Credit Union Practices cheat sheet
Credit Union Practices · Keep the key ideas within reach.
Credit Union Structure, Governance, and Regulatory Framework
Credit unions are member-owned, not-for-profit cooperatives; each member has one vote regardless of share balance.
Field of membership must be a common bond: occupational, associational, or geographic; NCUA regulates federal charters.
Board of directors: volunteer, elected by members; typically 7-11 members serving staggered terms.
Supervisory committee: mandatory, appointed or elected; oversees internal controls and audits, reports to members.
NCUA exam cycle: federal credit unions examined at least every 18 months; risk-based schedule may vary.
Net worth ratio = total net worth / total assets; PCA requires 7% well-capitalized, 6% adequately capitalized.
Federal Credit Union Act (1934) authorizes federal charters; NCUA created in 1970 to insure shares.
State-chartered credit unions may be regulated by state agency and NCUA if federally insured.
Member Services and Account Operations
Share account = member's ownership deposit; share draft = checking; share certificate = time deposit.
Regulation CC funds availability: next-day items (cash, wire, government checks) vs. local checks (2 days) and exception holds.
Truth in Savings (Reg DD): disclose APY, dividend rate, minimum balance, and fees before account opening.
Account ownership types: single, joint with right of survivorship, POD (payable on death), trust, and custodial.
Dormant account: no member-initiated activity for 12 months; escheatment to state after state-defined period (often 3-5 years).
Stop payment on share draft: member must provide oral or written order; written confirmation may be required within 14 days.
Regulation E error resolution: provisional credit within 10 business days for most disputes; 45-day investigation.
Overdraft opt-in required for ATM/debit transactions under Reg E; not required for checks or ACH.
Lending and Credit Administration
Loan-to-value (LTV) = loan amount / appraised value; higher LTV increases risk; many CU policies cap at 80-100%.
Debt-to-income (DTI) = total monthly debt payments / gross monthly income; typically capped at 40-45% for consumer loans.
Regulation B (ECOA) prohibits discrimination; requires adverse action notice within 30 days of completed application.
Regulation Z (TILA): APR disclosure, right of rescission for refinances (3 business days), and ability-to-repay for mortgages.
Credit score use: FICO or VantageScore; adverse action notice must include score and key factors if score used.
Loan loss allowance: CECL requires expected credit losses over life of loan; replaces incurred loss model.
Delinquency ratio = delinquent loans / total loans; charge-off policy typically after 120-180 days delinquent.
Business loan: member business loan (MBL) limit = lesser of 1.75x net worth or 15% of total assets; NCUA rule.
Deposit and Share Insurance
NCUA share insurance: standard maximum share insurance amount (SMSIA) = $250,000 per depositor, per insured credit union, per ownership category.
Ownership categories: single, joint, revocable trust, irrevocable trust, certain retirement accounts, employee benefit plans, and government accounts.
Joint accounts: each co-owner receives $250,000 coverage; two owners = $500,000 total.
Revocable trust: coverage based on each beneficiary's interest; $250,000 per beneficiary, per owner.
Retirement accounts (traditional IRA, Roth IRA, Keogh) covered up to $250,000 per member.
Share insurance fund: NCUA's Share Insurance Fund (SIF) backed by full faith and credit of U.S. government.
Insurance applies to shares (deposits), not to investments like mutual funds or annuities.
Excess share insurance may be purchased from private insurers for balances above $250,000.
Compliance, Consumer Protection, and BSA/AML
Bank Secrecy Act (BSA): requires Currency Transaction Report (CTR) for cash transactions over $10,000 in a business day.
Suspicious Activity Report (SAR): file within 30 days of detection; no dollar threshold for insider abuse; $5,000 threshold for other suspicious activity.
Customer Identification Program (CIP): collect name, date of birth, address, and identification number before account opening.
OFAC screening: check against Specially Designated Nationals (SDN) list; block and report within 10 business days.
Regulation P (Privacy): provide initial and annual privacy notices; opt-out required for sharing nonpublic personal info with nonaffiliates.
Fair Credit Reporting Act (FCRA): adverse action based on consumer report requires notice; dispute investigation within 30 days.
Home Mortgage Disclosure Act (HMDA): collect and report loan data for covered mortgages; public disclosure.
Servicemembers Civil Relief Act (SCRA): 6% interest rate cap on pre-service debts; requires written notice and military orders.
Financial Management, Accounting, and Asset-Liability Management
Net interest income (NII) = interest income - interest expense; key driver of earnings.
Net interest margin (NIM) = NII / average earning assets; measures efficiency of asset-liability mix.
Return on assets (ROA) = net income / average total assets; benchmark 1.0% or higher for credit unions.
Net worth ratio = net worth / total assets; PCA minimum 7% well-capitalized; leverage ratio.
ALM: manage interest rate risk via gap analysis (rate-sensitive assets vs. liabilities) and duration.
Liquidity ratio = liquid assets / total assets; NCUA expects adequate liquidity (e.g., 10% or more).
Allowance for credit losses (ACL) under CECL: estimate based on historical loss, economic forecasts, and loan characteristics.
Budgeting: zero-based or incremental; monitor variance between actual and budgeted income/expense.
Risk Management, Internal Controls, and Fraud Prevention
Segregation of duties: separate authorization, custody, and record-keeping to prevent fraud.
Dual control: two people required for cash handling, vault access, and wire transfers.
Fraud red flags: unusual transaction patterns, new account with immediate large deposits, reluctance to provide ID.
Internal control framework: COSO components-control environment, risk assessment, control activities, information/communication, monitoring.
Risk assessment: identify, measure, monitor, and control risks; use risk rating matrix (likelihood x impact).
Suspicious activity monitoring: automated systems flag unusual transactions; manual review and SAR filing if warranted.
Information security: Gramm-Leach-Bliley Act (GLBA) requires written information security program; regular risk assessments.
Business continuity: disaster recovery plan tested annually; backup systems for critical operations.