NCUA Continues to Clarify Waivers for State Member Business Lending Rules

ALEXANDRIA, Va. – The Texas Credit Union Department recently sought clarification on its authority to apply a general lending rule to waive requirements found in the state’s member business lending rule. In a July 9 opinion letter to Harold Feeney, the state’s commissioner, NCUA Associate General Counsel Sheila Albin wrote the state may only grant waivers from MBL requirements if the NCUA Board approved the type of waivers permitted and the procedure for authorizing waivers when it granted the state rule exemption. A state that has received an exemption from NCUA’s MBL rule cannot use a general waiver provision to grant MBL waivers without NCUA approval. The clarification from NCUA comes on the heels of a July 2 letter the regulator sent to John Smith, director of the Missouri Division of Credit Unions. The NCUA Board granted an exemption from NCUA’s MBL rule to Texas on Nov. 18, 1999, and approved amendments to Texas’ MBL rule (Texas rule) on Jan. 23, 2003. 7 TEX. ADMIN. CODE 91.709. But neither of the proposals presented to the NCUA Board for review addressed types of waivers permitted or a procedure for waivers similar to those in NCUA’s MBL rule. 12 C.F.R. 723.10-.11. Albin wrote “there is a general lending regulation in the Texas Administrative Code that, by its terms, grants you discretion to permit waivers of lending requirements. 7 TEX. ADMIN. CODE 91.701(e). Waivers, if any, granted under this provision for any requirements in the Texas MBL rule approved by the NCUA Board are impermissible. The potential application of this waiver provision in the general lending regulation was not presented to the NCUA Board as part of its approval of the Texas MBL rule.” The NCUA Board did not analyze the impact of waived requirements when reviewing the Texas rule and did not authorize (Texas’) office to grant waivers from the requirements in the Texas rule. NCUA must approve the scope of waivers permitted for federally insured state-chartered credit unions (FISCUs) operating under an exempt state rule, Albin wrote. Otherwise, an FISCU could seek a waiver from many conditions imposed in the rule that may not be waived in NCUA’s rule or under the Federal Credit Union Act. 12 C.F.R. 723.10. Furthermore, a state’s waiver process must adequately address NCUA’s role for waiver approvals. Albin directed Texas to review 2 C.F.R. 723.11 – “being part of the process allows NCUA, as the insurer of credit unions, to ensure that all waiver requests are properly reviewed.” 64 Fed. Reg. 28721, 28725 (May 27,1999). “NCUA’s responsibilities remain the same regardless of whether a state operates under NCUA’s MBL rule or receives an exemption for its own rule,” Albin wrote. When the NCUA Board exempts a state rule, it does so with the understanding that FISCUs in that state will be subject to the entire rule as presented to and reviewed by the Board. Albin cited a July 2, 2004 legal opinion, which concluded that an SSA cannot authorize additional lending authority outside of the four corners of the state’s exempted rule approved by the NCUA Board. To accommodate Texas FISCUs that seek relief from some of the Texas rule’s requirements, Albin said the SSA can either seek approval from the NCUA Board to amend the Texas rule by placing waiver guidelines and a waiver process in the Texas rule or rescind the current Texas rule so that Texas FISCUs can use the NCUA MBL rule that went into effect in October 2003 and obtain waivers as provided in NCUA’s MBL rule. [email protected]