Posted by Ms. Pamela Blevins, Remote Financial Services Manager, Credit Union Resources, Inc on 4/21/2014

For those who participate in open-end lending, 2009 was a year of many changes in the way open-lending was conducted.  In January 2009, the Federal Reserve Board (FRB) made many modifications to Regulation Z which significantly affected open-end credit loan products and birthed MFOEL.

What does MFOEL stand for?

Multi Featured Open-End Lending.  In an MFOEL, the borrower will sign an umbrella loan agreement for one account that can be used in correlation to sub-accounts for different credit types.  This type of plan is established to manage open-end credit.  When the credit union uses a blended approach of open-end and close-end loan types, this is called Multi-Featured Lending (MFL).

What has changed in Regulation Z?

Prior to January 2009 credit unions could perform underwriting procedures for open-end lending plans, including each loan advance, and were encouraged to do so.  However, this has changed under the new ruling.  Now credit unions are only permitted to perform underwriting procedures when the credit line is established and afterward “occasionally and routinely”.  “Under Regulation Z, no verification of credit information can be done in connection with, or triggered by, an individual advance request if that advance is treated as open-end credit” NCUA.   

How do I underwrite open-end plans?

When the open-end plan is established, the credit union should gather enough credit information to determine the creditworthiness of the member for that line of credit as well as all subsequent advances.  The credit union should develop a policy that determines the type of information that should be gathered at the creation of the plan to establish the member’s creditworthiness.  Examples would be credit scores and debit ratios.  Since credit unions can no longer re-verify creditworthiness for each loan advance, the credit union should also establish in their policy objective underwriting procedures for the “occasional and routine” monitoring of credit worthiness.  An Examiner will be closely monitoring these policies to determine if MFOEL or blended MFL Policies establish the credit worthiness criteria used at plan opening and to determine if the establishment of procedures and timeframes for the “occasional or routine” verification of credit worthiness has been documented and implemented.  The credit union should also document which products will be offered under the plan. 

What does “occasionally or routinely” mean?

Often, credit unions will use the phrase “occasionally and routinely” in their MFOEL plan to establish the timeframe of ongoing monitoring of creditworthiness; however, the credit union should determine an actual timeframe and occasions that best suit the size and complexity of their credit union.  Routine verification means a set timeframe (quarterly, semi-annually, annually, etc.) that the credit union has established in policy to determine if the member continues to meet the credit union standard for the terms and limit of credit.  “Occasional is a limited, ad hoc basis that is outside the regular ‘routine’ side timeframe” NCUA.  Again, these cannot be triggered by an individual loan request.  “If a routine or occasional verification occurs concurrently with an advance request, the credit union should be able to demonstrate that the verification was performed within the verification procedures documented in the MFOEL Policy” NCUA.  If during the routine and occasional verification process it is determined that the member’s creditworthiness has deteriorated, the credit union can revise the credit limit and terms of that plan.

Can the credit union still offer open-end auto loans?

Yes; however, the underwriting process for collateralized loans would remain the same as the open-end plan for a personal line of credit.  Advances of the auto loan cannot trigger underwriting procedures or verification regardless of the time gap between advances.  Be that as it may, verification of collateral valuation can still be executed before extending additional credit.

Am I in compliance?

With the continued changes to the Open-End lending program, many credit unions might feel confused or worried that they are not in compliance with these changes.  If you have additional questions or concerns, there are resources available through Cornerstone Credit Union League and Credit Union Resources which can help explain and walk you through this complex situation.

References (July 2012). NCUA Letter to Credit Union (12-FCU-02.) Appendix A: Supervisory Letter – Supervision Considerations for Multi-Featured Lending Programs

Categories: Compliance, Education & Training, Financial & Auditing
Posted by Tracy Florida, Director, Sales & Service, Credit Union Resources, Inc on 4/18/2014

If someone smiles on a phone call, and no one is there to see it, does it make a sound?  As it turns out, it does! When you smile while talking on the phone, it might be unseen, but it is most certainly heard.  Does this little trick actually work?  The answer is yes, it really does.  You are not the only person whose attitude is changed by your smile. Other people will recognize the smile in your voice and begin to ease up themselves.  Remember…smiling is contagious!

The power of smiling on the phone is not only contagious, it is standard advice in sales and member service. While this advice has been around for many years, it still amazes me how many people have not been exposed to it or seemingly do not understand its power.  In addition to those who have never had foundational sales or member service training, the younger generation of workers new to the workforce, have most likely never been given this advice.  It’s not exactly the kind of thing they teach in school.  On a personal note, I’m not entirely sure my kids would have “listened” anyway. 

This advice is honestly not some sort of New Age hokum.  Why?  Because intuitively, it’s solid advice that makes sense!  We all just sort of know it to be true.  I did wonder as to whether or not there was some research to support what seems obvious, and happily for me, there is some science to support the validity of smiling on the phone.  According to an article on Discovery, human beings can differentiate vocal intonation not only between a smile and a non-smile but among different types of smiles. “Smiling affects how we speak, to the point that listeners can actually identify the type of smile based on sound alone.”  Additionally, when you smile, you actually are sending messages to your brain that you are in a good mood. Even if this is not actually true, your brain will accept it as fact and your manner will change, including your tone of voice. You automatically become more relaxed and will sound warmer and more personable.  How cool is that?

So, if smiles can be detected over the phone, what can we do to remind ourselves and our staff to smile before picking up the phone and saying hello?  Here are some helpful tips that will bring that smile out in full force.

• Leave notes or quotes for yourself at your desk or wherever you talk most on the phone so you always see that little reminder.

• Keep a mirror close by or check yourself out in a reflective surface to see if you are remembering to smile.

• Look at things that make you smile while you talk – flowers, kittens, puppies, smiley faces, pictures of kids or family, whatever does the trick.

• Read a joke or funny comic before an important call so you’re relaxed and begin the call sounding warm and receptive.

So the next time you answer the phone or make a call, smile and see if it makes a difference!  I bet it will…smiling IS contagious!

Categories: Sales & Service
Posted by Emily Maxie, Marketing Director, SIGNiX, Inc. on 4/17/2014

Credit unions all over the country are seeing the benefits of e-signatures—increased member satisfaction, online lending and efficiency. But if you’ve started looking for an e-signature vendor, you probably know how confusing the process can be. You don’t just need a vendor that will make it easy to sign online, you also need someone that will keep your members’ personal information safe.

picking e-signature vendorEvery vendor says you can trust them, but how do you know who to believe? The only way to really know how to pick an e-signature vendor is to know the right questions to ask. John Harris, an e-signature expert and our very own director of product management, suggests that credit unions ask these three questions to pick a secure and compliant e-signature vendor.

1. What options will I have to prove the identity of my signers?

When you’re dealing with account openings and loan applications, it’s important to know who’s signing your documents. This is even more important when someone is signing remotely. That’s why some e-signature vendors offer a feature called “identity authentication.

Here are some of the options for identifying your signers:

  • Email Authentication: The signer gets an email with a secure link to access and sign the document. The fact that they’re able to access the email is seen as a very basic way of proving their identity. This is a low cost option that should only be used for low-risk transactions or in situations where you know and trust the signer. 
  • Shared Secret Questions: This type of authentication lets you pick a question to ask signers based on some information you already know about them. Many credit unions use this type of authentication to ask members their account number or the name of the branch where they opened their account. 
  • Cell Phone Authentication: This method sends a unique code via text message to the signer’s cell phone. This is a popular choice for credit unions because it’s easy and members love it—after all, most of your members already take their phones with them everywhere.
  • Knowledge-Based Authentication (KBA): If you’re dealing with a high-value or high-risk transaction, KBA authentication is the way to go. Signers are asked to enter their date of birth and social security number, and then they’re prompted with a set of multiple-choice questions pulled from a database of 30 years of public records. Questions could be “What year was the Jeep you owned in 1987?” or “Which North Carolina county have you lived in?”

It’s important to pick an e-signature vendor that lets you change the authentication for each person in the transaction. For example, you might already know and trust your employees, so you could set their authentication level to be “email only.” But if you have members or members’ spouses signing remotely, you might want to use a higher level of identity authentication.

2. How will my documents be protected against tampering?

It seems like every day you hear about another financial institution suffering a data breach or digital security flaw. In the past, someone would have to break into your branch to tamper with your members’ signed documents. But today, an advanced hacker could access your documents without stepping foot in your offices. That’s why you need to make sure your documents are protected against tampering. 

Some e-signature vendors offer a feature called “tamper evidence,” which can protect your documents from hackers and fraudsters alike. This feature alerts you if anyone makes even a small change to the document. 

You should pick an e-signature vendor that protects your documents throughout the signing process—not just at the end. Some vendors only secure the document from tampering after everyone has signed. This leaves you open to risk because the second signer could change the terms of the agreement after someone has already signed the document.

SIGNiX adds a tamper-evident seal to the document with each signature and initial applied to the document, which means you don’t need to worry about in-transit tampering. We also offer a Signature History feature that can show you an image of what the document looked like when it was signed. This helps to protect you if someone ever claims, “It didn’t look like that when I signed it.”

3. What happens to my signed documents if I switch vendors?

This is definitely the most important question, and many credit unions overlook it. Most of our competitors prove documents are authentic (they haven’t been tampered with) by giving you a link back to their website. That might not seem like a big deal, but it’s actually critically important for your credit union.

If someone ever challenges one of your documents in court, you’ll need evidence to prove the document is authentic. If you use a company that only links back to their own website to give you legal evidence, you’re putting your credit union at risk.

What if the e-signature vendor gets acquired, goes out of business or changes their technology? What if they raise their prices and you don’t want to use their services anymore? Because the evidence isn’t contained in the document, it doesn’t belong to you—it belongs to the vendor.

If you try to get the legal evidence in one of those situations (or even without an Internet connection), all you'll get is a message saying "404 Error – Web Site Not Found." I’ve seen enough episodes of Law & Order to know that would get ripped apart by an attorney in court.

In contrast, the legal evidence for SIGNiX’s e-signatures belongs to your credit union because they’re based on standards. All of the information you’d need to prove a document in court is contained within each signed document, and you can easily view it using any free PDF reader software.

That means you don't have to be a SIGNiX customer or even be connected to the Internet to prove your documents are authentic. You can see who signed, when they signed and if the document has been tampered with after signing without even leaving the document.

This is essential because, as anyone who ever used a Blackberry knows, technology changes incredibly quickly. If you base your credit union’s business on a specific technology rather than published standards, you're putting your credit union at risk. In fact, you’d be safer continuing to use paper processes than to use a vendor that doesn't embed standards-based signatures with every signature and initial into your signed documents. Yes, using is a lot more expensive and less efficient than e-signatures, but that would be better than using a technology that puts your credit union at risk.

If you keep these three questions in mind, you can be sure you pick an e-signature vendor that you'll be happy with—not just today but decades down the road.  

Get a credit union e-signature case study

Categories: Business Partners, Remote Transaction, Technology Consulting & Compliance
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