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NCUA clarifies Reg Z definition of open-end credit
ALEXANDRIA, Va. (2/1/08)—The National Credit Union Administration (NCUA), in a recent legal opinion letter, clarified that an extension of consumer credit by a federal credit union (FCU) meeting the definition of “open-end credit” under Regulation Z is a "line of credit" under the NCUA’s regulations. What that means, the letter said, is that such credit would not be subject to a maturity limit. The Jan. 16 letter also acknowledge that an earlier legal opinion, OGC Op. 92-0232, has created confusion in its discussion of a particular loan product as a “hybrid or bifurcated loan.” It added that this new communication supersedes the older one, and is intended to clarify the agency’s interpretation regarding application of the Regulation Z definition of open-end credit in determining if a loan product is a line of credit for purposes of NCUA regulations. “Upon reconsideration, we believe OGC Op. 92-0232 is incorrect in concluding that a loan could be neither open-end credit nor closed-end credit; in the 15 years since it was issued, the opinion has created some confusion.” wrote Michael J. McKenna , NCUA deputy general counsel. “NCUA’s interpretation of Regulation Z, confirmed as correct by legal staff at the Federal Reserve Board), is that any extension of consumer credit is either open-end credit or closed-end credit. “Accordingly, an extension of consumer credit by an FCU meeting the Regulation Z definition of open-end credit is, for NCUA’s purposes, a line of credit and not subject to maturity limits. An extension of consumer credit by an FCU that does not meet the Regulation Z definition of open-end credit is, therefore, closed-end credit and subject to applicable maturity limits under the FCU Act and NCUA’s regulations,” the letter clarified. Use the resource link below for more on the NCUA letter.
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