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NCUA opines on conflict-of-interest lending reg
WASHINGTON (2/18/09)--A National Credit Union Administration (NCUA) provision that prohibits credit union officials from receiving compensation when making loans does not apply when a credit union sells loans it previously made, according to NCUA Associate General Counsel Sheila Albin. NCUA responded to a letter questioning whether a general lending regulation prevents credit unions from selling loans to a bank in which one of the credit union’s directors owns stock. The provision, Section 701.21 (c)(8), applies when credit unions make loans to their members, but not to a credit union’s sale of whole loans or participating interest in loans it has granted. “Credit union officials are cautioned, however, to avoid any impropriety when deliberating on or participating in the determination of any matter affecting their pecuniary interest, including the sale of credit union loans to a bank in which an official owns a minority interest,” Albin wrote. In general, the interested director should not deliberate or vote on the transaction. The purpose of the rule is to ensure that an individual in a position of authority does not put self-interest ahead of the credit union’s interest in making good loans and providing good services to members, NCUA said. For the full letter, use the link.
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