regulatory and compliance issues and considerations

policies, procedures and documents in place in order to establish creditworthiness when
a plan is opened and verify continued creditworthiness for advance requests. Maximize
the ‘revolving’ nature of the open end plan (offering of an LOC or OD Line to members)
Work with data processor to ensure changes are made for compliance to Regulation Z
(e.g. periodic statements).
Of course they can. This does not address any of the issues of consequence as
to when a loan may not be open-ended (note it specifically focuses on LOC and
OD – which is what OE lending should focus upon).
Q: Do all subaccounts within a Plan need to be replenishing?
A: NO. This misconception started due to the original proposal from FRB in 2007 which
stated all subaccounts need to be self replenishing. This provision was removed in the
final rule.
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)).
See comment above and the word “infrequently.”
Q: Can credit unions offer vehicle secured advances under MFOEL?
A: YES. Vehicle secured advances do not need to be self replenishing and are a
permissible subaccount. A credit union can verify continued creditworthiness based on
their policies and procedures, to make an informed decision in relation to vehicle
secured advance requests
Of course they can – the question is – “is this really and OE advance.” Again, the
question – how may additional advances can a member receive on his/her car
loan sub-account?
123-2009 Community Notice // Forms – Truth in Lending Homework and Due
Diligence.
Copyright©1994-2010 by Credit Union Resources & Educational Services, LLC. All rights reserved.
Revised February 2010
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