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incorporating it into Investment, Cash Management, or other policies. The form of the policy is not as important as its scope. Regardless of form, credit unions should clearly document their IRR management program in writing.” See 02-FCU-09 for General Guidance on Allowance for Loan and Lease Losses; See 01-FCU-08 for Liability Management Guidance; See 01-FCU-19 for Managing Share Inflows in Uncertain Times; 99-FCU-12 Managing Real Estate Balance Sheet Risk; NCUA Letter No. 126 on Guidelines for Establishing and Maintaining Allowance for Loan Losses (ALL); NCUA Letter Nos 154 and 157 on Investments and Selection of Brokers Preparing for new laws and regulations in 2010 including significant developments with Truth-in- Lending and Regulation Z Due Diligence – Due Diligence – Due Diligence 93A-2009 Community Notice // Open-end / Closed-end Lending July 2010 -- Be Sure to Assess the Big Picture Credit Unions keep hearing statements like – “multi-featured, open-end lending is a viable alternative for credit unions” --- I would agree in part yes – BUT – in part no. I am not concerned with the plan or forms you choose to use. I am concerned that you understand the systems and insure you have forms, procedures and training that “consistently” provide for compliance with the “coming TILA changes.” Below are excerpts sent to me from the CUNA website and my responses, which I provide to clients only to insure you are all considering the scope of issues I feel are appropriate to the “big picture.” Copyright©1994-2010 by Credit Union Resources & Educational Services, LLC. All rights reserved. Revised February 2010 38
Also – consider the other changes coming such as the CARD Act affects on periodic statements (which do not apply to closed-end loans) …. Further, when reviewing information from vendors such as the following from CUNA© be sure to assess the full nature of the question ---- Q: Can a credit union offer secured advances under [Multi-Featured Open-end Lending Plan] MFOEL? A. YES. Regulation Z allows credit unions to offer secured advances. The commentary states: “Some creditors offer programs containing a number of different credit features… Some features of the program might be used repeatedly (for example, an overdraft line) while others might be used infrequently (such as the part of the credit line available for secured credit). If the program as a whole is subject to prescribed terms and otherwise meets the definition of open-end credit, such a program would be considered a single, multi-featured plan.” (Regulation Z 226.2 (a)(20)). Ask yourself this question – how many additional advances can the member obtain under their new 60-month car loan under their “open-end” plan? Note – it says “infrequently” --- not one single advance under a “sub-account” under which the Credit Union does not allow future advances. Also – review your periodic statements on these open-end loans to insure your compliance with 12 CFR 226.7 and after August 20, the CARD Act. Q: How do credit unions make informed credit decisions at the time of individual advance requests? A: Credit information about borrowers may be routinely verified throughout the plan through a credit update, credit report, or other means that a credit union establishes. The credit union may refuse an advance request under the plan due to the deterioration of the member's creditworthiness. This does not address the “underwriting” issue or assessment with an application, or assessment of a CR in connection with a risk-based lending system. In fact – it appears to paint over this key element. Here is what we wrote previously: HOWEVER – the FRB has adopted rules that will allow Credit Unions to continue to use “multi-featured open-end plans,” but will require a closed-end disclosure in connection with such a subaccount or advance (i.e., a “clopen-end loan disclosure”). Here is the crux of the new rules: Copyright©1994-2010 by Credit Union Resources & Educational Services, LLC. All rights reserved. Revised February 2010 39
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Compliance Update - I REGULATORY AN
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Introductory Notes: Basic Obligatio
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performed by boards of directors. T
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What if an applicant “volunteers
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Please answer the following questio
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MULTIPLE ISSUES AND RESOURCES - SOM
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• Review of the negative shares r
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illustrates how certain provisions
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SAMPLE CREDIT UNION BUSINESS PLAN M
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EMPLOYMENT AGREEMENT Revise to addr
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13. Evaluate the job performance of
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2. By Employer For No Cause. Employ
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Vendor Due Diligence II Security As
Page 27 and 28: Vendor Due Diligence VII TERM AND T
Page 29 and 30: Vendor Due Diligence XII Backgroun
Page 31 and 32: Monitoring the Vendor At a minimum,
Page 33 and 34: NOTE: The BSA also contains a “wh
Page 35 and 36: (5) Confidentiality of reports. SAR
Page 37 and 38: PRIVACY - INFORMATION SECURITY Priv
Page 39 and 40: Disposal of Consumer Reports and Ot
Page 41 and 42: Compliance Update - II REGULATORY A
Page 43 and 44: Introductory Notes: Knowing if you
Page 45 and 46: I. POLICY AND GUIDELINES Portions O
Page 47 and 48: any CUSO. [Gifts may not be accepte
Page 49 and 50: Conference and Seminar Costs Fees f
Page 51 and 52: We have stated that there must be a
Page 53 and 54: IV. POLICY REGARDING CONFLICTS OF I
Page 55 and 56: public, even though, such relatives
Page 57 and 58: and other relatives who live in the
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Page 63 and 64: MERGER AND CONSOLIDATIONS ISSUES NO
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Page 67 and 68: A Review of ‘Red Flags’ and wha
Page 69 and 70: Business Depositors: Understanding
Page 71 and 72: WHAT POLICIES, PROCEDURES AND RISK
Page 73 and 74: 16. Conflict of Interest/Code of Et
Page 75 and 76: Union Assessment 33. Identity Theft
Page 77: Procedures 60. Training Policy See
Page 81 and 82: policies, procedures and documents
Page 83 and 84: Underwriting Advertising In July 20
Page 85 and 86: 135-2009 Community Notice // OE/CE
Page 87 and 88: Credit Union’s lien right are not
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