ALEXANDRIA, Va.–NCUA has issued a pair of legal opinion letters, the first on the “reasonable proximity” requirement of the FCU Act, and the second on MSRs and data input.
In the first opinion, NCUA states the “reasonable proximity” requirement under the Federal Credit Union Act doesn’t set a maximum distance between the location of a group that wants to be served and the location of the credit union that would serve it.
The June 10 opinion, first reported by Regulatory Report, is signed by NCUA Acting General Counsel Frank Kressman and states that consistent with the statute and legislative history, the agency has always viewed “reasonable proximity” as including a geographic component, “but the NCUA will continue to assess this geographic component on a case-by-case basis free of a mileage limit.”
Regulatory Report noted the opinion states the agency’s board, in its first iteration of the NCUA chartering manual following enactment of the 1998 Credit Union Membership Access Act, determined “numerous inequities” would arise from using distance factors. “While mileage limitations often facilitate regulatory decisions, frequently, they are artificial and cause unfair results simply because of small geographic differences. Accordingly, mileage limitations were deemed inappropriate and not advisable. Essentially, the service area means that a member can reasonably access the service facility. In rural areas, this may include distances encompassing several counties. In a densely populated area, it may be a portion of a city,” Regulatory Report quotes the opinion letter as stating.
MSRs and Data Input
In the second letter, issued June 16, the agency considers whether an FCU member service representative is barred by the FCU Act from inputting data into the institution’s automated loan underwriting system (ALUS) and then disbursing funds if the ALUS, not the member rep, approves the loan. With the right controls and safeguards in place, the FCU Act “does not prohibit such a scenario,” the letter notes, Regulatory Report said.
“NCUA’s long held interpretation is that the purpose of this provision is to segregate loan approval and disbursement duties of the loan officer to decrease the incidence of fraud, embezzlement, and errors,” the letter states. “We continue to interpret § 1761c(b) of the FCU Act in this way.”