SACRAMENTO, Calif. — Nearly a year after a California assembly bill was signed into law that included updates on granting nonmember loans, the California Department of Financial Institutions has weighed in on the changes.

Passed on July 27, 2007, California assembly bill 1518, added paragraph (c) to financial code 14950 that states a CU may permit a nonmember to participate in an obligation or extension of credit to a member as a joint applicant or co-obligor. California state-chartered CUs previously faced a number of restrictions, said Daniel Loritz, an attorney with Okun Lortiz LLP, a Glendale, Calif.-based firm.

Lortiz sought DFI clarification on the restrictions that included the entity qualifying for membership and a CU having a phrase that says "organizations of such persons" and every owner of the business is a member. In a March 12 opinion letter, Kenneth Sayre-Peterson, acting general counsel with California's DFI, agreed that 14950 (c) extends to member business loans. Lortiz is concerned CUs may not be aware of the extension.