FCU Powers & Limitations (Ch. 1)

Question 1

How do NCUA’s lending regulations interact with state law?

Answer 1

Preempts any state law purporting to limit or affect:
-Rates of interest and amounts of finance charges, including: (1) The frequency or the increments by which a variable interest rate may be changed; (2) The index to which a variable interest rate may be tied; (3) The manner or timing of notifying the borrower of a change in interest rate; (4) The authority to increase the interest rate on an existing balance;
- Late charges; and
- Closing costs, application, origination, or other fees;
- Terms of repayment, including:
- The maturity of loans and lines of credit;
- The amount, uniformity, and frequency of payments, including the accrual of unpaid interest if payments are insufficient to pay all interest due;
- Balloon payments; and
- Prepayment limits;
Conditions related to:
- The amount of the loan or line of credit;
- The purpose of the loan or line of credit;
- The type or amount of security and the relation of the value of the security to the amount of the loan or line of credit;
- Eligible borrowers; and
- The imposition and enforcement of liens on the shares of borrowers and accommodation parties.

NOT preempted - It is not the Board’s intent to preempt state laws that do not affect rates, terms of repayment and other conditions described above concerning loans and lines of credit, for example:
(i) Insurance laws;
(ii) Laws related to transfer of and security interests in real and personal property
(iii) Conditions related to:
(A) Collection costs and attorneys’ fees;
(B) Requirements that consumer lending documents be in “plain language;” and
(C) The circumstances in which a borrower may be declared in default and may cure default.

Question 2

What are the state laws preempted by NCUA

Answer 2

• Opening, maintaining, and closing accounts
• Dividends
• Dormant account fees
• Charging a fee for cashing on‐us checks for nonmembers

Question 3

Nonparticipation Policy

Answer 3

A member’s failure to vote in elections or failure to purchase shares, obtain a loan, or lend to the FCU

• FCU must provide notice to the membership within 30 days of the effective date of the policy
• Once adopted, the policy may be enforced to expel members that do not participate in the FCU

Question 4

How do you impress a statutory lien?

Answer 4

1. Notice must be given to a member via account opening documentation
2. For loans, by giving notice of the lien through the loan documentation
3. Through a bylaw amendment or policy, which the member is given notice

Question 5

How do you enforce a statutory lien?

Answer 5

Debiting funds in the account and applying the funds to any outstanding financial obligation due and payable to the credit union
- Not permitted toward credit card debt

Question 6

List of activities included in the preappoved list of incidental powers

Answer 6

• Charitable activities
• Electronic funds services (online banking)
• Finder activities
• Marketing activities
• Correspondent activities (credit union to credit union)

Question 7

3-prong test for incidental powers

Answer 7

1. Convenient or useful in carrying out the mission or business of FCU
2. Functional equivalent or logical outgrowth of activities that are part of the mission or business of FCU
3. Involves similar risks in nature to those already assumed

Question 8

What is the process for expelling a member?

Answer 8

1. Notice of the meeting must state the purpose (no other business can be discussed)
2. Member must have the opportunity to be heard at the meeting
3. A 2/3 vote of the members present is needed to expel the member

Question 9

Two fundamental rights for credit union members

Answer 9

1. The right to vote at elections

2. The right to hold par value in a share account