ALEXANDRIA, Va. (UPDATED: 12:25 P.M. ET, 9/18/12)--The National Credit Union Administration (NCUA) has expanded the definition of "fleet" of vehicles, as used in its member business lending rule, to mean five or more vehicles--saying its former use of two vehicles to define fleet is "overly restrictive."
The NCUA, in a legal opinion letter dated Sept. 13, said the revision better reflects "marketplace realities" and provides regulatory relief to credit unions, enabling them to more effectively serve the business needs of their members.
The NCUA said that in reviewing how best to define "fleet," it evaluated case law, how other government agencies use the term, and auto industry standards. NCUA Associate General Counsel Frank Kressman, who penned the opinion, said the agency was "particularly persuaded" by Internal Revenue Service publications on the topic and treatment of fleets by auto industry fleet programs.
"Accordingly, we amend the definition of 'fleet' as follows: A fleet is five or more vehicles that are centrally controlled and used for a business purpose, including for the purpose of transporting persons or property for commission or hire.
"The revised definition also addresses our safety and soundness concerns about collateral devaluation. In this definition, we intend to capture only those vehicles that depreciate at a faster rate than personal vehicles not used for a commercial purpose," Kressman wrote.
However, the opinion letter added, the NCUA continues to expect credit unions to properly underwrite MBLs, taking into account all risks posed by business lending.
The opinion was requested by John Hirabayashi, president and CEO, Community First CU of Florida, who is on CUNA's Examination and Supervision Subcommittee.
"This is a positive development, and we encourage the agency to replicate this approach as often as possible," said Mary Dunn, CUNA deputy general counsel.