April 6, 1998
Carla Stone Witzel, Attorney at Law
233 East Redwood Street
Baltimore, Maryland 21202-3332
You have written asking whether the board of directors can delegate
its review of loan appeals to a committee composed solely of directors.
As explained below, the answer is no.
The Federal Credit Union Act (the Act) states that if a federal
credit union does not have a credit committee all loan appeals
must be reviewed by the board of directors. 12 U.S.C. §§1761b(17)
and 1761c(b). You analogize these provisions to the provisions
of the Act that require director approval for loans to directors.
12 U.S.C. §1757(5)(A)(iv) and (v). You question why we
allow the board to delegate to a committee composed solely of
directors the authority to approve director's loans, but don't
allow the board to delegate loan review appeals. Our view is
that the intent of the director loan approval provisions is to
guard against insider abuse and to ensure that the directors know
about and approve of lending to officials above the stated limits.
Delegating approval to a committee composed solely of directors
and requiring the committee to report the loans to the full board
each month complies with the statutory intent.
We believe the intent of the loan appeal statute is quite different.
This provision is for the protection of the member. Providing
members a review of loan denials by a committee rather than the
entire board of directors would dilute the procedural right provided
in the Act. Therefore, we conclude that the directors may not
delegate its review of loan appeals to a committee.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MFR:bhs
SSIC 3600
98-0214