The Case of the Missing Credit Policy

Last week, a chief lending officer from a credit union we work with sauntered into our office and sank down in a chair across from my desk.  I had seen Bob (names have been changed to protect the guilty) many times before, but never this distraught.  He held his head in his hands for a good five minutes before looking up at me and crying, “I need help.  We have lost our loan policy!”

Now such a statement is quite surprising, but I have learned over the years to not show any surprise, no matter what outlandish claim is uttered by anyone sitting across from my chair.  After all, this is what a good credit sleuth does.  Before I could utter a word, Bob cried, “Our regulator friends have shut us down until we find our policy!”

The regulators!  For some these folks cause much pain and heartbreak.  Many times, the regulators are simply doing their job and trying to guide the wayward sheep back to the right path.  This situation does warrant further investigation to the cause behind the shutdown.

“So, to start, we should retrace your steps and see what you were doing when you last saw it” I replied.

Bob scratched his head in deep thought as he picked up my deerstalker hat and ran his fingers across the seams on my calabash pipe.  Finally, in a moment of discovery, his eyes lit up.  “I remember seeing it five years ago when it was approved by the board.”

My eyes widened.  “Five years is quite a long time,” I stated.  “Hasn’t the board reviewed the policy since that time?” 

“Never.  We never saw any reason to bring it back before the board.”

“Well,” I asked, “what about the requirements with the new regulation that went in place January 1, 2017?”

Bob thought and then replied, “We never saw any reason to change how we do things.”  

The situation was beginning to become crystal clear, as the clues pointed me toward the source of the trouble.  “There is much additional freedom in the regulation granted to MBL departments.  However, with much freedom, comes much individual responsibility on the individual institution.  The reg basically requires all institutions to rewrite their loan policy.”

Bob sat the pipe down on the edge of my desk and stood up.  He sauntered to the window and looked longingly outside.  “But why do we need to constantly change our loan policy?” he asked.

“Well for one thing, if you worked with the policy a lot, you would not lose it to begin with!” I chuckled, but held any other sarcasm as I saw the annoyance in Bob’s furrowed brow.  Besides, I needed a payday and would take the case.  “It is very elementary, Bob.  The freedom granted you requires more oversight by your board and staff leadership.  Your MBL policy should be reviewed at least annually, just like other policies that govern your credit union should be.”

“Annually?”  Bob shrieked.  “This seems quite excessive.”

I calmly replied, “It is not, if you realize it is part of your responsibility to have your leadership manage the department well.  Reviewing policy and procedures is just one piece of a properly executed credit department.  We can help you draft, structure, and set up the policies and procedures to make sure you are back in business.”

Bob appeared relieved for the first time since he slumped into my office.  “I will take you up on the offer!” he exclaimed.

“The case of the lost loan policy has been closed successfully,” I stated.  “We will begin the process of drafting your new policy.” 

If you have not reviewed your loan policy and procedures, we are here to help.  Reach out to us!