OLYMPIA, Wash. – The Department of Financial Institutions warned credit unions last week they may want to save original copies of loan documents and transactions, just in case they need to produce the paper copy in the event of litigation.
State law allows a credit union to copy records and destroy originals, except in certain cases, the DFI warned credit unions in a new Bulletin issued Friday. For instance, judges have declined to grant foreclosures when the original loan document could not be produced. Certain courts, said the DFI, are entertaining “produce the note” defenses and delaying foreclosures.
“Credit unions adopting electronic record retention systems should address the risks resulting from inadequate record retention practices systems,” said Bulletin. “The failure of credit unions to maintain adequate record retention systems can create significant reputation, transaction, credit and compliance risks.”
Credit union, said the DFI, should design and operate their electronic records systems so they are adequate for: potential use in litigation; for internal and external audits and controls and for compliance with regulatory requirements.
