December 19, 2017

NAFCU asks St. Louis Fed to clarify e-sig acceptance

NAFCU's Andrew Morris in a letter yesterday asked the Federal Reserve Bank of St. Louis to develop and adopt guidelines related to its Borrower-in-Custody (BIC) program in order to allow electronic signatures on auto loans as pledged collateral.

"Credit unions are experienced lenders that know how to create legally binding and enforceable agreements utilizing electronic records and signatures," wrote Morris, NAFCU's regulatory affairs counsel. "The Federal Reserve Bank of St. Louis should permit acceptance of e-signed auto loans as pledged collateral under BIC program guidelines, provided that credit unions can demonstrate that their electronic lending platform produces records which preserve the marketability of the loan."

Morris argued that the lack of clear guidance on the issue "directly impacts credit unions' access to liquidity in a service area that contains 11 million members." He also noted that perfection of security interests on electronically signed auto loans would not be a burden on the St. Louis Federal Reserve.

In order to develop its guidelines, Morris recommended the St. Louis Federal Reserve review impediments to e-lending that might exist within its service area and adopt procedures for assessing the marketability of e-signed loans.