Multi-featured lending has been a hot topic since changes to Reg Z's open-end rules were announced in 2009. The most recent development is the NCUA's July 2012 letter to federal credit unions, 12-FCU-02, and accompanying supervisory letter to examiners.
The new guidance is clearly written and easy to understand. Nonetheless, some in the industry continue to express confusion about what credit unions can and cannot do under the Reg Z open-end rules. Allow me to clarify.
The LFCU clearly describes the fundamental rules for the two main types of multi-featured plans that emerged after the rules changed. A multi-featured open-end lending plan is strictly open-end because it provides only open-end disclosures, even for closed-end loans such as vehicle loans. This means credit unions can perform no underwriting or credit verification in connection with an advance request. Instead, credit unions using MFOELs must adhere to a complicated set of severe restrictions to perform "occasional" or "routine" credit verification.
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