Is small business being choked by big banks?

January 3, 2012 at 6:53 am Leave a comment

It may be a new year, but just like Tony Romo can’t beat the Giants in a big game, events continue to show the economic harm being done by keeping credit unions from extending business loans free of the fear that they will run up against the artificial cap.

The single biggest argument that the banking industry makes against increasing the MBL cap is that business does not need the help of credit unions.  Banks are more than willing to help out small businesses, they argue, and if credit unions really want to join the party, all they have to do is change their tax exempt status.  But the bankers might have a tough time explaining an article in this morning’s Los Angeles Times, which reports that Bank of America is hurting small businesses across California by demanding that small business customers pay off their credit line balances all at once or agree to onerous new lending terms.  As explained by one Californian, who called up the bank in exasperation, “dude, you’re calling a guy who is barely surviving.”

Although Bank of America always seems willing to provide an example of why credit unions are so important, its actions are not unique.  The paper reports that many banks have already tightened lending standards to small businesses.  This is consistent with a recent post by Rohit Arora, a leading expert on small business, who argues that 2011 saw an increasing number of small businesses turn to alternative sources of financing, including credit unions, as banks squeezed the lending spigot.

In 2011, credit unions did a great job in getting out the message to the American consumer that we are a different kind of lender and that there is an alternative to commercial banking.  Hopefully, in 2012, Congress will get the same message.

Entry filed under: Advocacy, Political, Regulatory. Tags: , , .

Ghosts past, present and future will continue to shape credit unions in 2012 The Fed Pulls Back the Curtain

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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