Credit Union Practices key terms

The defined group or groups of people a credit union is legally permitted to serve, such as employees of a common employer, members of an association, or residents of a geographic area, as stated in its charter.

The legal authorization from a state or federal regulator that permits a credit union to operate and defines its powers, field of membership, and basic structure.

The National Credit Union Administration, the independent federal agency that charters, supervises, and insures federally chartered credit unions and administers the share insurance fund.

The volunteer body elected by members that sets policy, hires and oversees the chief executive, and bears fiduciary responsibility for the credit union's direction and safety.

A member-elected committee required at federally insured credit unions that oversees internal controls, audits, and member account verification, and may act on member complaints.

The legal obligation of directors and officers to act in the best interest of the credit union and its members, placing institutional welfare above personal gain and avoiding conflicts of interest.

A defined subset of members within a credit union's field of membership, such as employees of one company or members of one association, tracked separately for reporting and representation purposes.

A member's ownership deposit at a credit union, representing an equity stake in the institution as well as funds available to the member, and typically required to establish membership.

The interest-like return a credit union pays to members on their share accounts or share certificates, declared by the board based on earnings rather than guaranteed in advance.

A time deposit product at a credit union, similar to a bank certificate of deposit, in which the member agrees to leave funds on deposit for a set term in exchange for a stated rate.

A charge imposed when a member withdraws funds from a term deposit before maturity, intended to offset the credit union's cost of replacing the funds and disclosed in the account agreement.

The federal rule implementing the Expedited Funds Availability Act, setting maximum times a depository institution may hold funds from checks before making them available for withdrawal.

A credit union's written disclosure of when deposited funds become available for withdrawal, including any exception holds, case-by-case holds, and the member's right to request expedited availability.

A borrower's total monthly debt obligations divided by gross monthly income, used by lenders to gauge capacity to repay a new loan and to apply underwriting standards.

The amount of a loan divided by the appraised or fair market value of the collateral securing it, used to measure collateral cushion and set lending limits.

The process of evaluating a loan application's creditworthiness, collateral, and repayment capacity against policy standards before approving, declining, or conditioning the loan.

An asset pledged by a borrower that the lender may seize and sell if the loan is not repaid, reducing the lender's loss exposure on the credit.

A valuation account that reduces the reported carrying amount of loans to reflect the amount management expects not to collect, adjusted through periodic provisions charged to earnings.

The accounting removal of a loan balance deemed uncollectible from the credit union's books, typically after collection efforts are exhausted, while the debt may still be pursued.

A loan status in which a scheduled payment has not been made by the due date, usually tracked in aging buckets such as 30, 60, or 90 days past due.

The function that contacts delinquent borrowers and pursues repayment through reminders, workout arrangements, or legal action before and after a loan is charged off.

The lender's recovery of collateral, such as a vehicle, after default, followed by sale and application of proceeds to the outstanding loan balance.

Federal or private protection that reimburses members up to a stated limit if an insured credit union fails, covering ownership categories separately and subject to rules on account titling and beneficiaries.

The NCUA-administered fund, backed by the full faith and credit of the United States, that pays insured member share balances when a federally insured credit union is liquidated.

A classification used to determine insurance coverage, such as single ownership, joint ownership, revocable trust, or retirement accounts, each insured separately up to the standard limit.

A person named to receive funds upon the owner's death; for share insurance purposes, certain payable-on-death designations increase coverage for the owner's accounts.

The federal anti-money-laundering law requiring financial institutions to keep records, file reports such as currency transaction reports, and maintain programs to detect and deter illicit finance.

A confidential filing made to the financial intelligence unit when an institution knows, suspects, or has reason to suspect transactions involve illegal activity or attempt to evade reporting rules.

The written procedures a credit union uses to verify the identity of new members and accountholders, collecting name, address, date of birth, and identification number before opening accounts.

Heightened scrutiny applied to higher-risk customers or transactions, such as foreign politically exposed persons or cash-intensive businesses, involving additional information gathering and ongoing monitoring.

The federal rule governing electronic fund transfers that sets consumer error-resolution procedures and limits a member's liability for unauthorized transfers based on how promptly the loss is reported.

The principle, enforced by statutes such as the Equal Credit Opportunity Act and Fair Housing Act, that credit decisions and terms must not discriminate on prohibited bases.

A written communication to an applicant explaining that credit was denied or terms were changed, stating the specific reasons and informing the applicant of rights under fair lending rules.

A discriminatory effect that arises when a neutral policy or practice disproportionately excludes or disadvantages a protected group, even without intent to discriminate.

The process of coordinating the composition, pricing, and maturities of assets and liabilities to manage interest rate, liquidity, and earnings risk within board-approved limits.

The exposure of earnings and capital to changes in market interest rates, arising from mismatches in the repricing or maturity of assets and liabilities.

Interest income minus interest expense, divided by average earning assets, measuring how profitably a credit union intermediates between depositors and borrowers.

The risk that a credit union cannot meet member withdrawals and funding obligations as they come due without incurring unacceptable losses or borrowing at excessive cost.

A credit union's net worth divided by total assets, a key regulatory measure of capital adequacy used to assign a composite capital category under prompt corrective action rules.

A regulatory framework that classifies credit unions by capital level and imposes increasingly strict mandatory and discretionary remedies as the net worth ratio declines.

The policies, procedures, segregation of duties, and monitoring activities designed to safeguard assets, ensure reliable records, and prevent or detect errors and fraud.

Dividing responsibilities so that no single person controls all stages of a transaction, such as authorization, custody, and recording, reducing the opportunity for undetected fraud or error.

Intentional deception for financial gain, such as forged checks, identity theft, or internal misappropriation, requiring detection controls and prompt reporting to the appropriate authorities.