What are the credit union incidental powers?
At the July 2001 Board Meeting, the NCUA Board approved a revision of Part 721 of the NCUA Regulations to expand federal credit unions’ incidental powers. The Incidental Power Regulation replaces the Group Purchasing Regulation.
Credit unions are created by statute, and their powers are found expressly in the statutes and supporting regulations (for federal chartered credit unions, the Federal Credit Union Act and the NCUA Regulations). However, some powers, although not expressly set forth in the statute and regulations, are permitted as incidental to the expressed powers. There have been court cases involving banks that have loosened the test to determine what powers are incidental to the banking powers. NCUA has extrapolated this test to credit unions and has expanded and listed the defined activities within the credit union’s incidental powers.
A summary of the approved services under the Incidental Powers Regulation is as follows:
- Certification Services – Certifying electronic and “wet” signatures.
- Correspondent Services – Services provided by a credit union to another (e.g., loan processing, check cashing).
- Electronic Financial Services – Web hosting and ISP services.
- Excess Capacity – Renting excess capacity in a building or technology that a credit union intends to use for future credit union purposes.
- Financial Counseling – Tax preparation and filing, estate and retirement planning and investment counseling (this does not include the sale of securities or insurance products).
- Finder Activity – A federal credit union is permitted to earn a fee for the introduction of outside vendors to the members, such as providing a membership list or advertisement in the newsletter or on the credit union’s web site. There are no limits as to the types of services that a credit union could offer through a vendor, provided that the activity and the revenue sharing arrangement are otherwise legal.
- Marketing Activities – Activities used to promote credit union services (e.g., raffles, membership referral drives, purchasing of advertising).
- Monetary Instrument Services – Purchase, sell, or exchange foreign currency and U.S. commemorative coins.
- Operational Programs – EFT, debit cards, check clearing, loan collection services, etc.
- Stored Value Products – Stored value cards, prepaid phone cards, public transportation cards, event tickets, postage stamps, etc.
- Trustee or Custodial Services – This does not include general trust powers but rather the ability of a credit union to act as trustee and custodian for IRA or other pension plans.
Please review the NCUA website (www.NCUA.gov) for the full text of the Regulation, including the complete set of the examples provided within each category.