NCUA Increases MBL Fleet Definition to Five or More Vehicles
The NCUA announced Tuesday it has revised its definition of a “fleet” of vehicles to five or more for purposes of member business lending.
The previous definition was for two or more vehicles. NCUA Board Chairman Debbie Matz had said the change was coming during her address to the NASCUS Summit in Denver on Sept. 12.
“The current definition of a business fleet—two or more vehicles—is no longer adequate to meet members’ needs. So, at the request of a credit union, NCUA’s general counsel reviewed the definition and issued a new legal opinion that both reflects the realities of today’s marketplace and protects safety and soundness,” Matz said in a release Tuesday.
The legal opinion said the member business lending rule requires all member business loans meet certain collateral and security requirements, and allows credit unions to make business vehicle loans without complying with an 80% loan-to-value requirement except in the case of “fleet” vehicles.
This is because fleet vehicles tend to depreciate more quickly than non-business, personal-use vehicles and therefore pose a higher risk to the lending credit union.
By updating the “fleet” definition, the NCUA is giving credit unions greater flexibility in making lending decisions, the agency said. A credit union making a loan to a member who owns a business with fewer than five vehicles would qualify for the loan-to-value exception.
The opinion is consistent with the way fleet vehicles are treated by the Internal Revenue Service and auto industry standards, the NCUA said.