WA DCU Issues Bulletin on Powers of Attorney in Vehicle Loan Transactions

Guest update from Brian Witt & Hal Scoggins

Last week, the Washington Division of Credit Unions issued DCU Bulletin B-16-16 – Practice of Using Power of Attorney for Vehicle Loans, alerting credit unions that the Washington Department of Licensing (DOL) will not accept powers of attorney executed by a credit union employee on behalf of a member. We agree with DOL’s position and DCU’s guidance on this issue is helpful.

Background

Early this summer, DOL investigated a credit union’s practice of executing a power of attorney form on behalf of a member to permit the credit union to sign and submit title transfer documents to DOL in the member’s name.  In this case, the member signed a consumer loan agreement that contained language obligating the member to cooperate and provide a power of attorney:

“You agree to sign any other documents…to perfect our security interest. You agree to give us an irrevocable power of attorney, to sign your name to title certificates and to apply in your name for the issuance of certificate of title…”

The credit union relied upon this language to execute a power of attorney, with a credit union employee signing on behalf of the member and presenting the power of attorney to the DOL to permit credit union employees to sign other necessary transfer documents.

Impermissible Practice

This practice may be accepted in other states, but not Washington. The Washington DOL requires the member, not a credit union representative, to execute a separate POA form.  After all, the scope of loan document language only states the member agrees to provide a power of attorney.  We understand this particular practice was an isolated practice accepted by one DOL office and not a common practice followed by other credit unions or accepted at other DOL offices.

Acceptable Process

Credit unions should review their vehicle lending and title transfer practices with the following practice guidelines:

Loan Document Reliance

The loan agreement language under which a member agrees to execute a power of attorney form is fine and remains necessary and appropriate. However, such language does not constitute a valid power of attorney under RCW 11.94.010 nor does it authorize a credit union representative to execute a power of attorney on a member’s behalf. The power of attorney form must be signed by the member (principal) not the credit union (agent).  Even if the loan document includes language that actually grants a power of attorney, the DOL indicates that it will not accept transactions based on such a power of attorney embedded in the loan documents.

Washington DOL Power of Attorney Form

The Washington DOL has issued and encourages the use of a specific  Release of Interest/Power of Attorney form (Release of Interest/ Power of Attorney – DOL.WA.gov TD-420-050) for use in transferring titles. The POA portion of this form must be signed by the member, not a credit union representative.  The person designated as attorney-in-fact may then sign other documents on behalf of the member.  In that case, such documents would be signed by the attorney-in-fact on behalf of the member, e.g., “Frank T. Member by John A. Smith, attorney-in-fact.”

Brian Witt & Hal Scoggins are from the Portland law firm of Farleigh Wada Witt.

Posted in NWCUA.