NCUA Clarifies Rules on Multi-Featured Lending

A letter issued last Friday by the National Credit Union Administration (NCUA) provides clarity and guidance around changes made in recent years related to open-ended and multi-featured lending.

In January 2009 the Federal Reserve Board (FRB) issued changes to Regulation Z that took effect in July 2010 and significantly altered the way financial institutions could support open-ended lending. Issued at the request of a number of groups, including the Credit Union National Association (CUNA) and CUNA Mutual Group, the NCUA’s letter to federal credit unions, 12-FCU-02, interprets the FRB rule changes, clarifying the NCUA’s position on open-ended lending and on multi-featured lending plans that provide closed-end disclosures for advances made under a master agreement.

After consultation with the Consumer Financial Protection Bureau’s (CFPB’s) regulatory staff regarding interpretation of some Regulation Z provisions, the NCUA concluded that:

  • Credit unions may offer a blended approach that includes a master agreement with closed-end disclosures for specific advances, such as to purchase a vehicle, and open-end disclosures for lines of credit issued under the agreement. This approach is called multi-featured lending (MFL).
  • Credit unions may offer multi-featured open-end lending (MFOEL) plans that provide open-end disclosures covering subaccounts issued for various purposes. However, credit unions may only underwrite credit at the time the initial application—or a request for a credit limit—is received, and they may only verify credit eligibility on an occasional or routine basis. Verification or underwriting may not occur in connection with a request for any specific advance.

“The NCUA guidance confirms that credit unions have the flexibility to use closed-end disclosures in connection with a master plan in order to provide convenient, efficient and compliant loan services to members,” said Hal Scoggins, an attorney with Farleigh Wada Witt and frequent collaborator with the Northwest Credit Union Association (NWCUA).

The NCUA also issued a supervisory letter to examiners that directs examiners to not discourage either MFOEL or blended programs. It says that examiners should instead ensure that credit unions understand and comply with the regulatory requirements regarding multi-featured lending.

“There seems to be consensus that the guidance was needed,” said John Trull, director of regulatory advocacy for the Northwest Credit Union Association (NWCUA). “Today the NCUA demonstrated that it is taking our concerns seriously.”

On October 11, 2007, the NWCUA (then the Washington Credit Union League), responded to the proposed rule by advocating the blended/multi-featured lending approach in a letter to the Federal Reserve’s Board of Governors. The letter primarily encouraged allowing uninterrupted MFOEL.

It is important to note that the NCUA’s letter is only to federal credit unions. Unless state regulators endorse the NCUA’s opinion, it will only apply to federally chartered credit unions and not state-chartered credit unions.


Questions? Contact Director of Regulatory Advocacy John Trull: 503.350.2209,

Posted in Advocacy News, Federal, NCUA, NWCUA.