April 6, 1998
John R. Goff, Vice President Compliance
Keesler Federal Credit Union
2602 Pass Road
P.O. Box 7001
Biloxi, MS 39534-7001
Dear Mr. Goff:
You are implementing a risk based lending program
in which the interest rate for a particular loan depends on the
member's credit risk score. You have asked whether the member
has a right of review for the interest rate offered in response
to a loan application. If the member has been denied a loan at
a particular interest rate because of his creditworthiness, the
member has a statutory right of review.
The Federal Credit Union Act provides, in part,
that:
If the bylaws provide for a credit committee,
all applications not approved by the loan officer shall be reviewed
by the credit committee, and the approval of a majority of the
members who are present at the meeting when such review is undertaken
shall be required to reverse the loan officer's decision provided
a majority of the full committee is present. If there is not
a credit committee, a member shall have the right upon written
request of review by the board of directors of a loan application
which has been denied.
12 U.S.C. ยง1761c(b). Keesler Federal
Credit Union's bylaws do not provide for a credit committee, so
a member has the right, upon written request, to have his denied
loan application reviewed by the board of directors. If the member
is seeking a rate for a particular loan lower than that which
the loan officer offers due to the member's creditworthiness,
the member may request that the board of directors review the
loan application. Even though the loan officer is willing to
make a loan at a higher rate, in effect, the member's loan application
at the lower rate available to others has been denied. In reviewing
the denied loan application, the board of directors should apply
the same risk based lending policies that the loan officer was
presumably using in determining the interest rate on that specific
loan for the member.
We note that the right of review of a denied
loan application is completely separate from any adverse action
notice requirements under Regulation B. 12 C.F.R . Part 202. Although NCUA enforces
Regulation B, you should address any questions regarding the regulation to the
Board of Governors of the Federal Reserve System since that agency
interprets Regulation B.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MJMcK:bhs
SSIC 3501
98-0133