NCUA letter details private student lending risks

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Dec. 10, 2013 – In a Letter to Credit Unions addressing private student lending, NCUA provides an overview of the practice and certain risk-management expectations of credit unions engaged in this type of lending.

Private student loans “are unlike other consumer-based loan products, and it is critical that credit unions have sound processes and controls in place to address their unique characteristics and risks,” NCUA Board Chairman Debbie Matz says in Letter to Credit Unions 13-CU-15. The letter includes a link to NCUA Supervisory Letter 13-13 and a questionnaire that will assist examiner staff reviewing credit unions’ private student loan activity.

The Supervisory Letter notes seven risk areas for credit unions involved in private student lending: credit, compliance, interest rate, strategic, transaction, liquidity and reputation risk. During examinations, field staff will be looking to ensure that credit unions:

  • understand the associated risks and support their PSL programs with sound planning, policies, and controls; and
  • have the necessary expertise and infrastructure to establish strong internal controls over a PSL program.

Related Links:
NCUA Supervisory Letter 13-13
NCUA Letter to Credit Unions 13-CU-15