NCUA Redefines ‘Fleet’ for MBLs

Legal opinion redefines number and use of ‘fleet.’

September 18, 2012

NCUA has revised its definition of a “fleet” for purposes of member business lending, the agency announced today.

The previous definition applied to two or more vehicles used to deliver a product or service integral to business. The updated definition allows for five or more vehicles that are centrally controlled and used for a business purpose.

“The current definition of a business fleet—two or more vehicles—is no longer adequate to meet members’ needs,” says NCUA Board Chairman Debbie Matz. “So, at the request of a credit union, NCUA’s general counsel reviewed the definition and issued a new legal opinion that both reflects the realities of today’s marketplace and protects safety and soundness.”

The opinion explains that the member business lending rule requires all member business loans meet certain collateral and security requirements. The maximum loan-to-value ratio, for example, can’t exceed 80% unless the excess above that percentage is covered by insurance or a similar guarantee.

The rule allows credit unions to make business vehicle loans without complying with that loan-to-value requirement except in the case of “fleet” vehicles. This is because fleet vehicles tend to depreciate more quickly than personal-use vehicles and, therefore, pose a higher risk to the lending credit union.

A credit union making a loan to a member who owns a business with fewer than five vehicles would qualify for the loan-to-value exception. The opinion is consistent with the way fleet vehicles are treated by the Internal Revenue Service and auto industry standards.

Credit unions certainly appreciate any actions NCUA takes to reduce their regulatory burden and allow them to better serve their members, says CUNA President/CEO Bill Cheney. “And CUNA values NCUA’s effort to lighten the load on credit unions.”

But to best help meet members’ business loan demand—and to help improve the economy—Congress still needs to pass legislation giving credit unions more authority to make business loans.

“Frankly, there are limits to what NCUA can do,” Cheney says. “It is hard to foresee an action that the agency could take which ultimately would have the impact that passage of business lending legislation would have for small business and for credit unions. Passage of this vital legislation remains our top priority.”