Have you ever had a member who refused to make payments on a loan? You try and try to work with them and they just push you to your wit’s end? Well, suffer no more and let me tell you about the statutory lien. Under the Federal Credit Union Act and Section 701.39 of NCUA’s Rules and Regulations credit unions are granted a statutory lien in its member’s shares and dividends. This allows credit unions to use funds deposited in a member’s account to satisfy outstanding defaulted loans. However, the lien comes with several requirements and limitations.
Impressing the lien
In order to first use the statutory lien, credit unions must first impress or attach the lien to a member’s account. Under section 701.39(c), a federal credit union may impress or attach a lien on an account held at the credit union in one of three ways:
- Provide notice to the member through account opening documentation;
- Provide notice of the lien through loan documentation that is signed or otherwise acknowledged by the member; or
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