July 7, 1998
Hubert H. Carroll, CPA
O'Rourke, Sacher & Moulton
150 North Hill Drive, Suite 27
Brisbane, CA 94005
Dear Mr. Carroll:
You have asked whether the boards of directors for state chartered
federally insured credit unions (FISCUs) and federal credit unions
(FCUs) must approve indirect loans to directors and committee
members. The Federal Credit Union Act (the Act) and the National
Credit Union Administration Rules and Regulations require an FCU
board of directors to approve loans to directors and committee
members or loans guaranteed by directors or committee members
that are over $20,000. 12 U.S.C. 1757(5)(A)(iv) and (v) and 12
C.F.R. §701.21(d)(4). These provisions do not apply to FISCUs.
12 C.F.R. §741.203.
Although your clients are FISCUs, you are also interested in the
requirements for FCUs. The attached letter from me to Linda J.
Lehnertz, dated August 6, 1997, explains that an indirect lending
arrangement will be classified as a loan if the FCU makes the
final underwriting decision and the FCU is assigned the loan shortly
after it is made. If you determine that the indirect lending
arrangement is a loan, the Act will apply and director approval
will be required prior to making the loan.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MFR:bhs
SSIC 4650
98-0637
Enclosure