Ga. Comp. R. & Regs. R. 80-2-12-.01 - Loans Generally, Interpretations and Rulings

(1) Lending limitations of Code Section 7-1-658 shall be computed quarterly as reported on the credit union's most recently filed call report; provided, however, that if significant capital changes occur after the filing of the call report which causes the net worth of the credit union to increase or decrease by 5 percent or more, then the legal lending limit will be immediately recalculated at the time of the capital change and it will be effective until the filing of the next call report. In determining whether the net worth capital has increased or decreased by 5 percent or more, each credit union will utilize the dollar amount reported on the applicable call report and recalculate its net worth if the dollar amount increases or decreases by 5 percent or more during the applicable time period.

(2) Where the lending limitations are reduced by recalculation, existing debt which was in conformity with the legal limitations at the time it originated shall not be construed to be non-conforming with new legal limitations.

(3) "Indirect" loans as used in Code Section 7-1-658 shall mean loans made for the substantial benefit of a third party where repayment of the loan is dependent on activities of the third party rather than solely dependent on the resources of the borrower and subject to the provisions of Rule 80-2-12-.05.

(4) Loans by a credit union to any wholly-owned subsidiary of the credit union, which subsidiary is located within an approved office of the credit union and which has agreed to abide by all laws, rules and regulations applicable to the credit union shall be exempt from the twenty-five (25) percent maximum lending limit of the credit union.

(5) Wherever approval of the Board of Directors or Credit Committee is required, such approval must be a specific, prior, and written approval of each extension of credit, except that advances made under a master note covering a specific purpose or project need not receive specific approval where such approval was accorded the master note. Annual approval of a line of credit may be used where interest rate, repayment terms, and anticipated collateral are clearly identified and current credit information is on file. Commodity, floor-plan and discount lines of credit which are anticipated to exceed five (5) percent of the legal lending limit may be approved annually to be deemed appropriate by the Board of Directors without each transaction receiving specific prior approval.

(6) In determining whether or not a loan in excess of the five (5) percent limitation is secured by "good collateral and other ample security," the lack of a perfected lien, inadequate insurance, and insufficient margins between collateral value and the amount of the loan shall be prima facie evidence of inadequate security to the debt.

(7) A borrower's savings accounts or certificate of deposits in the lending credit union will be regarded as collateral to a loan when they are not subject to check or withdrawal, mature on or after the loan which is secured, are under the sole control of the credit union, and are properly assigned. Where, according to the terms of the deposit contract, the deposit is eligible for withdrawal before the secured loan matures, the credit union must establish internal procedures to prevent release of the security without the lending credit union's prior consent. If proper procedures are in place, such deposits will be considered as collateral. Where deposit balances are properly taken as collateral to a loan, the loan may be reduced to the extent of the deposit in determining the amounts loaned for either secured or unsecured legal lending limitations, as applicable.

(8) In determining the primary collateral basis upon which a loan is granted, that portion of the collateral having the greatest market value shall be assumed to be the primary collateral.

(9) In determining amounts loaned, all amounts guaranteed or insured by any instrumentality of the United States government shall be deducted to the extent of the guaranty or insurance coverage. Immediate and deferred participations on loans by an instrumentality of the United States government shall also be excluded. Where the source of repayment of a loan, i.e. lease payments, is guaranteed by an instrumentality of the United States government and such guarantee is assignable and has been assigned to the credit union, such loan may be excluded to the extent of the guarantee.

(10) Except as provided in this paragraph, exposures in the form of insufficient funds checks held beyond the permissible return date and overdrafts shall be considered "extensions of credit" solely for the purpose of determining compliance with the legal limitation as it applies to the maker of the check or owner of the overdraft. Such exposures shall also be subject to the requirements for prior written approval and ample collateral where the total indebtedness of the borrower exceeds five (5) percent of the credit union's net worth. Such exposures will not be considered extensions of credit for purposes of compliance with the above legal loan limitations and requirements, provided that the exposure is inadvertent, which requires that:

(a) The extension(s) do not exceed the aggregate amount of $1,000 at any one time; and

(b) The account is not overdrawn or the insufficient funds check held for more than five business days.

(11) Extensions of credit to political subdivisions of the State of Georgia authorized to levy taxes or backed by the taxing authority of another political subdivision shall qualify for exemption from the twenty-five (25) percent loan limitation under the provisions of O.C.G.A. § 7-1-658(g), only where such extension of credit otherwise conforms with the provisions of Georgia Constitution, Article 9, Section 5.

(12) Pursuant to O.C.G.A. § 7-1-658(h), a loan or extension of credit to a leasing company for the purpose of purchasing equipment for lease shall be considered a loan to the lessee, provided that:

(a) The credit union documents the basis for its reliance on the lessee as the primary source of repayment before the loan is extended to the leasing company;

(b) The loan is made without recourse to the leasing company;

(c) The credit union receives a security interest in the equipment and, in the event of default, may proceed directly against the equipment and the lessee for any deficiency resulting from the sale of the equipment;

(d) The leasing company assigns all of its rights under the lease to the credit union;

(e) The lessee's lease payments are assigned and paid to the credit union directly by the lessee; and

(f) The lease terms are subject to the same limitations that would apply to a credit union acting as a lessor.

(13) The Department shall promulgate a form which may be used to document compliance with the requirements for approval of loans and obligations in excess of 5 percent of the net worth of the credit union by members of the board of directors or credit committee as set forth in O.C.G.A. § 7-1-658(e).

Notes

Ga. Comp. R. & Regs. R. 80-2-12-.01

O.C.G.A. §§ 7-1-61; 7-1-658.

Original Rule entitled "Loans Generally, Interpretations and Rulings" adopted. F. Aug. 15, 2007; eff. Sept. 4, 2007. Note: Correction of typographical error in Rule title on SOS Rules and Regulations website. In accordance with the Official Compilation Rules and Regulations of the State of Georgia (as published September 4, 2007), "Loan Generally, Interpretations and Rulings" corrected to "Loans Generally, Interpretations and Rulings." Effective July 17, 2018. Amended: F. June 27, 2018; eff. July 17, 2018. Amended: F. Jan. 8, 2021; eff. Jan. 28, 2021.