Credit Unions Advised to Prepare for Changes in Determining Creditworthiness

The Maryland Department of Labor is urging state-chartered credit unions to be operationally ready on October 1, 2021 to comply with a new law that provides alternative methods of determining creditworthiness.

State chartered credit unions, along with other financial institutions, will be required to adhere to specified federal regulations when evaluating an application for a primary residential mortgage loan or an extension of credit. Financial institutions covered by the law will be required to consider the following verifiable alternative indications of creditworthiness:

• history of rent or mortgage payments
• history of utility payments
• school attendance
• work attendance

In addition, upon request by the applicant, any entity subject to the bill’s requirements must consider other verifiable alternative indications of creditworthiness presented (or made available) to the entity by the applicant.

Guidance released by the Office of the Maryland Commissioner of Finance urges credit unions to integrate this new requirement into their respective risk and compliance framework by establishing sufficient policies, procedures, and controls to ensure the appropriate and consistent implementation of these requirements. The Office further advises that failure to properly implement the provisions of the legislation could result in violations of Maryland law.