No limits on purchase or participation in indirect auto loans serviced by a third party would be imposed on credit unions under a proposal issued by their federal regulator Tuesday.
In its so-called “eighth round” of deregulation proposals, the National Credit Union Administration (NCUA) said removing the limits on credit union purchase or participation in the indirect auto loans would “reduce regulatory burden and allow credit unions and their boards greater flexibility to decide what amount of purchased indirect vehicle loans serviced by third parties is appropriate for the credit union’s size, the complexity of the transactions, and the board’s risk tolerance.”
Comments on the proposal will be due 60 days after its publication in the Federal Register.
Limits on the indirect loan investment were imposed in 2006 by a final rule. The agency said that, in 2006, NCUA was concerned that some credit unions may involve themselves in indirect lending programs without adequate due diligence, appropriate controls, or sufficient experience with a third-party servicer. “At that time, the Board thought this could create undue risk where a third party manages a credit union’s relationship with automobile dealers and with credit union members whose loans the third party services.”
In the ensuing 20 years, NCUA asserted, things have changed. The agency now contends that the rule “set prescriptive, inflexible limits on the aggregate amount of indirect loans and participations in indirect loans.”
“These requirements create a rigid, one-size-fits-all framework that is unduly burdensome for credit unions,” NCUA said, adding that the agency now believes that a credit union’s board is in the best position to develop policies that are appropriately scaled to its activities.
Tuesday’s proposal, as the agency noted, is the eighth installment of its “deregulation project,” which started early this year.
NCUA Announces Eighth Round of Deregulation Proposals
Leave a Reply