12 U.S.C. § 1757a — Limitation on member business loans

(a) In general. On and after August 7, 1998, an insured credit union may not make member business loans if the total outstanding amount would exceed the lesser of 1.75 times the credit union’s actual net worth or 1.75 times the minimum net worth required under section 1790d(c)(1)(A) for a well-capitalized credit union. (b) Exceptions. The limit in subsection (a) does not apply to an insured credit union chartered to make member business loans, or with a history of mainly making them, as the Board determines. It also does not apply to an insured credit union that serves mostly low-income members as the Board defines, or that is a community development financial institution as defined in section 4702 of title 12. (c) Definitions. (1) “Member business loan” means a loan, credit line, or letter of credit whose proceeds will be used for commercial, corporate, or other business investment property or venture, or for agriculture. It does not include credit that: (A) is fully secured by a lien on a one-to-four-family home; (B) is fully secured by shares in the lending credit union or deposits in other financial institutions; (C) is described above but was made to a borrower or associated member whose total of all such credit is less than $50,000; (D) is fully insured or guaranteed, or subject to an advance commitment to be bought in full, by the Federal Government, a State, or a political subdivision; or (E) a corporate credit union, as the Board defines that term, gives to another credit union. (2) “Net worth” means an insured credit union’s retained-earnings balance under generally accepted accounting principles. For a credit union serving mostly low-income members as the Board defines, it also includes secondary-capital accounts that are uninsured and subordinate to every other claim against the credit union, including claims of creditors, shareholders, and the Fund. (3) “Associated member” means a member sharing ownership, investment, or another financial interest in a business or commercial activity with the borrower. This section does not otherwise define the quoted terms. (d) Effect on existing loans. An insured credit union whose outstanding member business loans exceeded the subsection (a) limit on August 7, 1998, must reduce them to no more than that limit within three years after August 7, 1998. (e) Consultation and cooperation with State credit union supervisors. In implementing this section, the Board must consult and seek to work cooperatively with State officials who supervise State-chartered insured credit unions.