WASHINGTON -- A lawyer with CUNA Mutual Group explained how recent changes to Federal Reserve regulations would likely impact some established credit union lending practices.
The regulatory changes specifically affect multifeatured, open-end lending, a practice used for nearly 30 years allows credit unions to have a single lending contract with a member covering multiple lending products, explained CUNA Mutual Group Associate Counsel William Klewin. Under this plan, the member can have multiple subaccounts with different program features and rate structures, he added.
Some features of a lending program of this type might be used repeatedly, like an overdraft line, while others might be used infrequently, such as the part of the credit line available for secured credit, said Klewin.
Because the Federal Reserve's first proposal to change rules overseeing this sort of lending could have negatively impacted multifeatured, open-end lending practices, credit union organizations-including CUNA Mutual-worked to raise awareness of the issue and prepare for potential disruptions to credit unions' lending practices. Among other efforts, CUNA Mutual met with Federal Reserve Board staff to discuss the issues and propose alternatives, filed comments with the board and continued to work with credit union organizations and regulators following the comment period.
Klewin said the final rule keeps largely keeps the multifeatured, open-end lending programs intact but makes some small changes such as removing the requirement that each subaccount have a self-replenishing credit limit and allowing credit unions to verify information in certain circumstances to assure continued creditworthiness
"The rule changes require credit unions to review their products, policies and procedures to identify any necessary changes as a result of the new regulations," Klewin said. He further suggested the affected credit unions work closely with their data processing and loan origination system providers to support any needed changes.
--dmorrison@cutimes.com
The regulatory changes specifically affect multifeatured, open-end lending, a practice used for nearly 30 years allows credit unions to have a single lending contract with a member covering multiple lending products, explained CUNA Mutual Group Associate Counsel William Klewin. Under this plan, the member can have multiple subaccounts with different program features and rate structures, he added.
Some features of a lending program of this type might be used repeatedly, like an overdraft line, while others might be used infrequently, such as the part of the credit line available for secured credit, said Klewin.
Because the Federal Reserve's first proposal to change rules overseeing this sort of lending could have negatively impacted multifeatured, open-end lending practices, credit union organizations-including CUNA Mutual-worked to raise awareness of the issue and prepare for potential disruptions to credit unions' lending practices. Among other efforts, CUNA Mutual met with Federal Reserve Board staff to discuss the issues and propose alternatives, filed comments with the board and continued to work with credit union organizations and regulators following the comment period.
Klewin said the final rule keeps largely keeps the multifeatured, open-end lending programs intact but makes some small changes such as removing the requirement that each subaccount have a self-replenishing credit limit and allowing credit unions to verify information in certain circumstances to assure continued creditworthiness
"The rule changes require credit unions to review their products, policies and procedures to identify any necessary changes as a result of the new regulations," Klewin said. He further suggested the affected credit unions work closely with their data processing and loan origination system providers to support any needed changes.
--dmorrison@cutimes.com
