On October 25, the Wisconsin Credit Union Review Board met at the Office of Credit Unions to discuss the OCU General Letter 4-18 on Loans. Nearly 40 people filled the room to review whether or not statutes allow co-borrowers of loans to be non-members of a particular credit union.
Letter 4-18 was written to provide clarification to all Wisconsin state-chartered unions regarding loans after recent examinations revealed that some credit unions had allowed co-borrowers to be non-members. “The Office of Credit Unions interprets these two statutes that a credit union can only make loans to members. Therefore, co-borrowers on a loan must be a member of a credit union. A cosigner on a loan does not need to be a member as they are not a borrower, they are a guarantor of the loan.”
Wisconsin Credit Union League President/CEO Brett Thompson indicated credit unions had four issues with LTR 4-18: that it was an inappropriate interpretation of the statute, OCU had not followed the proper process to issue the letter, that the letter provided operational hardships to credit unions, and that the reputational risk of the credit union has increased if the institution has to ask non-member co-borrowers to create an account “for no reason.” The most controversial of his comments were directed at the statutory membership requirement. He stated, “The statute doesn’t say they (credit unions) can lend money only to members.” Indeed, one credit union identified 1,773 current loans with co-borrowers who are not members.