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May 21, 2019

Lending compensation questions addressed in Compliance Blog

compliance blog coffeeNAFCU Regulatory Compliance Counsel Reginald Watson – in response to questions about the NCUA's efforts to modernize regulations related to lending compensation for senior management officials – highlights the guidance currently available from the agency in a new Compliance Blog post.

Watson clarifies that although officials and employees of a federally-insured credit union and their immediate family members are generally prohibited from receiving compensation in connection with any loan made by the credit union under NCUA's rules and regulations there are some exceptions.

"… [T]he rule does not prohibit credit unions from paying an incentive or bonus to an employee in connection with loans made by the credit union provided that the board of directors establishes written policies and internal controls in connection with such incentives and monitors compliance with such policies at least monthly," wrote Watson.

Watson also notes that this particular exception does not apply to "senior management employees," defined by the NCUA as CEOs, CFOs and assistant chief executive officers.

Watson includes excerpts from various NCUA Legal Opinion Letters that offer further insight to these issues.

The NCUA Board recently approved an advance notice of proposed rulemaking (ANPR) seeking public feedback on proposed changes to compensation related to loans to members. Watson directs readers to NAFCU's Regulatory Alert which provides a summary and analysis of the ANPR and requests feedback on how the NCUA's lending compensation regulations may be improved.

For more on lending compensation rules and the ANPR, read Watson's full blog here. Those interested can sign up to receive new NAFCU Compliance Blog posts in their inbox every Monday, Wednesday and Friday by clicking here.