NCUA Partners with EXIM to Help Credit Unions Support Small Businesses

A series of joint initiatives will help credit unions better understand EXIM loans and resources.

6/16/2020Compliance

The National Credit Union Administration and the Export-Import Bank of the United States have launched a three-year collaborative effort to bring small businesses and credit unions together and expand awareness about EXIM programs.

The NCUA and EXIM signed a memorandum of understanding to undertake a series of initiatives that will help credit unions better understand and make use of EXIM guaranteed loans and resources. These joint initiatives may include webinars and training events.

“Under this agreement, we’ll be working with EXIM to develop educational and training initiatives on export financing opportunities to share with credit unions, so they can educate their small-business members about the available opportunities, such as an EXIM guaranteed loan being exempt from the member business cap of 12.25%,” said NCUA Chairman Rodney E. Hood. “Helping small businesses to gain access to capital is essential, and we can anticipate that this collaboration will be a great help to many hard-pressed entrepreneurs, particularly the steep challenges they face in today’s environment.”

Commercial lending by federally insured credit unions has grown in recent years. At the end of 2019, credit unions reported more than $81 billion in outstanding commercial loans.

“This MOU represents EXIM’s first-ever targeted outreach to credit unions and their millions of customers and will provide important support to America’s small businesses – especially those that may be exporting for the first time,” said Chairman Reed. “NCUA Chairman Hood is a visionary leader and I look forward to the collaboration between our agencies to raise awareness with credit unions on the services available through EXIM to help their members export, grow their businesses and U.S. jobs, and bring prosperity to local communities.”

Question of the Week

Q. Under the Military Lending Act, what is a reasonable bona fide fee?

A. A bona fide fee is a fee charged to a credit card account for items like cash advances, rewards programs, and foreign transaction fees. In order for the fee to be reasonable, the creditor has the option of complying with one of two tests to determine the reasonableness:

(ii) Safe harbor. A bona fide fee is reasonable under paragraph (d)(1) of this section if the amount of the fee is less than or equal to an average amount of a fee for the same or a substantially similar product or service charged by 5 or more creditors each of whose U.S. credit cards in force is at least $3 billion in an outstanding balance (or at least $3 billion in loans on U.S. credit card accounts initially extended by the creditor) at any time during the 3-year period preceding the time such average is computed.

(iii) Reasonable fee. A bona fide fee that is higher than an average amount, as calculated under paragraph (d)(3)(ii) of this section, also may be reasonable under paragraph (d)(1) of this section depending on other factors relating to the credit card account. A bona fide fee charged by a creditor is not unreasonable solely because other creditors do not charge a fee for the same or a substantially similar product or service.

And what is reasonable?

(iv) Indicia of reasonableness for a participation fee. An amount of a bona fide fee for participation in a credit card account may be reasonable under paragraph (d)(1) of this section if that amount reasonably corresponds to the credit limit in effect or credit made available when the fee is imposed, to the services offered under the credit card account, or to other factors relating to the credit card account. For example, even if other creditors typically charge $100 per annum for participation in credit card accounts, a $400 fee nevertheless may be reasonable if (relative to other accounts carrying participation fees) the credit made available to the covered borrower is significantly higher or additional services or other benefits are offered under that account.

It is important to note that fees must be compared to like-kind fees. A cash advance fee cannot be compared to a foreign transaction fee — it must be compared to another creditor’s cash advance fee.

Resources

32 CFR 232.4(d)(3)

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The NCUA and the Export-Import Bank of the United States launched a three-year collaborative effort to bring small businesses and credit unions together and expand awareness of EXIM programs.

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Questions? Contact the Compliance Hotline: 1.800.546.4465; [email protected].