ALEXANDRIA, Va. (7/6/09)--In a recent National Credit Union Administration (NCUA) legal opinion letter, the agency addressed a query regarding which restrictions apply to credit union service organizations (CUSOs) that purchase and service delinquent loans. NCUA Associate General Counsel Sheila Albin wrote that the “primary restriction” for CUSOS that service delinquent loans may not “advance new principle.” While CUSOs cannot originate consumer loans that are not student loans or mortgage loans, they may “restructure loans in aid of their collection activity,” she added. According to Albin, the NCUA’s view on these types of transactions is that CUSOs that purchase “non-performing loans” are permitted to restructure delinquent debt, provided the “credit union made the original underwriting decision and no new credit is being extended to the borrower.” The NCUA currently permits CUSOs to change some loan terms, including payment schedules and/or interest rates. However, Albin added, CUSOs should not use these limited loan restructuring rights to attempt to circumvent lending restrictions on federal credit unions. To read the complete letter, use the resource link below.