by Amy Kleinschmit, Director of Compliance

The changes affect many topics within the administration rules for credit unions.  All of the changes in their entirety can be found at this link: http://www.legis.nd.gov/files/resource/administrative-code-quarterly-supplement/arc0113.pdf.

Several of the changes removed references to the corporate central credit union. Some of the other revisions include changes to Chapter 13-03-02, which relates to limiting and restricting the amount that may be loaned on real property security.  With regard to administrative rule 13-03-02-02, requirements for advancement of money on security of real property, some of the changes include increasing from $100,000 to $250,000 the threshold for which a written appraisal is then required.  Also, a credit union’s “designated appraiser” was modified to provide that the “designated appraiser must be independent of the transaction and be state-certified or licensed, or if the loan is one million dollars or more, be state-certified.  The written appraisal must comply with the uniform standards of professional appraisal practices and be filed with the loan documents.”

 Please note that for real estate loan less than $250,000, “an evaluation of the property value must be well-documented, reasonably support the value assigned, and be included with the loan documents; the county’s annual tax statement is acceptable for this person performing the evaluation provided the loan officer indicates, in writing, agreement with the value must be qualified to perform the evaluation and be independent of the transaction.”  As was previously the case, this subsection does not apply to real estate loans subject to Part 722 of the NCUA rules and regulations.

One of other areas that were amended includes Chapter 13-03-08, Administration of Negotiable or Transferable Instructions of Account.  These approved rules added 13-03-08-03, Credit applications and overdrafts, which now provides that, “Consistent with policies established by the board of directors, the credit committee or loan officer shall ensure that a credit application is kept on file for each borrower supporting the decision to make a loan or establish a line of credit. A credit union may advance money to a member to cover an account deficit without having a credit application from the borrower on file if the credit union has a written overdraft policy.  The policy must set a cap on the total dollar amount of all overdrafts the credit union will honor consistent with the credit union’s ability to absorb losses, establish a time limit not to exceed forty-five calendar days for a member either to deposit funds or obtain an approved loan from the credit union to cover each overdraft, limit the dollar amount of overdrafts the credit union will honor per member, and establish the fee and interest rate, if any, that the credit union will charge members for honoring overdrafts.  All overdrafts will be reported on the credit union’s financial statements in accordance with generally accepted accounting principles, and will be treated as a loan in determining compliance with subdivision g of subsection of North Dakota Century Code section 6-06-12 and North Dakota Administrative Code chapter 13-03-06.”  This is very similar to language found under §701.21(c)(3) which applies to Federal Credit Unions.

Another addition is the requirement to provide notice to membership and the commissioner if a credit union intends to close a branch.  This notice is required at least thirty days prior to the closing date and is found under Chapter 13-03-15-06.  Revisions were made to the Chapter 13-03-16, Member Business Loan limits, including the revision of 13-03-16-06, Prohibitions, specifically, “A credit union may not make member business loans to the follow…(a) Any member of the board of directors who is A compensated as such director unless the board of directors approved granting the loan and the compensated director is recused  from the decision making process.”

With regard to Chapter 13-03-23 Credit Union Service Organizations, a number of revisions were made to 13-03-23-05, permissible services and activities and also 13-03-23-08, examinations.  The examination section was expanded to require that each credit union must have a written agreement in place with the credit union service organization, prior to investing in or lending to the credit union service organization, providing that the credit union service organization will provide the department with the right to inspect or examine all records of the credit union service organization; account for all its transactions in accordance with generally accepted accounting principles; prepare quarterly financial statements and provide the credit union with a copy of these statements within forty-five days of the quarter end; and comply with applicable federal, state, and local laws.

If you have questions on these changes, feel free to contact Amy Kleinschmit at akleinschmit@cuad.coop.