Federal credit unions can use a fully automated loan approval process but should be careful that it has safeguards to ensure that it doesn't raise safety and soundness concerns, according to a legal opinion letter by NCUA Associate General Counsel Hattie Ulan.

She said a major concern for the agency is that because under the automated system a human audit of the application and loans only occurs the funds have been disbursed.

Ulan also expressed concern, however, about allowing federal credit unions to use the automated system for new membership applications, especially if they run a credit check on potential applicants.

Ulan said that “the rationale for limiting online applicants to persons who agree to a credit report check is not apparent.”

She also cautioned that credit union employee who enters a loan applicant's data into an automated system can't act as both the loan officer and the person who disburses the money.

Ulan responded to an inquiry from Oklahoma City lawyer Laura N. Pringle.