[Code of Federal Regulations]

[Title 12, Volume 6]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 12CFR723.5]



[Page 580-581]

 

                       TITLE 12--BANKS AND BANKING

 

            CHAPTER VII--NATIONAL CREDIT UNION ADMINISTRATION

 

PART 723_MEMBER BUSINESS LOANS--Table of Contents

 

Sec. 723.5  How do you implement a member business loan program?



    (a) Generally. The board of directors must adopt specific business 

loan policies and review them at least annually. The board must also use 

the services of an individual with at least two years direct experience 

with the type of lending the credit union will be engaging in. The 

experience must provide the credit union sufficient expertise given the 

complexity and risk exposure of the loans in which the credit union 

intends to engage. Credit unions do not have to hire staff to meet the 

requirements of this section but must ensure that the expertise is 

available. A credit union can meet the experience requirement through 

various approaches. For example, a credit union can use the services of 

a credit union service organization (CUSO), an employee of another 

credit union, an independent contractor, or other third parties. 

However, the actual decision to grant a loan must reside with the credit 

union.

    (b) Conflicts of Interest. Any third party used by a credit union to 

meet the requirements of paragraph (a) of this section must be 

independent from the transaction and is prohibited from having a 

participation in the loan or an interest in the collateral securing the 

loan that the third party is responsible for reviewing, with the 

following exceptions:

    (1) The third party may provide a service to the credit union 

related to the transaction, such as loan servicing;



[[Page 581]]



    (2) The third party may provide the requisite experience to the 

credit union and purchase a loan or a participation interest in a loan 

originated by the credit union that the third party reviewed; or

    (3) A credit union may use the services of a CUSO that otherwise 

meets the requirements of paragraph (a) of this section even though the 

CUSO is not independent from the transaction, provided the credit union 

has a controlling financial interest in the CUSO as determined under 

Generally Accepted Accounting Principles.



[68 FR 56551, Oct. 1, 2003]