CUNA Mutual Issues Update on Lending Compliance for MFOEL/MFL

CUNA Mutual Group has issued the following update in light of the recent National Credit Union Administration (NCUA) Legal Opinion Letter regarding multi-featured lending plans:

I wanted to keep you in the loop on our lending compliance activities following the recent NCUA guidance and clarification around multi-featured open-end lending and multi-featured lending.  The NCUA has released two letters in recent weeks clarifying Multi-Featured Open-End Lending (MFOEL), and CUNA Mutual Group has been active in the conversation. We continue to be a resource to credit unions for compliance advice and compliant lending products.

The second legal opinion letter was released last Wednesday, August 15, 2012, and provided additional opinion on the issue of consummation as it relates to disclosures required under Regulation Z. The issues were substantive enough to warrant a new Compliance Alert to CUNA Mutual Group credit union customers, which we issued last Friday. I’ve copied the text of the Compliance Alert below:

Lending Compliance Alert Issued 8/17
NCUA Questions Legality of Securian’s Multi-Featured Lending Plan


On August 15, 2012 the National Credit Union Administration (NCUA) issued a legal opinion letter to Securian Financial Group regarding the legality of a Multi-Featured Lending (MFL) plan that utilizes a “single signature” approach.

Alert Detail:

On August 15, 2012 the National Credit Union Administration (NCUA) issued a legal opinion letter to Securian Financial Group regarding the legality of a Multi-Featured Lending (MFL) plan that utilizes a “single signature” approach.  Securian’s MFL plan allows a single signature on an umbrella loan agreement for open-end and closed-end credit features at plan opening; however, the plan does not require an additional signature on a closed-end loan transaction after the presentation of required Truth in Lending disclosures.  Although the NCUA stated that Securian’s MFL approach is compliant with Regulation Z on its face, it warned that such a plan may be functionally impractical or illegal if it is not consistent with state law regarding consummation of loan transactions. Specifically, the NCUA stated:

“Consummation is defined as the time that a consumer becomes contractually obligated on a credit transaction. 12 C.F.R. § 1026.2(a)(13). When that obligation is created is determined under applicable state law; Regulation Z does not guide or govern this determination. 12 C.F.R. § 1026.2, Comment 2(a)(13)-1.  Accordingly, if state law defines the point of time when consummation occurs in a way that makes the use of an MFL plan functionally impractical or illegal, then an [Federal Credit Union] may not use the MFL plan in that state.”

NCUA’s clarification is consistent with CUNA Mutual Group’s longstanding position that these “single signature” plans create an unacceptable compliance risk for credit unions.  Failure to obtain an additional signature after the presentation of Truth in Lending disclosures on a closed-end loan transaction may not be in compliance with state and federal law.

CUNA Mutual Group has the lending products to support credit unions’ requirements for compliance with both federal and state laws.  We have been, and will continue to be, credit unions’ compliance leader.  For answers to your LOANLINER questions, contact our team of compliance and operations experts at 800.356.5012, option 2, or

A copy of NCUA’s legal opinion can be found at

In addition, field staff for CUNA Mutual Group were provided with an email to send to their credit union accounts. I’m including it below so you’re aware of messages your credit unions may be receiving:

Subject: NCUA casts doubt on Securian’s “single signature” approach

The NCUA acted swiftly to clarify a key point in NCUA Letter 12-FCU-02. The new clarification (attached) was addressed to Securian in response to its request for a legal opinion addressing the viability of the company’s Multi-Featured Lending (MFL) product. While affirming that MFL “is not inconsistent with Regulation Z,” the NCUA raised questions about the functional practicality and legality of the “single-signature” approach at the state level. The concern centers on when the Truth in Lending disclosure is provided to a member relative to a state-based definition of consummation of the loan: 

“(I)f state law defines the point in time when consummation occurs in a way that makes the use of an MFL plan functionally impractical or illegal, then an FCU may not use an MFL plan in that state.” (NCUA Letter – Multi-Featured Lending Plans Using Umbrella Loan Agreements – August 10, 2012)

While the Securian approach may seem convenient, it may not be compliant. In most states, when consummation occurs in an MFL plan is unclear. Furthermore, courts have not addressed the specific set of facts present in the MFL ‘single signature’ plan described above. Consequently, credit unions who are considering a MFL ‘single signature’ approach should seriously consider these risks, along with the consequences of non-compliance.

At CUNA Mutual Group, we remain concerned over the legality of a single signature MFL product. Without any evidence that this is a viable and compliant lending solution, we just can’t recommend a path that may create avoidable exposure to litigation and financial risk for credit unions. We’re committed to providing you compliant options to help execute your lending strategy. The best solution for you may be some combination of open-end and closed-end lending that complies with Federal and state regulations. Credit unions across the country have relied on CUNA Mutual Group as the trusted source for compliance guidance for the credit union movement for many decades. CUNA Mutual Group is dedicated to protecting your credit union and your members at every lending opportunity.

Lastly, we have hosted three educational Webinars – both independently for our customers and in partnership with CUNA – with two more planned for next week. Over 1200 credit union registrants have had the opportunity to hear the latest information on this issue so far. Here’s the summary for the CUNA Mutual Group sessions:

Webinar Summary

CUNA Mutual Group advocated for clarity from the NCUA for years and is providing advice and real solutions in the wake of regulator opinion. CUNA Mutual Group is currently offering webinars to summarize the recent NCUA Letter 12-FCU-02. Conducted by Bill Klewin, Director of Regulatory Compliance at CUNA Mutual Group along with other compliance and legal experts from CUNA Mutual, the webinars focus on:

  • Events leading up to the NCUA letter
  • Key points in the letter
  • Likely impacts on credit unions
  • Four lending options for credit unions
  • The continuing need for compliance
  • Suggested next steps for credit unions to take
  • Resources available to help credit unions during their journey 


Each webinar also features approximately 30 minutes of Question & Answer.


Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, CUNA, GoWest Solutions, Industry Insight, NCUA.