This sample policy provides a guide or a place to begin. Credit union policies should always be structured
to meet the specific needs of the credit union and its membership. Efforts are made to update the material
to reflect applicable changes in the law. This sample should not be considered legal advice nor relied upon
as a substitute for professional services. Credit unions are encouraged to contact legal counsel for legal
advice. The Kansas Credit Union Association will not be liable for any direct, indirect or consequential
damages resulting from the use of this policy.
CONSUMER LOAN POLICY
I. General Policy
A. State that the purpose of this policy is to set general guidelines pertaining
to the types of loans offered, underwriting guidelines, responsibility and
reporting requirements, and any other items included in the policy.
B. Federal and State Laws
State that it is the policy of this credit union to comply with the letter and
intent of all applicable laws of the United States and of the State of Kansas
and regulations promulgated there under.
C. Equal Credit Opportunity and Credit Protection Acts
State that you will not deny credit, limit its amount, use different application
procedures, require greater security values or increase the finance charge
because of a loan applicant’s (member or potential member) race, color,
religion, national origin, age, sex, marital status, physical handicap, the fact
that all or part of the applicant's income derives from any public assistance
program, of the fact that the applicant has in good faith exercised any right
under the Consumer Credit Protection Act. State that you will not
discourage an applicant or prospective applicant from making or pursuing
an application on the basis of the foregoing factors.
II. Borrowing Eligibility
A. State that as required by law, membership in this credit union is open only to
individuals who are included in the field of membership as it is defined in the
Credit Union charter.
B. Indicate that no officer or staff member of this Credit Union will, in any
manner, discourage a member from submitting an application for credit.
State that the credit union will accept and consider an application from any
member who wishes to submit a request for credit.
A. State how often the Loan policy of the Credit Union will be reviewed by the
Board of Directors
B. Indicate that all rates and terms for loans will be set by the Board of
Directors and posted in a visible area for disclosure to the membership.
IV. Approval Authority
A. State who has the authority to approve credit.
B. If applicable, state that the Board of Directors will appoint:
_______________________________________ as loan officer(s) and will
delegate to them the authority to approve the following loan applications:
(Indicate limits of loan officers’ authority)
C. Indicate how review of loan denials will be handled. How can a member
appeal the decision to deny a loan application.
A. If applicable, state how often a loan officer’s report will be submitted to the
Credit Committee or Board of Directors. List the information to be included
in the report.
B. If applicable, indicate how often a report will be given by the Credit
Committee to the Board of Directors. List the information to be included in
C. Indicate that an annual report will be prepared and presented to the
members at the annual meeting.
VI. Credit Processing
A. List the items required by the Credit Union for processing a credit request.
These items will be documented and become part of the member’s loan file
and may include, but are not limited to the following:
1. State that a separate loan application must be completely filled out by the
applicant for each loan. An up-dated, complete loan application will be
obtained when the previous application is over 12 months old or when the
member’s personal information such as name, job, etc., has changed.
2. State that a checklist will be used during the loan granting process to
avoid errors in record keeping. The checklist will remain attached to the
loan papers in the member’s file.
3. Indicate that the loan officer will obtain income verification on members
prior to the loan being approved. If company stock or share deposits
secure the loan, verification and debt ratio may be waived. Acceptable
proof will be a copy of the pay stub, tax return or other proof of income.
4. State that a Credit Bureau Report will be obtained with each new loan
application. The current (12 months or less) credit report will be
maintained in the member’s file for use in determining the
creditworthiness of advances to the member. If the credit report is older
than 12 months, a new report will be obtained. State that the debt ratio
calculation will be noted for each loan application.
5. State that collateral valuations will be documented in the file. Used
car/truck values will be determined by the current N.A.D.A. book. Boats,
campers, trailers, motor homes and mobile homes will also be valued by
the current N.A.D.A. book. On new or used vehicles purchased from a
dealer, the dealer’s sheet must accompany the loan application. High
and low mileage is to be considered when using the N.A.D.A. Book.
6. State that titles must be obtained on any titled security. The credit union
is to be shown as the first lienholder. All title fees will be the
responsibility of the member.
7. Indicate that the loan screen is to be printed out and attached to the loan
papers before the check for loan proceeds is issued.
8. If required, state that approval must be obtained prior to the
disbursement of funds. Prior to approval, loans are to be reviewed for
collateral, rate, payment and credit report. All documentation should be
obtained and all figures reviewed and verified. Loans requiring Credit
Committee approval will be forwarded with all documentation and a
written summary of the reasons for denial by the loan officer.
A. State that it is the general policy of this Credit Union that all loan applications
will be judged on individual merit under the guidelines of the Equal Credit
Opportunity Act. List the evaluation criteria, which might include the
1. The granting of a loan or extension of a loan is based on the member’s
ability to repay, salary, and how past and present obligations are met.
2. Any member who has adverse credit such as garnishments,
repossessions, suits for collection of debts, or a collection account
may be denied loan privileges or restrictions may be placed on the
amount to be borrowed.
3. A member whose personal checks have been repeatedly returned for
insufficient funds, account closure or payment stopped may also be
denied loan privileges.
4. A member who is three months delinquent on any loan with the Credit
Union must bring the loan to a current status and then must wait for six
months before an application for new credit will be considered.
5. Debt to income ratio - total monthly payments on all obligations
(including Credit Union and house payments) cannot exceed ____% of
gross monthly income figures calculated on a 40-hour week.
B. State the general requirements for collateral.
1. Suggested acceptable collateral may include, but is not limited to:
a. New and used automobiles, trucks, boats, trailers, campers,
d. Other titled collateral will be considered based on age, condition
and acceptable loan to value ratio.
b. Shares with the Credit Union;
c. Company stock (if applicable
2. State the conditions under which the release of collateral will be
a. Collateral will normally be released upon payment in full of the loan.
b. If a release will be considered under special conditions, indicate what
those conditions might be.
c. Company stock certificates pledged as collateral will be held by the
credit union. The member(s) in whose name the stock is held must
sign the stock assignment form. State what action must be taken if
stock value changes and how value is to be monitored.
1. Indicate the insurance requirements for collateral coverage.
2. State that the Credit Union must be shown as the loss payee on
3. Explain the action that will be taken if the policy is cancelled or expires.
1. Indicate the circumstances under which a co-signer will be considered.
2. State that the cosigner will be evaluated by the same standards as the
VIII. Types of Loans
A. List the types of loans the Credit Union will offer to its members (suggested
1. Unsecured/Signature Loans
2. Share secured loans
3. Auto loans - new and used
4. Boats, campers, trailers - new and used
5. Motorcycles - new and used
6. Company stock secured loans
7. Other secured loans
B. Define an unsecured or signature loan
C. State the maximum acceptable loan value on new model autos, trucks,
motorcycles, boats and RVs. Example: the finance value is a maximum of
85% of reasonable sticker price. State the maximum acceptable loan value
on older models. Example: the finance value is a maximum of the loan
value as listed in the N.A.D.A. Book. If a loan value is not available, indicate
how a value will be determined. Example: a written appraisal given by a
qualified dealer on letterhead stationary.
D. State that stock-secured loans may only be collateralized by company stock.
The finance value will be ___% of the closing price quoted on the New York
Stock Exchange as printed in the Wall Street Journal.
E. The shares or certificates used to secure a loan must be invested with this
Credit Union. The finance value will be ____% of the cash value of the
shares or certificate.
See Addendum A for current loan rates and terms.
IX. Loans to Officials and Staff
A. State that an official is a member of the Board of Directors or a member of
the Supervisory or Credit Committee of the Credit Union. Any credit request
made by an official as direct obligor, endorser, cosigner or guarantor must
be approved by the Credit Committee or Board of Directors, as applicable.
State that the rates, terms, and conditions on any loan that is made to,
endorsed or guaranteed by an official or an official’s immediate family
member shall not be more favorable than those for other members.
B State that any credit request made by an employee as direct obligor,
endorser, cosigner or guarantor must be approved by
________________________. The rates, terms, and conditions on any loan
that is made to, endorsed or guaranteed by an employee or an
employee’s immediate family member shall not be more favorable than
those for other members.
A. State that payment responsibilities and payment methods will be clearly
established during loan closings.
XI. Notification to Applicants of Action Taken
A. The Credit Union must take action on a completed application, either
favorable or adverse, and notify the applicant within 30 days after the
completed application is received. Notice of incompleteness must be sent
within 30 days of receipt of an incomplete application if it is not treated as an
B. If adverse action is taken on any application for credit, the Credit Union must
give the applicant a written statement of the action taken within 30 days. If
the applicant requests the specific reasons for the adverse action within 60
days of notification of the adverse action, the credit union must provide the
applicant with a written response stating those reasons within 30 days of the
request. If a counteroffer is made and not accepted an adverse action
notification must be made within 90 days after notifying the applicant of the
C. If more than one applicant is involved, only one notice needs to be sent.
The notice should be given or sent to the primary applicant.
A. State the policy of the Credit Union regarding the eligibility of members for
credit who have filed for bankruptcy. Indicate what the member’s borrowing
rights will be. Note: Legal counsel should be consulted before writing a
policy on bankruptcy.
Reviewed by the Board of Directors:_____________________(Date)