ALEXANDRIA, Va. — On Feb. 8, NCUA clarified the member businessloan two-year rule in a recent legal opinion letter (08-0128).

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Stating that credit unions may use an outside underwriter or oneof their own employees, NCUA was succinct in its guidance that if acredit union were to use its own employee, the credit union'semployee must have two years of direct experience in memberbusiness lending.

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According to NCUA, “the experience must provide the credit unionsufficient expertise given the complexity and risk exposure of theloans in which the credit union intends to engage. Credit unions donot have to hire staff to meet the requirements of this section butmust ensure that the expertise is available. A credit union canmeet the experience requirement through various approaches. Forexample, a credit union can use the services of a credit unionservice organization.”

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For example, NCUA pointed out, “an individual with experiencesolely in taxi cab loans does not have the requisite experiencenecessary to underwrite a loan to the taxi company for a gasstation, because the individual will be unfamiliar with relatedissues that may impact the loan, such as environmental lawsapplicable to underground storage tanks.”

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The same analogy applies to member business lending, NCUAsaid.

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These individuals must be familiar with the proper underwriting,analysis, and origination of loans of a particular type in order tounderstand their complexity and risk exposure.

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NCUA further explained that employees need not have had memberbusiness lending experience at the time of hiring, but could gainit during the tenure of their career. The ultimate decision to makea loan will always reside with the credit union, NCUAreiterated.

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