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The circumstances under which federal credit unions are permitted to freeze or restrict access to a share account when a member is delinquent on a loan were detailed in a NAFCU Compliance Blog post Monday by Regulatory Compliance Counsel Benjamin Litchfield.

Litchfield explained that federal credit unions do have the authority to limit services or access to credit union facilities to a member who is disruptive to credit union operations under federal credit union bylaws.

However, Litchfield explained, NCUA's Office of General Counsel has cautioned that contract provisions in account and other member services agreements, and federal and state laws, may affect a federal credit union's ability to implement a suspension of services policy. He cited Regulation B as an example as it may prohibit credit unions from implementing a suspension of services policy that has a disparate impact on minority borrowers.

Another example he used involved consumer credit cards. He said Regulation Z prohibits the use of offsets to satisfy a cardholder's indebtedness to the credit union unless the member has granted a consensual security interest in the account to the credit union. Litchfield said commentary on this section of the bylaws states that holds on accounts or "freezing" accounts are considered to be the functional equivalent of an offset and are likewise prohibited unless the cardholder and the credit union have a consensual security agreement that permits the credit union to place a hold on the account.

He suggested credit unions consult competent local counsel to review proposed programs and determine whether such programs comply with relevant legal requirements.