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porrower proposes to utilize for the purpose, the borrower's other commitments und anticipated needs over the loan period, and the best interests of the credit inion.

(b) Pursuant to the bylaws, the board of directors of a Federal credit union by resolution may require that all loans approved by the credit committee, or by Bduly appointed and authorized loan officer, or that certain classes of such loans, shall provide for payment or amortization by periodic, substantially equal, payments of principal which are to be made at intervals shorter than 12 months and which are sufficient to retire the loan at its maturity. .

(c) Subject to any limitations imposed by the board of directors as provided for by paragraphs (a) and (b) of this section, the credit committee, or a duly appointed and authorized loan officer, may approve loans with maturities of one year or less which provide for retirement thereof by a single payment of the principal at maturity.

(d) (1) Subject to any limitations imposed by the board of directors as provided for in paragraphs (a) and (b) of this section, loans with maturities in excess of one year approved by the credit committee, or a duly appointed and authorized loan officer, shall provide for payment or amortization by periodic, substantially equal, payments of principal which are to be made at intervals of not greater than 12 months and which are sufficient in amount to retire such loans at maturity.

(2) Notwithstanding the provisions of subparagraph (1) of this paragraph, and subject to any limitations imposed by the board of directors as provided for by paragraphs (a) and (b) of this section, loans with maturities in excess of one year but not in excess of thirty months, may provide for retirement by a single payment of principal at maturity or by payments at intervals greater than 12 months where the credit committee finds that such terms are justified by the needs and condition of the borrower after taking into account, among other factors deemed relevant, his current commitments, the source or sources of the funds from which he plans and proposes to make such payment or payments, the regularity, frequency and reasonably predictable nature of the receipt of such funds, and the best interests of the credit

union: Provided, That the payment or payments so provided for shall be scheduled to coincide with the anticipated receipt of the funds intended to be used therefor: And provided, That the findings of the credit committee shall be in writing signed by the chairman of the committee and retained in the borrower's loan file.

(3) Notwithstanding the provisions of subparagraph (1) of this paragraph, and to the extent that the board of directors by resolution approves, loans with maturities up to five years for the purpose of higher education of the member-borrower may be made upon such terms of payment or amortization as the credit committee finds consonant with the needs of the member-borrower and the best interests of the credit union.

(e) All loans shall provide for the payment of interest with each payment of principal: Provided however, That no loan shall provide for the payment of interest less frequently than at intervals of twelve months. (25 F.R. 5286, June 14, 1960, as amended at 27 F.R. 6980, July 24, 1962) $ 301.22 Selling checks and money

orders. (a) A Federal credit union may undertake to sell negotiable checks (including travelers checks) and money orders to its members only, for a fee which does not exceed the direct and indirect costs incident to providing such service, when it is determined by the board of directors that the provision of such service will not have any adverse effect upon the accomplishment by the credit union of its basic purpose of promoting thrift among its members and of providing to them à source of credit for provident and productive purposes.

(b) A Federal credit union which undertakes to provide this service shall:

(1) Have adequate physical facilities to handle and safeguard the cash funds to be used in connection therewith;

(2) Establish and maintain effective internal controls for the handling of and accounting for the cash funds and fees to be received and charged in connection therewith;

(3) Establish and enforce reasonable rules covering the kinds of negotiable checks (including travelers checks) and money orders, and the maximum amounts thereof, that it will sell to members;

(4) Establish and enforce reasonable . (b) A Federal credit union which unruies and procedures to assure that the dertakes to provide this service shall: service will be provided to members of (1) Have adequate physical facilities the Federal credit union only, including to handle and safeguard the cash funds the identification of any member who to be used in connection therewith; requests the service;

(2) Establish and maintain effective (5) Obtain, and maintain in force and internal controls for the handling of and effect, and additional surety bond and accounting for the cash funds to be used insurance coverage required thereby;

and the fees to be charged in connection (6) Determine that the fee charged therewith; does not exceed the direct and indirect (3) Establish and enforce rules covercosts incident thereto.

ing the kinds of checks and money (c) The board of directors of a Fed orders, and the maximum amounts thereeral credit union which has undertaken of, that will be cashed; to provide this service shall review its (4) Establish and enforce rules and operation from time to time to make procedures to assure that the service will certain that it is not having any adverse be provided to members of the Federal affect upon the accomplishment by the credit union only, including the identicredit union of its basic purpose, and fication of any member who requests the that the requirements of paragraph (b) service; of this section are being fulfilled on a (5) Obtain, and maintain in force and current basis. Controls, rules and pro- effect. any additional surety bond and cedures established pursuant to para insurance coverage required thereby: graph (b) of this section may be

(6) Determine that the fee charged amended by the board of directors from does not exceed the direct and indirect time to time to provide new or increased

costs incident thereto. safeguards against loss, and to meet the

(c) The board of directors of a Fedbest interests of the cerdit union and its

eral credit union which has undertaken members.

to provide this service shall review its (d) The fees or commissions which a

operation from time to time to make Federal credit union may receive pur

certain that it is not having any adsuant to a contract with a third party

verse effect upon the accomplishment providing for the sale of negotiable

by the credit union of its basic purpose, checks (including travelers checks) and

and that the requirements of paragraph money orders furnished by the third

(b) of this section are being fulfilled on party, shall be deemed to be not in excess

a current basis. Controls, rules and proof the direct and indirect costs incident to providing this service.

cedures established pursuant to para(e) No fee shall be charged by a Fed

graph (b) of this section may be amenderal credit union to a member for a

ed by the board of directors from time check drawn by it on its own bank ac- to time to provide new or increased safecount in connection with the withdrawal guards against loss, and to meet the best by the member from a share account, or interests of the credit union and its in connection with the disbursement of members. the proceeds of a loan.

(d) No fee shall be charged by a Fed§ 301.23 Cashing checks and money

eral credit union to a member as for orders.

the cashing of a check or money order (a) A Federal credit union may un

when such check or money order is used dertake to cash checks and money orders

in whole or in part for payment of a for its members only, for a fee which

loan, payment of interest, payment of does not exceed the direct and indirect any obligation to the credit union, or costs incident to providing such service, the purchase of shares. Nor shall any when it is determined by the board of fee be charged to the member for the directors that the provision of such sery cashing of a check or money order ice will not have any adverse effect upon drawn by the Federal credit union on the accomplishment by the credit union its own bank account and issued to the of its basic purpose of promoting thrift member in connection with a withdrawal among its members and of providing to by the member from a share account or them a source of credit for provident in connection with the disbursement of and productive purposes.

a loan.

$ 301.24 Refund of interest.

The board of directors of a Federal credit union may authorize an interest refund to all members who paid interest to the credit union during any dividend period and who are members of record at the close of business on the last day of any such dividend period. The board may authorize an interest refund for a dividend period only during a month in which, under the bylaws, it may declare the dividend, except that if, under the bylaws, a credit union has semiannual dividend periods, and an interest -refund was not authorized for the first dividend period, the board may provide an interest refund for the first dividend period in the authorization for interest refund made for the second dividend period. However, the board shall not authorize an interest refund for any dividend period with respect to which it has not declared a dividend. The amount of interest refund to the members shall be in proportion to the amount of interest paid by them during the dividend period as determined for the dividend period by the application of a uniform percentage. When an interest refund is authorized with respect to a dividend period, it shall be recorded in the books of the credit union as a reduction of interest income for that period. If the authorization covers both semiannual dividend periods, the combined interest refunds shall be a reduction of interest income for the second dividend period. An interest refund may be credited to the members' share accounts or paid directly to the members. (30 F.R. 5794, Apr. 24, 1965) $ 301.25 Insured loans to student mem

bers in eligible higher education or

vocational institutions. Notwithstanding the limitations of the Federal Credit Union Act with respect to loans to members, and the provisions of $ 301.21, a Federal credit union, upon appropriate amendment of its Bylaws in compliance with $ 301.4, may make insured loans to student members pursuant to the power conferred by the Higher Education Act of 1965, Title IV, Part B, section 434, P.L. 89–329, 79 Stat. 1247, approved November 8, 1965, and the National Vocational Student Loan Insurance Act of 1965, section 16, P.L. 89-287, 79 Stat, 1048, approved October 22, 1965. The exercise of this power by a Federal credit union, including the aggregate and individual amounts, terms, and conditions of insured loans to student mem

bers, and the necessary practices and procedures in connection therewith, shall be in accordance with the provisions of Title IV, Part B, of the Higher Education Act of 1965, the National Vocational Student Loan Insurance Act of 1965, and the regulations issued thereunder. (31 F.R. 4802, Mar. 22, 1966) $ 301.26 Purchase of accounting serv

ices. A Federal credit union may purchase accounting services for the maintenance of all or a portion of its accounting records. As used in this section the term "accounting services" means the maintenance of bookkeeping, accounting, or other records related to the purposes and functions of a credit union, by manual, mechanical, or electronic methods, and the furnishing of reports and information derived from such records. Any purchase of accounting services shall be evidenced by a written agreement the terms and conditions of which shall expressly include a provision requiring compliance with $ 301.14, and a provision requiring the vendor to make any accounting records of the Federal credit union in his possession immediately available for examination by the Bureau. A Federal credit union purchasing accounting services shall notify the Regional Representative in writing of the arrangement at least 30 days prior to the date on which such services shall commence. Such notice shall disclose the name and address of the vendor and information with respect to the records to be maintained and the method to be used. A Federal credit union shall notify the Regional Representative in writing at least 30 days prior to the discontinuance of the arrangement. A Federal credit union, in addition to regular payments for services as provided under the written agreement, shall not pay in advance the actual or estimated charges for more than 3 months services. Where such advance payment is made it shall be amortized over a period not in excess of the period of the written agreement. No official or employee of a Federal credit union shall be engaged directly in the management or operation of the accounting services purchased pursuant to this section, except where the vendor of such services is owned and operated by or controlled by one or more credit union leagues. However, in no event shall an official or employee of a Federal credit union receive from the vendor of such

services any salary or compensation other than the reimbursement of necessary expenses incurred in connection with the vendor's activities. (32 F.R. 5271, Mar. 29, 1967) 8 301.27 Participation in accounting

service center. (a) A Federal credit union may participate with one or more other credit unions (either Federal or State chartered) in the establishment or maintenance of an accounting service center, the functions, facilities, and operations of which are limited to providing data processing services only for such participating credit unions. As used in this section the term "data processing seryices" means the maintenance of bookkeeping, accounting, or other records related to the purposes and functions of a credit union, primarily by mechanical or electronic methods, and the furnishing of reports and information derived from such records. Participation in the accounting service center may be by means of a partnership or other noncorporate arrangement between or among the participating credit unions or by participation in an accounting serv; ice center corporation organized for the sole purpose of providing data processing services to the participating credit unions, through ownership of a proportionate amount of the capital stock of such a corporation, provided that the remaining capital stock of such corporation is available for ownership only by the participating credit unions. A Federal credit union's proportionate ownership of the accounting service center shall be in similar proportion to the total ownership of the center as the total facilities and services used by the Federal

lit union bears as a percentage to the total facilities and services provided by the accounting service center to all the participating credit unions, but the cost of such ownership shall not exceed two percent of its members' shareholdings. Ownership by the participating credit unions will be reviewed not less frequently than every two years and adjusted among them as necessary to bring such ownership into conformity with the percentage of the total facilities and services of the accounting service center used by each of them.

(b) A Federal credit union may not participate in the establishment or maintenance of an accounting service center unless the arrangement provides, (1) that he operating costs of the account ing service center shall be charged to each of the participating credit unions in such proportion to the total operating costs as the total facilities and services used by each bears as a percentage to the total facilities and services used by all of them; (2) that each participating credit union will have in its records current information disclosing, (i) the name of each participant, (ii) the proportion and amount of ownership of each in the accounting service center, (iii) the proportion of the facilities and services used by each, (iv) the current total operating costs of the accounting service center, and (v) the proportion and the amount of the total operating costs charged to each of the participating credit unions; (3) that the accounting service center shall establish and maintain the records of participating Federal credit unions in accordance with the requirements of $ 301,14; and (4) that the records of participating Federal credit unions in possession of the accounting service center shall be available immediately for examination by the Bureau. No official or employee of a participating Federal credit union may receive any salary or compensation from the accounting service center other than the reimbursement of necessary expenses incurred in connection with service center activities.

(c) Each Federal credit union participating in an accounting service center shall notify the Regional Representative in writing of the arrangement at least 30 days prior to the date on which such participation shall commence. Such notice shall disclose the name and address of the accounting service center, the name of its managing officer, and shall provide information on the records to be maintained and the method to be used for that purpose. A Federal credit union shall notify the Regional Representative in writing at least 30 days prior to discontinuing its participation in an accounting service center. (32 F.R. 5271, Mar. 29, 1967] $ 301.28 Joint operations and activities.

(a) A Federal credit union may agree with one or more other credit unions to

share quarters and to carry or business shareholdings, transfers of net earnings operations either individually or jointly. to the Regular Reserve may be limited to The agreement, which shall be in writing the amount necessary to maintain the and which shall have the prior approval Regular Reserve equal to 10 percent of of the Director, shall provide that: (1) the total amount of members' shareThe assets and records of each credit holdings; and (3) recoveries on items union shall be completely segregated; (2) previously charged to the Regular the individual identity of each credit Reserve. union will be clearly maintained; (3) the (b) A Federal credit union may charge joint costs will be shared equitably; (4) to its Regular Reserve losses on uncolwith respect to joint operations, cen lectible loans to members and to other tralized management controls will be credit unions (including unrecovered colmaintained over joint personnel and lectible costs). facilities which, nevertheless, permit (c) (1) A Federal credit union may each credit union to retain its respon charge to its Regular Reserve losses other sibility for carrying on its own business. than those resulting from uncollectible

(b) Requests for approval should be loans to members or to other credit submitted to the Regional Representa unions provided that each such charge tive in writing together with a copy of has been approved in advance by the the agreement and all pertinent facts in Director. In determining whether such support of the proposal not later than charges shall be approved, the Director 30 days prior to the proposed implemen- will be guided by the nature of the loss tation of the agreement,

and the financial condition of the Fed132 F.R. 5272, Mar. 29, 1967]

eral credit union concerned as indicated

by: The amount of loan delinquency and PART 302_RESERVES

estimated losses on outstanding loans,

current and prospective net earnings, Sec. 302.1 Reserves in general,

and similar facts which may affect its 302.2 Regular Reserve.

operations and development. 302.3 Special Reserve for Delinquent Loans. (2) Applications for approval to charge AUTHORITY: The provisions of this Part 302

such losses to the Regular Reserve shall ssued under sec. 21, 73 Stat. 635; 12 U.S.C.

be made in writing to the Regional Rep1766.

resentative. The application shall: (1)

be authorized by the board of directors SOURCE: The provisions of this part 302 appear at 25 F.R. 5289, June 14, 1960, unless

of the Federal credit union; (ii) state otherwise noted.

the amount and nature of the loss; and

(iii) describe fully the causes of the loss; 3 302.1 Reserves in general.

and (iv) be accompanied by a copy of Federal credit unions shall establish the Federal credit union's current finanind maintain such reserves as may be

cial and statistical report (Form FCUrequired by the Act, or by regulation, or 109) and a copy of the current schedule n special cases by the Director on his of delinquent loans. The Regional Repinding that the reserves of the Federal resentative may request such additional :redit union concerned are insufficient. information concerning the financial 302.2 Regular Reserve.

condition, operating practices, and man

agement of the Federal credit union as (a) The treasurer shall transfer to a he may deem necessary in a particular 'eserve to be known as the Regular Re case. erve (1) as of the close of business (3) The Regional Representative will each month all entrance fees, trans investigate each such application and her fees and late charges collected during will make a recommendation as to he month;(2) as of the end of each whether it should be approved or disaplividend period 20 percent of the net proved. The application and recomarnings for that period before the mendation of the Regional RepresentaTeclaration of any dividend: Provided, tive shall be forwarded to the Bureau in Lowever, That when the Regular Re Washington, D.C. The Director shall erve thus established shall equal 10 approve or disapprove the application. percent of the total amount of members' The Regional Representative will be in

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