Compliance Blog

Written by Steve Van Beek

I wanted to highlight an article from the December NCUA Report (the CFPB threw a wrench (or forest) into my reading pile) from Region IV on What Makes a Sound Member Business Lending Program?

If your credit union does member business lending, this is a great article to read and pass along to others at your credit union.  The article discusses four critical elements to a MBL program: (1) capital adequacy and planning, (2) policies and procedures, (3) staffing, and (4) systems.

For example, the article includes this on policies and procedures:

"Comprehensive policies and procedures tailored to the types of MBL products targeted in the strategic plan should drive MBL programs.  This includes underwriting guidelines consistent with the desired risk profile.  Policies and procedures should provide loan officers and underwriters flexibility while holding them to the standard dictated by the board's tolerance for risk."

And, this for staffing: 

"MBL personnel should have experience specific to the loan and collateral types booked to the portfolio.  In addition, an MBL department should have the appropriate mix between business development and loan underwriting personnel.  The proper balance ensures adequate controls between loan sales, underwriting and administration." (emphasis in original).

The article concludes with this summary:

"Credit unions are proven small business lenders. When building an effective MBL program, a credit union needs to acquire the systems necessary to service a portfolio, prepare marketing and strategic plans prior to implementation, and develop policies and procedures commensurate with the size and complexity of the program. Putting in place the infrastructure necessary for a successful and safe and sound MBL program takes commitment and can be expensive, but credit unions have shown a ready willingness to provide the critical resources their members need to start and grow a small business."

Again - if your credit union offers member business loans (or is thinking of doing so in the future), be sure to read the article.