New Lending Rules & Due Diligence Should Be at the Top of Your CU To-Do List

NCUA Boardroom. Credit/NCUA

Now that the NCUA’s “Financial Innovation” amendments have been posted in the Federal Register, beginning Oct. 30 federal credit unions and state charters, depending on their state laws and regulations, will have more flexibility to engage with third-party lenders in general and with fintechs, in particular. By, among other things, codifying legal opinion letter 15-0813 to clarify indirect lending arrangements, narrowing regulatory limits on the purchase of eligible obligations and trying to simplify the legal distinction between loan participations and eligible obligations, the NCUA has removed much of the confusion in a fundamental area of banking. It should help smaller credit unions purchase more loan participations and give larger ones increased opportunities to purchase loans from third parties.

With this increased flexibility, however, comes increased risks and a concomitant responsibility to ensure that your credit union understands not only the benefits but the risks of its lending relationships and then implements appropriate policies and procedures to address these concerns.