Kansas Credit Union Regulator Spots Member Business Lending Violations
After noticing several member business loan violations involving net worth limits and loan to value ratios, the Kansas Department of Credit Unions has issued a reminder to state-chartered credit union to follow the NCUA’s MBL rules.
The Kansas regulator said it also examined credit unions where the limitation of 15% of the credit union’s net worth was not followed.
“Kansas chartered credit unions that do member business lending must follow the NCUA Rules and Regulations Part 723.1 through 723.21,” the bulletin read.
While most of the state’s credit unions don’t do member business lending, KDCU Administrator John P. Smith said some appear not to be following regulations. Kansas has not had any major issues but because of MBL problems at credit unions in other states, Smith said the bulletin is a just a reminder to be informed.
Among the reminders, a credit union board must use the services of an individual with at least two years direct experience with the type of MBL the credit union will be engaging in.
Generally, the total of a credit union’s net MBL balances and the nonmember loan balances must not exceed the lesser of 1.75 times the credit union’s net worth or 12.25% of the credit union’s total assets unless the credit union has first received approval from the KDCU administrator and the NCUA regional director, according to the bulletin.
Kansas’ credit unions were also reminded to be aware of collateral and security requirements and ensured that their boards adopt a MBL policy with certain minimum requirements that must be reviewed annually.