For those of you in the credit union industry (or familiar with it) - why is it that they are able to consider direct auto loans to be open-end credit even though they are not revolving loans? What are the benefits of doing that? I'm reading Reg. Z and commentary and still not getting it.

Thank you so much for your input!

In reply to Anonymous, I have the same question...And in the state of California, which UCC code does it affect? Can someone out there assist us? Thanks!

I have spoken with a credit union lender, the explanation I recieved on this issue is that the application used is a "loan liner" and it covers all notes extended. that way you can have a co-signor on an app that covers all loans requested. Now, a co-X would have to sign the note each time but the app is covered. A closed end car loan or note would require the co-X responsible on that one particular note only, just in case they would want other credit extended. This does not however exempt them from typing "renewals" for an advance on my car loan if I needed $1,000 for something and I had the equity. In this instance open end, I think, mainly covers the application process and any co-Xers. If it makes sense to think of open end and closed end to refer more to the application than the actual note itself. I can't really think of an advantage to this off-hand, except if you had a credit that went bad and you could hook the co-Xer on any additional, not related credits. This is my opinion from a conversation I had with a loan officer at a credit union, I can't guarentee my interpretation is perfect or correct.

I drafted the original open-end LOANLINER program, so I am very familiar with credit union multi-featured open-end plans. The reason credit unions can do car loans on open-end is that credit unions have members sign an open-end plan that allows the member to borrow money from time to time. Credit unions use simple interest on loans, so they automatically satisfy the criterion that the finance charge be imposed on an outstanding balance. The Commentary to 226.2(a)(20) discusses the fact that an open-end plan need not have a credit limit. Credit union multi-featured plans do not have credit limtis, but they are reusable. The commentary even makes a reference to doing car loans on open-end. My former boss at CUNA Mutual, neither of us is there any longer, lobbied the FRB heavily at the time the Commentary was being written so that it would include references to credit union multi-featured plans. He was successful, because there are a number of references that support multi-featured plans.