The ABC’s of MBL

June 13, 2017 at 10:24 am Leave a comment

Those of you who do MBL loans or who are thinking about doing MBL loans should take a look at this recent FAQ released by the NCUA in its Quarterly Report.

As readers of this blog know, on January 1st NCUA instituted a radical new approach to MBL regulation under which credit unions are given greater flexibility in shaping their MBL programs while examiners still retain the responsibility for making sure that credit union programs are designed and implemented in a safe and sound way. This approach is certainly worth trying, but it is a work in progress that requires credit unions not only to embrace their increased flexibility but their increased responsibility and examiners to distinguish between an inappropriate MBL program and a creative one.

As such, this FAQ is an important guidance which should be read in conjunction with NCUA’s Examination Guide. Most importantly, the guidance reiterates that there are baseline elements that examiners are expecting to see in an MBL program. For example, credit unions are not just expected to have relevant policies and procedures commensurate with the sophistication of their MBL programs but also personnel qualified to manage these programs.

I continue to get questions about whether NCUA expects credit unions to continue to get personal guarantees when making commercial loans. So I was happy to see NCUA explain that “in those cases where there are strong mitigating factors” a credit union is not required to get a personal guarantee, but should detail in writing why it decided that a guarantee was not necessary.

Curmudgeons like myself have always been concerned that, just as credit unions now have greater flexibility in administering their MBL programs; examiners also have greater flexibility in curtailing credit union practices on safety and soundness grounds. As a result clear and consistently applied guidance is absolutely crucial if this bold experiment is going to succeed. The FAQ explains that the primary sources for credit unions implementing MBL programs are the proposed and final rules and their preambles, as well as the updated commercial and MBL section of the examiners guide.

The NCUA also explains what steps credit unions should feel free to take when they disagree with an examiners assessment pertaining to their MBL program. I have been around credit unions long enough to know that some of you read that last sentence and snickered out loud (SOL), but seriously, for this new approach to regulatory oversight to work credit unions can’t be afraid to engage in a dialogue with their examiners about their MBL practices.

SC Decides Important Debt Collector Case

Yesterday, the Supreme Court unanimously upheld a narrow interpretation of the Fair Debt Collection Practices Act (FDCPA). The court ruled that Santander Bank was not subject to the FDCPA after it purchased delinquent car loans.

Incidentally, for you legal geeks and grammarians the decision was the first written by Neil Gorsuch and included a discussion of the past participle.

Entry filed under: Compliance, Regulatory. Tags: .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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