subsequent quarterly call report, and obtains the 

23 approval of the Board.’’. 

24 (b) IMPLEMENTATION.— 


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1 (1) TIERED APPROVAL PROCESS.—The Board 

2 shall develop a tiered approval process, under which 

3 an insured credit union gradually increases the 

4 amount of member business lending in a manner 

5 that is consistent with safe and sound operations, 

6 subject to the limits established under section 

7 107A(a)(2) of the Federal Credit Union Act (as 

8 amended by this Act). The rate of increase under 

9 the process established under this paragraph may 

10 not exceed 30 percent per year. 

11 (2) RULEMAKING REQUIRED.—The Board shall 

12 issue proposed rules, not later than 6 months after 

13 the date of enactment of this Act, to establish the 

14 tiered approval process required under paragraph 

15 (1). The tiered approval process shall establish 

16 standards designed to ensure that the new business 

17 lending capacity authorized under the amendment 

18 made by subsection (a) is being used only by insured 

19 credit unions that are well-managed and well capital20 ized, as required by the amendments made under 

21 subsection (a) and as defined by the rules issued by 

22 the Board under this paragraph. 

23 (3) CONSIDERATIONS.—In issuing rules re24 quired under this subsection, the Board shall con25 sider— 


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1 (A) the experience level of the institutions, 

2 including a demonstrated history of sound 

3 member business lending; 

4 (B) the criteria under section 107A(a)(2) 

5 of the Federal Credit Union Act, as amended 

6 by this Act; and 

7 (C) such other factors as the Board deter8 mines necessary or appropriate. 

9 (c) REPORTS TO CONGRESS ON MEMBER BUSINESS

10 LENDING.— 

11 (1) REPORT OF THE BOARD.— 

12 (A) IN GENERAL.—Not later than 3 years 

13 after the date of enactment of this Act, the 

14 Board shall submit a report to Congress on 

15 member business lending by insured credit 

16 unions. 

17 (B) REPORT.—The report required under 

18 subparagraph (A) shall include— 

19 (i) the types and asset size of insured 

20 credit unions making member business 

21 loans and the member business loan limita22 tions applicable to the insured credit 

23 unions; 


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1 (ii) the overall amount and average 

2 size of member business loans by each in3 sured credit union; 

4 (iii) the ratio of member business 

5 loans by insured credit unions to total as6 sets and net worth; 

7 (iv) the performance of the member 

8 business loans, including delinquencies and 

9 net charge-offs; 

10 (v) the effect of this section on the 

11 number of insured credit unions engaged 

12 in member business lending, any change in 

13 the amount of member business lending, 

14 and the extent to which any increase is at15 tributed to the change in the limitation in 

16 section 107A(a) of the Federal Credit 

17 Union Act, as amended by this Act; 

18 (vi) the number, types, and asset size 

19 of insured credit unions that were denied 

20 or approved by the Board for increased 

21 member business loans under section 

22 107A(a)(2), as amended by this Act, in23 cluding denials and approvals under the 

24 tiered approval process; 


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1 (vii) the types and sizes of businesses 

2 that receive member business loans, the 

3 duration of the credit union membership of 

4 the businesses at the time of the loan, the 

5 types of collateral used to secure member 

6 business loans, and the income level of 

7 members receiving member business loans; 

8 and 

9 (viii) the effect of any increases in 

10 member business loans on the risk to the 

11 National Credit Union Share Insurance 

12 Fund and the assessments on insured 

13 credit unions. 

14 (2) GAO STUDY AND REPORT.— 

15 (A) STUDY.—The Comptroller General of 

16 the United States shall conduct a study on the 

17 status of member business lending by insured 

18 credit unions, including— 

19 (i) trends in such lending; 

20 (ii) types and amounts of member 

21 business loans; 

22 (iii) the effectiveness of this section in 

23 enhancing small business lending; 


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1 (iv) recommendations for legislative 

2 action, if any, with respect to such lending; 

3 and 

4 (v) any other information that the 

5 Comptroller General considers relevant 

6 with respect to such lending. 

7 (B) REPORT.—Not later than 3 years after 

8 the date of enactment of this Act, the Comp9 troller General shall submit a report to Con10 gress on the study required by subparagraph 

11 (A). 

12 (d) DEFINITIONS.—In this section— 

13 (1) the term ‘‘Board’’ means the National 

14 Credit Union Administration Board; 

15 (2) the term ‘‘insured credit union’’ has the 

16 meaning given that term in section 101 of the Fed17 eral Credit Union Act (12 U.S.C. 1752); 

18 (3) the term ‘‘member business loan’’ has the 

19 meaning given that term in section 107A(c)(1) of 

20 the Federal Credit Union Act (12 U.S.C. 

21 1757a(c)(1)); 

22 (4) the term ‘‘net worth’’ has the meaning 

23 given that term in section 107A(c)(2) of the Federal 

24 Credit Union Act (12 U.S.C. 1757a(c)(2)); and 


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1 (5) the term ‘‘well capitalized’’ has the meaning 

2 given that term in section 216(c)(1)(A) of the Fed3 eral Credit Union Act (12 U.S.C. 1709d(c)(1)(A)). 

Æ 


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