Focus On the ‘Open’ In Open-End Lending
Not counting my first $400 loan from UW Credit Union in Madison, Wis. (to buy my first color television set), I cut my teeth in credit unions working with something called multifeatured open-end lending. Under this plan, credit unions have a single lending contract with a member covering multiple lending products.
What does this mean?
The changes further define open-end lending. Thus, credit unions must focus on the open-endedness of their multi-featured open-end lending plans.
As a result, review your practices, policies, and procedures to determine if you want to continue to use multi-featured open-end lending as a primary consumer lending strategy. Credit unions will need to comply by July 1, 2010.
Key questions to ask:
Does your data processing system allow you to identify members who have multi-featured open-end plans with your credit union? Credit unions must know which members have these plans to know when to use an open-end process rather than a closed-end process.
There's no safe harbor for determining whether an open-end lending plan will comply with the changes to the definition of open-end lending. In reviewing your lending plan, determine what features you'll need to change to maintain compliance.
Reprinted with permission from Credit Union Magazine.
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