Many credit unions
structure their organization to include the presence of a credit committee that is either
appointed by the chairman of the board or elected by the membership. The credit
committee’s purpose is to assure membership fair access to members’ deposits
in the form of loans. To better illustrate the Credit Committee's function, you need
to understand that the board of directors are responsible for determining the policies
from which the credit union will operate. The loan policy will outline the conditions
necessary for any member to qualify for credit through the credit union. It is the credit
committee’s responsibility to implement, monitor and evaluate these lending policies
established by the board of directors.
By our definition, the committee must "assure
membership fair access" to credit opportunities. In a democratic organization
such as the credit union, fairness can be achieved best if a committee oversees this
process. Usually the credit union's bylaws will define the structure of the credit
committee, however it's most common for credit committees to consist of three or five
members. The only qualification needed to serve on the credit committee is to be a member
in good standing. To be considered "in good standing" one must maintain the
minimum share balance requirement as established in the credit union bylaws and not be in
default on any loans with the credit union. Typically, one member of the committee will
serve as chairperson and one member will serve as secretary.
The credit committee should meet at least once a month,
however many have found meeting weekly is most effective in satisfying their
responsibilities. At each meeting the credit committee will review applications for credit
and render a decision for each. The secretary should document all actions taken by the
committee in the form of minutes. The credit committee has the power to approve or deny
loans to members with the credit union. Depending on the size of the credit union, the
committee may recommend that the board approve at least one member of the committee and
various credit union personnel to serve as loan officers. To better serve the membership,
loan officers are usually given appropriate levels of authority to render a decision for
credit. If a credit union designates loan officers to approve or deny loans, it becomes
the committee's responsibility to review these loans to evaluate the quality of the
process. Remember, the responsibility of the committee is to implement, monitor and
evaluate the lending process.
With this power of granting credit comes considerable
responsibility. Credit unions are required to operate within governmental regulations and
it’s the responsibility of credit union staff and committees to operate within these
regulations. Like all other credit union volunteers, the credit committee should allocate
time toward education and training.
As mentioned, one of the committee’s tasks is to
implement the policies established by the board of directors. As committee members
it’s important that each review the loan policy and continually evaluate its content
in relation to fairness for the members and soundness for the credit union. Collectively,
the committee should present any recommendations for revision to the board of directors
and often this is done in cooperation with the management of the credit union.
