June 24, 1999

Charles F. Plassenthal, Manager
Dayton Firefighters Federal Credit Union
338 South Patterson Boulevard
Dayton, Ohio 45402-2845

You have asked for a legal opinion on whether Dayton Firefighters Federal Credit Union (FCU) would meet regulatory requirements for records retention if it scans members' original paper loan applications and promissory notes onto a laser disk imaging computer system, and then destroys the originals. You have also asked whether the printed copies of the scanned images would be indisputable for legal purposes.

The National Credit Union Administration (NCUA) recommends that the FCU retain all original loan documents until the borrower satisfies the loan. After the borrower satisfies the loan, NCUA leaves the decision on retaining loan records to the discretion of the FCU's board of directors, subject to any other applicable federal and state records retention laws. The FCU should consult local counsel on whether the printed copies of the scanned images would be indisputable in a court of local jurisdiction in Ohio.

The NCUA regulation governing preservation of vital records by federally insured credit unions does not include loan documents among the vital records that the credit union must preserve. 12 C.F.R. Part 749 (enclosed). The NCUA Accounting Manual for Federal Credit Unions (the Manual), at section 5190 (enclosed), sets forth NCUA's policies for FCU records retention. The Manual recommends that the FCU consult with local counsel regarding whether a court in the FCU's jurisdiction would accept microfilmed records. The same applies for printed copies of scanned records.

The Manual also provides that the FCU should retain all original loan documents until the borrower satisfies the loan and as other records retention laws require, including Regulation Z, Regulation B, Regulation C, the Real Estate Settlement Procedures Act, Flood Disaster Protection Act, the Fair Credit Reporting Act, the Bank Secrecy Act, and any other applicable law or regulation. We have enclosed the record retention provisions in Regulation Z, Regulation B, and Regulation M, and the corresponding Federal Reserve Board Official Staff Interpretations that you may find helpful on this issue. 12 C.F.R. §§202.12, 213.8, 226.25, and Appendices.

Enclosed are letters from me to Robert N. Buck, dated August 25, 1998, regarding the use of imaging system for records storage, and to John U. Barker, dated June 25, 1998, regarding the Manual and permanent retention of records. Finally, we recommend you consult with your NCUA examiner regarding any related safety and soundness issues.

Sincerely,

Sheila A. Albin
Associate General Counsel

GC/RMM:bhs
SSIC 3500
99-0443
Enclosures