Magazine article American Banker

NCUA Plan to Curb Loan Officer Bonuses Comes under Attack

Magazine article American Banker

NCUA Plan to Curb Loan Officer Bonuses Comes under Attack

Article excerpt

Credit unions are criticizing the government's plan to restrict bonuses paid to loan officers.

A refrain in many of the 70 letters filed on the National Credit Union Administration proposal is that credit unions alone should design incentive programs.

The comment period for the proposal, issued in April, ended June 19.

"This regulation, as written, is overkill," said Donald C. Berra, president of First Community Credit Union, Ellisville, Mo. "Rather than granting wider latitude by which to offer incentives, by drafting this proposal in this manner, NCUA has succeeded in tightening the constraints a credit union has on incenting employees."

Ironically, the agency thought it was doing the industry a favor by issuing the proposal. Current regulations ban people involved with approving a loan from receiving incentive pay. Other programs are acceptable, such as those rewarding employees for the institution's overall performance.

Although a handful of credit unions praised all or some of the agency's restrictions, most told the NCUA to butt out.

Under the proposal, loan underwriters and collectors could receive incentive pay connected to loans as long as the supervisor with the final say receives no commission.

Many credit unions argued that all employees should be entitled to incentive pay, regardless of their management level. Proponents said universal incentives are necessary to retain employees, who might leave for higher salaries elsewhere, and to increase lending.

"It seems counterproductive to restrict motivation techniques for supervisory and management personnel," wrote Bradley W. …

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