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State reminds credit unions to follow business loan rules

  • The Wichita Eagle
  • Published Monday, June 4, 2012, at 4:52 p.m.

The regulator of Kansas chartered credit unions is reminding them to follow the rules when it comes to member business loans.

The Kansas Department of Credit Unions issued to a bulletin to Kansas’ 79 state-chartered credit unions about complying with regulations that were established by the National Credit Union Administration more than a decade ago.

John Smith, administrator of the KDCU, said credit union examiners noticed that several credit unions were not following the federal regulation, which was established in 1999.

“Most of our credit unions don’t do member business loans,” Smith said Monday. “Credit unions that we’ve examined recently appear to not be following the regulations.”

The bulletin Smith’s office issued about a month ago highlighted some of the provisions that examiners noted were being violated. Those provisions included:

• Having business loan policies that have been adopted by the credit union’s board of directors and are reviewed annually.

• Using an individual with at least two years of direct experience in making member business loans.

• Keeping a credit union’s member business loans within the limits established by the NCUA, which is the lesser of 1.75 times a credit union’s net worth or 12.25 percent of its total assets.

Smith said the violations weren’t a huge issue but did need to be addressed by some state-chartered credit unions.

“Really, we issued the bulletin to remind credit unions they need to be informed, knowledgeable about the regulations,” Smith said. “I don’t think we’ve had any issues in Kansas, but the NCUA in some of the other states have had some failures because of member business loans.”

The bulletin comes at a time when a bill that would raise the cap on member business loans for credit unions awaits action in Congress. The legislation, Senate Bill 2231, remains idle in the Senate, where it waits to be voted on.

Reach Jerry Siebenmark at 316-268-6576 or jsiebenmark@wichitaeagle.com.

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