The National Credit Union Administration has eased its policy on indirect auto leasing.

In an Aug. 10 legal opinion, NCUA general counsel Robert M. Fenner said a federal credit union can take a lien on a leased property rather than hold title to it.

Earlier, federal credit unions needed to take title to the property.

The new policy "will allow credit unions to avoid contingent liability risks they might face if they held title," said NCUA staff attorney Lisa Henderson.

Ms. Henderson said the agency shifted gears after reviewing its previous policy and after credit unions urged a change.

To hold a lien rather than title, Mr. Fenner wrote, several conditions must be met:

* The leasing company must assign all rights in the lease to the credit union.

* The credit union must be the sole lease holder.

* The credit union must have the right by state law to take title to the leased property if the leasing company goes insolvent or bankrupt.

* Leases must be net, full-payout leases, with a maximum limit of 25% residual value, and with the credit union retaining salvaging powers.

* The leasing company must maintain an insurance policy naming the credit union as coinsured.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.