04 NCAC 06C .0205 LOANS TO CREDIT UNION OFFICIALS
(a) Officials. For purposes of this Rule, an "official" is a member of the Board of Directors, credit committee, or supervisory committee; the President, Chief Executive Officer, Chief Financial Officer, Comptroller, General Manager, Treasurer/Manager, or Executive Vice President; and Outside Attorneys and Outside Accountants of the credit union. For the purpose of this Paragraph, the following definitions apply:
(1) "Outside Attorneys" means independent attorneys or law firms that are retained to provide 25 percent or more of the legal services for the credit union, based on the annual legal expense; and
(2) "Outside Accountants" means independent accountants or accounting firms that are retained to provide accounting or audit services for the credit union.
(b) Loans to Officials. A loan or line of credit extended to an official as the borrower, direct obligor, endorser, cosigner, or guarantor with direct or indirect pecuniary interest in the loan shall be reviewed by the Board of Directors or a duly appointed committee thereof, as provided in Paragraph (c) of this Rule, at the next regular meeting following the date of such extension of credit, provided the following computation produces a total amount in excess of fifty thousand dollars ($50,000) including limits of credit cards.
(A) the loan amount extended for the current loan;
(B) the outstanding balances of loans, including the used portion of an approved line of credit, extended to or endorsed, cosigned or guaranteed by the official; and
(C) the total unused portion of approved lines of credit extended to or endorsed, cosigned, or guaranteed by the official.
(2) Subtract from the above total:
(A) the amount of shares pledged by the official on loans or lines of credit extended to, or endorsed, cosigned, or guaranteed by the official; and
(B) the amount of shares pledged by the official on the current loan or line of credit.
(c) Review of Loans to Officials by Duly Appointed Committee. The Board of Directors may appoint a committee to review and report on loans made to officials. All members of the committee shall be on the Board of Directors. The committee shall meet before the regular monthly board meeting to review all officials' loans that have been approved since the previous meeting. The committee shall make a report to the board that shall consist of at least the official's loan number, his or her title or position, the amount of the loan, purpose of the loan, aggregate amount of indebtedness to the credit union, and a statement regarding compliance with loan policies. Each credit union's Board of Directors shall review this loan approval report on a monthly basis. This review shall be done at the regular monthly board meeting. In the event the board does not meet monthly, a procedure shall be established whereby a written report shall be sent to each director on a monthly basis.
(d) Non preferential treatment. The rates, terms, and conditions on a loan or line of credit made to or endorsed, co-signed, or guaranteed by:
(1) an official;
(2) an immediate family member of an official. For the purpose of this Rule, "immediate family member" means a spouse or other family member living in the same household; or
(3) any individual having a common ownership, investments, or other pecuniary interest in a business enterprise with an official or with an immediate family member of an official, shall not be more favorable than the rates, terms and conditions for comparable loans or lines of credit to other credit union members.
(e) Avoidance of conflicts. No official or any employee of the credit union shall in any manner, directly or indirectly, participate in the deliberation upon or the determination of any question affecting his or her pecuniary interest or the pecuniary interest of any corporation, partnership, or association (other than the credit union) in which he or she is directly or indirectly interested.
(f) Indirect Benefits. It shall be unlawful for an official or employee to:
(1) have any interest or to benefit in any manner in the proceeds of a loan or from the sale by the credit union of any real or personal property unless the official or employee has disclosed to the Board of Directors of the credit union the nature and extent of the benefit that may be received and the loan or sale, regardless of the amount of money involved, has been approved by a vote of at least two thirds of the directors of the credit union; or
(2) have any interest direct or indirect, in the purchase at less than face value of any savings account or evidence of indebtedness issued by a credit union.
(g) Penalty. A violation of the provisions of this Rule shall be sufficient basis for removal of any official or employee by the. Administrator, as set forth in G.S. 54-109.19.
History Note: Authority G.S. 54‑109.12; 54‑109.19; 54‑109.39;
Eff. February 1, 1976;
Readopted Eff. April 4, 1978;
Amended Eff. March 1, 2015; August 1, 1998; October 1, 1983;
Pursuant to G.S. 150B-21.3A, rule is necessary without substantive public interest Eff. September 6, 2016.