Yesterday, we blogged about the recent NCUA guidance detailing their response to the ongoing pandemic. In the guidance, NCUA “encourages credit unions to work with affected borrowers” and offers numerous options for how credit unions can achieve this. One option NCUA poses is allowing members to defer or skip loan payments. Even though NCUA suggests this option, there are still compliance issues to consider before doing so. Today’s post reviews these considerations when allowing members to skip a payment for open-end credit, such as credit cards or lines of credit.
As a starting point, whether a member is permitted to skip a payment will be determined by the credit agreement between the credit union and its member. Credit unions will want to review these agreements to determine whether they already include a skip payment option. If a credit union determines this is not included in the agreement, have no fear, you can still help your members. In that case, credit unions can enter into a separate agreement with the member that modifies the original agreement and permits members to skip payments. The terms of the original agreement or any separate agreement will also determine how many payments the credit union will permit a member to skip.
Determining whether the skip payment option is already part of the original credit agreement is important because it will determine the rules that will apply when a member decides to take advantage of this option. Comment 2 to section 1026.9(c)(2)(v) of Regulation Z explains a change in terms notice covering the terms of the skip payment arrangement is not required when the terms were already outlined in the original credit agreement.
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