Compliance Blog

Posted by Sarah Loats

NCUA issued guidance this past Friday on multi-featured open-end lending plans (MFOEL). For credit unions that offer MFOEL plans, this is a must read. The guidance summarizes the rule and provides a list of best practices to follow for credit unions using these plans. NCUA stresses that credit unions may not underwrite each individal advance under a plan, and if a credit union does evaluate each credit transaction, it should treat them as closed-end loans. NCUA also emphasizes safety and soundness concerns and indicates that when safety and soundess calls for the underwriting of a particular advance, closed-end products are appropriate:

This letter also emphasizes the need to use the appropriate lending disclosures for the appropriate loan products. When your credit union’s safety and soundness requires that underwriting be performed for a particular loan product at the time funds are advanced, then it is appropriate to use closed-end products and provide the member with closed-end disclosures. NCUA examiners will be reviewing compliance with the amended Regulation Z in conjunction with regular safety and soundness examinations.

There is a good discussion of routine vertification vs. underwriting and NCUA indicates that credit unions cannot verify credit information as a condition of an advance. This letter contains some excellent guidance so go read it.