Section 029-133-IV - GENERAL PROVISIONS OF THE REGULATIONA credit union may lease personal property to its members as long as the leases are the functional equivalent of secured loans for personal property. Accordingly, such leases will be subject, to the extent applicable to the provisions of Chapter 85 of the Maine Banking Code. The credit union, however may not assume burdens or subject itself to risks greater than those ordinarily incident to a secured loan. Although leasing and lending are recognized under federal law as functional equivalents when certain requirements are met, they are not legal equivalents and therefore lease transactions are not subject to Maine usury laws. The following criteria must be present for the leases to be permissible:
A. The leases must be net, full payout leases.B. The leases may be either open-end or closed-end.C. The leases may be either direct or indirect. In the case of indirect leasing where the credit union does not have legal title to the leased property, the credit union will be deemed to have effective ownership of the leased property if the credit union requires the leasing company that retains legal ownership of the leased property to: (1) Assign all of its rights in the lease to the credit union (the credit union will receive the lease payments and determine if the lease is in default);(2) Name the credit union as sole lienholder on the title to the leased property; and(3) Give the credit union an unconditional and irrevocable power of attorney to at will assign title to itself or to any other person it may choose.D. The residual value relied upon to meet the full payout requirement can not exceed 25% of the original cost of the leased property, unless the residual value is reasonable and guaranteed by a non-affiliated financially capable party.E. The credit union must maintain a contingent liability insurance policy with an endorsement for leasing.F. The credit union must retain salvage powers over the leased property so that it may take reasonable and appropriate action to salvage or protect the value of the leased property or its interest arising under the lease.G. The credit union is subject to the requirements of the Maine Consumer Credit Code, which incorporates the Consumer Leasing Act and Federal Reserve Board Regulation M ( 12 CFR 213).H. The leases must comply with applicable state and federal lending laws and regulations.02-029 C.M.R. ch. 133, § IV