Incidental powers? CUNA report addresses questions, explains how FCUs can benefit from reg

<p>WASHINGTON – The NCUA Board’s approval last year of its incidental powers regulation was hailed by credit unions for the increased service options it provides credit unions and the opportunity it affords them to boost earnings. But what are the regulation’s provisions and how can federal credit unions use them to better serve members needs? From questions CUNA’s Assistant General Counsel Mary Dunn has fielded from FCUs, it’s become apparent to her that there is some confusion about the incidental powers reg, and she has issued a report, “NCUA’s Incidental Powers Rule – How It Can Help Federal Credit Unions Serve Their Members Better” to explain the ABC’s of the rule. Some of the items in the NCUA’s incidental powers rule are not new to credit unions. “What is new is that now there are no regulatory limits on the amount of fee income that may be obtained from these kinds of arrangements,” Dunn wrote in the report sponsored by CUNA’s Federal Credit Union Subcommittee. Dunn referred to the incidental powers rule as “one of the most significant developments” affecting the regulation of credit unions. “It is under this rule that the agency allows federal credit unions to engage in activities that are not spelled out in the Federal Credit Union Act.” In addition to taking a look at the incidental powers rule and discussing the improvements it provides, the report also raises several issues credit unions should consider when considering offering new activities and provides them an assessment checklist to facilitate the process. What makes the incidental powers regulation special is that the rule “is designed to actually help federal credit unions serve their members. Also, it is not limited to federal credit unions that meet certain net worth or CAMEL rating requirements, it is applicable to all federal credit unions,” Dunn wrote. Under the rule, she states, there are no limits on the amount of compensation a federal credit union may receive from a third party vendor. “By facilitating the ability of a federal credit union to determine for itself what third party products and services are in its members best interests and by allowing a credit union to receive income limited only by the marketplace rather than the federal government, NCUA has provided federal credit unions with important options in keeping pace with their members’ needs and demands for financial services.” While Congress, through the Federal Credit Union Act, authorized the express powers federal credit unions are allowed to engage in, the incidental powers rule “recognizes the significance of so-called `incidental powers’ in ensuring the continued viability of credit unions and the agency’s pivotal role in determining what activities a federal credit union may engage in under this legal rubric.” Before the rule was passed, issues involving incidental powers were decided on a case-by-case basis. With the regulation in place now, the regulatory process has been simplified by centralizing the list of the types of activities that have already been approved by NCUA. “The beauty of the new rule is that is codifies what categories of activities are currently permissible and provides useful examples of the kinds of services each category includes.” A copy of Dunn’s report was sent to NCUA. It will also be available on CUNA’s Web site. -</p> <p>[email protected]</p>