NCUA’s Proposed Commercial Lending Rules 2015

Change may be ahead for credit union commercial lending as the NCUA has proposed a rule in an effort to allow for more business loan approvals. Business Lending is a growing interest to many credit unions, but it is currently limited by statute and regulation. One type of commercial loan, member business loans, in particular, has strict regulations that may soon change. Let’s take a look at NCUA’s Proposed Commercial Lending Rules 2015.

Currently, credit union commercial loans are limited to “1.75 times the actual net worth of the credit union,” or “1.75 times the minimum net worth required . . . for a credit union to be well-capitalized.” The CUMAA required a net worth ratio of 7% in order to be well-capitalized, This effectively created an MBL limit of 12.25% of a credit union’s total assets (1.75 x 7% = 12.25%). The 12.25% limit was explicitly codified the following year by NCUA regulations, which, among other provisions, also created a waiver application process through which borrowers could petition an NCUA Regional Director for relief from the various MBL requirements.”

In July, the NCUA proposed new rules to MBL requirements. These proposed rules would eliminate “prescriptive risk management by loan-to-value ratios, minimum equity investments, portfolio concentration limits for types of loans, and personal guarantees from the principal of the borrower. The need for credit unions to petition for waivers of these requirements would thus also be abrogated.” Instead, the new rule will require credit unions that offer a member business loan to “create a comprehensive written commercial loan policy and establish procedures for commercial lending.” This rule also states that credit unions who have both “assets less than $250 million and total commercial loans less than 15% of net worth, that are not regularly originating and selling or participating out commercial loans, would not be required to create such a commercial loan policy at all.”

The current limit set to credit unions approving a loan is 15% of the credit union’s net worth. With the new proposed rule, a borrower is allowed an additional 10% of a credit union’s net worth as long as the “15% general limit is fully secured at all times with a perfected security interest by readily marketable collateral”.

The National Federal Credit Union states that the “end of the prescribed limit on the non-MBL commercial loans would not only provide necessary regulatory relief for the industry but also allow credit unions much-needed flexibility in their diversification strategies.”

If your credit union is currently processing MBL’s or is considering adding business loans to the mix, Oak Tree Business Systems, Inc. is the best solution for your business lending forms. We have the expertise and the programs to put you into this highly profitable lending area. Visit our Business/Commercial Lending forms page or chat with a forms expert today.

_{Source: Stephenson, H. Grant, and Hoying, Steven D. “NCUA’s Proposed Rules Concerning Credit Union Commercial Loans” Porter Wright Morris & Arthur LLP, Lexology, 16 Nov. 2015. Web. 20 Nov 2015.}

(note: this is an older blog entry and has been edited since originally posted.)

The Telephone Consumer Protection Act

The Telephone Consumer Protection Act

The Telephone Consumer Protection Act (TCPA) was passed in 1991 by the United States in order to protect consumers from solicitations. This act limits “automatic dialing systems, artificial or prerecorded voice messages, SMS text messages, and fax machines.” Although this is not a new act, new guidelines have been provided and it is important for your credit union to know these to avoid legal litigation. In July, the FCC added new guidelines to this act, such as a new definition to autodialers, and exceptions for pro-consumer messages regarding time-sensitive financial information.

The TCPA has a new expanded definition of autodialers. This broadens the scope of what is considered an autodialer to be, as: “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such number.” The FCC has exceptions for pro-consumer messages regarding time-sensitive financial matters. The commission granted financial services permissions to provide consumers with “beneficial, time-sensitive information.”

The FCC approved a  petition that was submitted by ABA, which “sought an exemption for financial-related calls or messages concerning:
(1) fraud and identity theft;
(2) data security breaches of consumers’ personal information;
(3) steps taken to prevent or remedy the harm of identity theft or a data breach; and
(4) money transfers.

Financial institutions will have to “work with a wireless carrier and third-party service providers to ensure that recipients are not charged for these messages.” The FCC also defines when financial institutions (and, presumably, agents working on behalf of financial institutions) can initiate voice calls or text messages without obtaining prior express consent.

They are allowed to do this so long as:

• The communications are sent only to the wireless telephone number that the customer provided to the financial institution;
• The communications state the name and contact information of the financial institution (these disclosures must be made at the beginning of a voice call);
• The communications do not contain any telemarketing, cross-marketing, solicitation, debt collection, or advertising content;
• The purpose of the communication is to alert the customer of (1) fraud and identity theft; (2) data security breaches of consumers’ personal information; (3) steps taken to prevent or remedy the harm of identity theft or a data breach; or (4) money transfers;
• The communications are short (one minute or less for voice calls and 160 characters or fewer for text messages);
• Financial institutions cannot send more than three communications (voice calls or text messages) per event over a three-day period;
• Financial institutions must provide customers with an “easy” means to opt-out of receiving the communication (i.e., an interactive voice or key press-activated opt-out mechanism for voice calls); and
• Financial institutions must immediately honor opt-out requests.

(information taken from abovethelaw.com)

In regard to marketing-related calls, credit unions must comply with the following rules before contacting a member:

• Members must provide prior express written consent to receive marketing calls, texts, and faxes.
• The written consent must clearly disclose that the member is giving consent to receiving the calls, text, or fax and that they are not required to agree to this in order to receive a loan or service from the credit union.
• Credit unions cannot use “prior express consent in making telemarketing calls to members.” A credit union must receive new consent from its members as of 2013.
• Members have the right to revoke their consent “at any reasonable way and time.”

To read the full rule please visit https://transition.fcc.gov/cgb/policy/TCPA-Rules.pdf or if you have any questions about how we can help your credit union, please email clientservices@oaktreebiz.com

(note: this is an older blog entry and has been edited since originally posted.)