Examiners need to strike a balance between ensuring the safety and soundness of low income and community development credit unions and taking into account the special mission of those institutions.
That's the message of a supervisory letter that the NCUA sent its examiners last week.
The agency urged its examiners to take into account the unique challenges facing members of these credit unions-such as limited or negative credit history and an acute need for small dollar loans-when evaluating loan portfolios and the products offered by the institutions.
The agency noted that these credit unions' non-traditional loan programs should be closely monitored to ensure that they have: a firm and fair collection officer, accurate and timely delinquency reports, a written collection policy, and quick reaction to missed payments.
When analyzing the financial statements of these credit unions, examiners should consider the effect of outside sources of funding on a credit union's balance sheet and should also note that those institutions have higher operating costs.
Examiners should also remember that while delinquency rates are often higher than at other credit unions this does "not translate proportionally into charge offs."