January 11, 2008

Mr. Gary E. Somerville

Director, Decision Support Systems

Vantage West Credit Union

P.O. Box 15115

Tucson, Arizona 85708

Re: Electronic Retention of Records.

Dear Mr. Somerville:

You asked for our opinion on the permissibility of a federally insured
credit union retaining records, specifically original loan documents for
outstanding loans to members, in an electronic format instead of a paper
format.  Under federal law and NCUA\'s record
retention regulation, records can be preserved in any format that can be
used to reconstruct the records, including in an electronic format.   

 

The Electronic Signatures in Global and National Commerce (E-Sign) Act
established a general rule of validity for electronic records and
signatures for transactions, effective October 1, 2000, with records
retention requirements effective March 1, 2001. 15 U.S.C. §7001(a)(1).
The E-Sign Act \"permits electronic retention of records required by
other statutes and regulations, as long as the electronic form is
accurate and capable of being reproduced for later reference.\" NCUA
Regulatory Alert No. 01-RA-03 (March 2001) (available on the NCUA
website, www.ncua.gov).

 

NCUA\'s Records Preservation Program regulation describes obligations
for federally insured credit unions to maintain a records preservation
program and implements the E-Sign Act. 12 C.F.R. Part 749. This
regulation establishes the formats for vital records preservation and
also for records required by other NCUA regulations. Records can be
preserved in any format that can be used to reconstruct the credit
union\'s records. The format used "must accurately reflect the
information in the record, remain accessible to all persons entitled to
access by statute, regulation or rule of law, and be capable of
reproduction by transmission, printing, or otherwise." 72 Fed. Reg.
42,273-42,274 (to be codified at 12 C.F.R. §§ 749.4, 749.5). In
addition, the credit union must maintain the necessary equipment or
software to permit an examiner to access the records during the
examination process.

Finally, we want to clarify the significance of prior legal opinions we
have issued on this topic. We note our office has previously issued a
legal opinion on

Gary E. Somerville

Page Two

electronic membership applications citing the E-Sign Act and
establishing the validity of electronic recordkeeping for federally
insured credit unions. OGC Op. 04-0543 (Aug. 5, 2004) (available on
NCUA's website, www.ncua.gov). You specifically asked about an older
opinion, OGC Op. 99-0443 (June 24, 1999), indicating it was confusing
because this opinion letter recommended that credit unions retain
original loan documents until a loan is paid off. We note we issued this
opinion before the E-Sign Act; also, the opinion references the NCUA
Accounting Manual as setting out NCUA's policies on records retention,
which is no longer correct. The Accounting Manual was substantially
revised several years ago and no longer addresses records retention.
Thus, OGC Op. 99-0443 has been superseded by revisions to Part 749 and
subsequent opinions on record retention.

Records retention guidance for federally insured credit unions is
provided in Appendix A to Part 749 in NCUA's regulations and it
specifically addresses the question of formats credit unions can use for
retaining records stating that "NCUA does not recommend a particular
format for record retention." 12 C.F.R. Part 749, Appendix A, Section A.
This section also discusses the criteria regarding accuracy and
accessibility of which credit unions should be mindful and notes that,
as far as relying on copies or reproductions of records, credit unions
"should also ensure that the reproduction is acceptable for submission
as evidence in a legal proceeding." *Id.* Whether a reproduction will be
acceptable in a legal proceeding may vary with state law requirements
and, therefore, we encourage credit unions to consult with their own
legal counsel on this aspect of their record retention policy.

Sincerely,

/S/

Sheila A. Albin

Associate General Counsel

GC/RMM/SAA:bhs

07-0812