NCUA Spells Out `Fleet' Definition in MBL Rule

ALEXANDRIA, Va. - The number of vehicles that constitutes a fleet was recently clarified by NCUA. In a Dec. 8 opinion letter, NCUA said a fleet will cover two or more vehicles used in a business if the business, itself, is transportation, but the meaning of "fleet" may also include two or more vehicles used to support the operations of a business. John Davis, chairman of The Cypress Group, LLC, a Florida-based MBL CUSO, asked for clarification on the vehicle exception to the loan-to-value (LTV) requirements in NCUA's MBL rule. NCUA Associate General Counsel Sheila Albin wrote the MBL rule provides that a CU may make MBLs secured by certain consumer-type vehicles without complying with the rule's LTV ratios, provided the vehicle is not part of a fleet of vehicles. In the preamble to the final rule creating this exception, the NCUA Board explained: "[T]he Board intends this exclusion to be used to finance business use or combined personal/business use vehicles and not, for example, to finance fleet purchases. One commenter asked the Board to clarify the concept of a fleet of cars. A fleet is defined as ``a group of vehicles, as taxicabs . . . , owned or operated as a unit.'' Webster's II New Riverside University Dictionary (1994) at 486. The final rule clarifies that a fleet of vehicles is not included in the vehicle exception to the LTV requirements because, when a business requires the use of a fleet of vehicles, it is likely these vehicles will depreciate far more quickly than vehicles used for personal use or a combined personal/business use. Albin acknowledged that "A determination is not always easy where the vehicles support a business operation but transportation, itself, is not the purpose or service the business provides. The facts presented by the borrower will dictate if vehicles are part of a fleet, and credit unions will need to make a case-by-case determination consistent with the rule." Albin did provide some examples where a fleet would apply such as with a catering or florist business; a plumbing or electrical company using vehicles to make home service calls; or a supply business of any sort that features delivery of its product to a location identified by the customer. "Our view is that, where using a vehicle to deliver a product or provide services is integral to the business, two or more vehicles will be considered a fleet," Albin wrote. A credit union may request a waiver of the general LTV requirements under the MBL rule for a fleet of vehicles, Albin pointed out. The discussion in the final rule's preamble highlights the "NCUA Board's concern that there may be more risk in financing fleets at 100% of their value than for other vehicle MBLs." "The MBL rule, however, does not restrict a region's authority to grant waivers from the LTV requirements imposed on a fleet of vehicles, if the region determines a waiver is appropriate," Albin wrote.