A new rule out of the state banking division will allow the credit union industry to do something the banking industry has been able to do for more than 30 years: Interstate branching.

The new law, titled An Act Relative to Credit Union Branching, establishes guidelines under which a Massachusetts credit union can apply to the Division of Banks for permission to establish a branch in New England or New York, as long as that new branch would be within 100 miles of its main office.

The law also provides guidelines for foreign credit unions – that is, out-of-state credit unions – to establish a branch in Massachusetts.

The law lays out eligibility standards for those Massachusetts-headquartered credit unions, requiring that any Bay State credit union looking to branch out under the law be adequately or well-capitalized and have a satisfactory Community Reinvestment Act (CRA) rating, but it does not get quite so specific as to those requirements for foreign credit unions.

Therein lies the Massachusetts Bankers Association’s first quibble with the new law, which went into effect late last week. Massachusetts has CRA requirements for credit unions, whereas certain other states, including New York, do not, said Jon Skarin, the association’s senior vice president for legislative and regulatory policy.

“We wanted the division to be very explicit in the regulations about compliance and what’s going to be their CRA plan, what people do they intend to serve, etc.,” he said. “Unfortunately, they didn’t get quite that specific in the regulations, though it’s my understanding the division may issue some regulatory follow-up.”

Secondarily, Skarin said, the association also has concerns surrounding membership requirements of those out-of-state credit unions branching into Massachusetts and worries that surrounding states’ less stringent rules around credit union membership will ultimately lead to the division watering down those requirements.

“You still have to apply to the division and prove your field of membership. It still has to go through the regulatory process,” said Paul Gentile, president of the Cooperative Credit Union Association. “We don’t see that as an issue.”

He also said that Rhode Island and Connecticut have CRA requirements for credit unions and added that credit unions, by their very nature, are CRA compliant.

“Two thousand of the nation’s 6,000 credit unions are now low-income designated,” he said. “Just by the very nature of who we serve, CRA has never been an issue for us.”

A spokesperson for the Division of Banks told Banker & Tradesman by email that the division had not yet received any applications from out-of-state credit unions looking to establish a branch in Massachusetts under the new law, and the new credit union branching law does limit a credit union to one application per 12 month-period, although that does not seem to assuage the banking association’s worries.

“I do think as the regulations are finalized and people get a little bit more comfortable with the process, you are going to see a number of out-of-state credit unions start the process of opening branches in Massachusetts,” Skarin said.

On the national stage, credit unions may win yet another small victory in the realm of business lending – long a bone of contention in the great bank versus credit union debate.

The National Credit Union Administration (NCUA) board this summer proposed a rule that would tweak the regulatory body’s requirements for credit unions making loans to member businesses, more or less giving credit unions more flexibility to write their own rules around business lending.

The proposed rule would eliminate the requirement for a personal guarantee, remove explicit loan-to-value ratios and the need for a waiver process, lift limits on construction and development loans and, finally, clarify that non-member participation loans would not count against the statutory member business loan cap.

The rule, which is still subject to a 60-day comment period, drew the ire of the Independent Community Bankers of America and the American Bankers Association, both of which pointed out the credit union industry’s tax-exempt status and decried what they characterized as taxpayer-subsidized risks to the financial system.

Gentile points out that the NCUA is not actually lifting the credit union industry’s business lending cap, though he adds that credit unions underwrote plenty of small business loans until the cap was placed on the industry in 1998 as part of a last-minute compromise in the Credit Union Membership Access Act.

“What’s sad is, there’s so many small businesses looking for small dollar amounts. … That’s what really helps the economy, so we think it’s really poor that we can only do a certain amount,” he said. “We’re excellent small business lenders. Hopefully down the line we’ll get more authority.”