ALEXANDRIA, Va. — The instances when a federal credit union can issue member business loans to CEOs, assistant chief executive officers, chief financial officers, and any "immediate family members" of these officials was recently clarified by NCUA.

In a Jan. 23 opinion letter, NCUA responded to a query from an FCU seeking guidance on whether it might issue a line of credit to a law firm in which the CEO's husband is a partner. The law firm in question is organized as a professional law corporation (PLC) under Louisiana law, which establishes it as a separate entity from its partners, thus the loan is permissible, NCUA Associate General Counsel Sheila Albin wrote.

The prohibition on making member business loans to immediate family members of senior credit union officials is designed to avoid conflicts of interest in lending decisions, Albin reminded. Accordingly, NCUA considered whether issuing a line of credit to the law firm where the CEO's husband is a partner is likely to create a conflict between the CEO's personal financial interest and her responsibility to the credit union. "As presumably a portion of the CEO's family income is tied to her husband's earnings from the law firm, the potential for a conflict of interest exists," she pointed out.