CU Compliance Connection

1. CU Compliance Connection NCUA Private Student Lending

2. Private Student Lending • Since 2011 credit unions have been increasingly engaging in private student lending: • Private student loan funding has grown 33%, from $1.5 Billion to $2.0 Billion. • Four credit union servicing organizations have been created.

3. Private Student Lending • The complexity of student loans includes: • Long-term maturities with unique repayment structures; • Deferment periods; and • Origination as a line of credit while the member is a student and convert to a closed-end loan once schooling is completed.

4. Private Student Lending • Private student loan risk features are unique: • They are exempt from discharge during bankruptcy; • Minimal credit history; and • Repayment dependent on the expectation of future employment and income.

5. Private Student Lending • Credit unions should mitigating PSL risk by: • Establishing loan policies; • Quality control procedures and processes; • Loan limits to control concentration risk; • Exit strategies for facets of the loan programs; and • Regular and ongoing portfolio analysis.

6. Private Student Lending • Credit unions should conduct a risk analysis including: • Field of study and degree; • School attended; and • Graduation year relative to the economic cycle. • The review by cohort should also include: • Graduation rates; • Employment prospects; and • Income potential for student members.

7. Private Student Lending The NCUA Field staff is instructed in the guidance to ensure that credit unions meet the requirements of all regulations with specific attention to the credit union’s disclosures, advertising, marketing, lead generation, and referral fees. • Truth in Lending Act • Electronic Funds Transfer Act • Fair Debt Collection Practices Act • Privacy Act • Equal Credit Opportunity Act • Unfair or Deceptive Practices • Higher Education Act • Bankruptcy Abuse Prevention and Consumer Protection Act • IRS Internal Revenue Code • US Bankruptcy Code

8. Private Student Lending • The credit union needs to assess third-party relationships: • Evaluate financial capacity; • Ensure the third party meets all legal and regulatory requirements; and • Contract provisions requiring adequate reporting to monitor and account for the PSL program.

9. Private Student Lending • The credit union must meet accounting and allowance for loan and lease loss requirements for private student loans: • All GAAP requirements; and • Financial Accounting Standards Board (FASB) ASC 450-20 - Loss Contingencies

10. Private Student Lending The credit union must understand default insurance policies. It is imperative that the credit union understands the insurance requirements and has policies, procedures and reporting for appropriate loan evaluation.

11. Thank you for joining me for this review of the NCUA Private Student Lending Requirements - Stay Tuned… Shawn Wolbert, CIA, CUCE Director CU System Relations 101 S. Washington Square, Suite 900 Lansing, MI 48933-1703 (800) 262-6285 Ext. 486 (734) 658-5427 Mobile Follow me on Twitter – Shawn Wolbert @ Go2CUGuru