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NCUA guides California CUs on IOUs
ALEXANDRIA, Va. (7/24/09)--The National Credit Union Administration (NCUA) has issued guidance for California credit unions accepting IOUs, or registered warrants, during the state’s budget crisis. On Monday, Calif. Gov. Arnold Schwarzenegger and state lawmakers reached an agreement to balance the state’s $26 billion deficit by making cuts throughout state government. However, details regarding the budget are still being negotiated (News Now July 22). Roughly 90 California credit unions are still accepting registered warrants issued by the state. According to NCUA:
* A federal credit union should not treat its acceptance of a warrant from a member as an investment but may treat its acceptance of a warrant as a collection item, deposit or loan depending on whether the credit union has extended credit to a member and the disclosures or other documentation it has provided to members; * A credit union should inform members of the charge back and collection rights the credit union may have if it extends credit in accepting the warrant; * Federal credit unions are not restricted in the type of collateral they can hold as security for payment of an extension of credit; * State-chartered credit unions are advised that if they choose to record the warrants as a credit union investment, they will have to reserve for a nonconforming investment under NCUA’s investment rule.
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