New York Codes, Rules and Regulations
Title 3 - BANKING
Legal Interpretations
LI 5 - Credit Unions
Section LI 5.1 - Revolving credit loans under banking law, section 470

A credit union inquired whether it had the power to approve lines of credit for its members and whether it could, in effect, enter revolving credit agreements with such members.

Relying on section 470 of the Banking Law, which requires that each loan application to a credit union "must be made in writing and must state the purpose for which the loan is desired and the security offered," the department concluded that a credit union is foreclosed from issuing a "line of credit" since the purpose of each advance will not be known to the credit union, nor will its credit committee have the opportunity to pass on the wisdom of granting each advance.

The department noted that the reason for the credit union's requesting this authorization might have been related to the inconvenience caused by the statutory requirement that the credit union's credit committee pass on every loan. Therefore, the department pointed out that, to a meaningful extent, this inconvenience has been eliminated by chapter 68 of the Laws of 1969 which authorized the credit committee of a credit union having shares in excess of $50,000 to appoint loan officers, which officers are authorized to make certain loans.

DATED: July 22, 1969