NCUA’s Incidental Powers Proposal: You Don’t Need a General Counsel Opinion to Petition the Board

NCUA’s deregulation project is moving again. John Crews’s first package includes three proposed rules out for comment, and one of them rewrites the incidental powers rule to say what NCUA said it meant in 2001.

This is a clarifying rule, not a new power. One sentence is being struck from the petition section. The scope section drops the legal opinion path. There are zero new requirements, zero new costs, and zero new information collections for federal credit unions.

The message: a federal credit union does not need an Office of General Counsel (OGC) opinion before petitioning the NCUA board to approve a new incidental powers activity.

Where incidental powers fit

A federal credit union’s express powers come from the Federal Credit Union Act, the ones Congress approved. Holding property. Lending to members. Investing. Taking in shares and certificates. Selling and cashing negotiable instruments.

Incidental powers supplement those. NCUA describes them as activities necessary or requisite to the business, and it has pre-approved a set of categories. The way I’d put it, and these are my words, not NCUA’s: they’re things that aren’t in the act but that, being a credit union, you need to be able to do almost by osmosis. The act doesn’t need to change for you to do them. They’re implied, and NCUA clarifies what they are.

The pre-approved list covers a lot of ground: certification services such as notarizing and signature guarantees; charitable contributions and charitable donation accounts; correspondent services; electronic financial services; leasing excess space or equipment; financial counseling, tax preparation, and retirement planning; finder activities; loan-related products such as debt cancellation and letters of credit; marketing; monetary instrument services; operational programs such as payroll and wire transfers; stored value products; trustee and custodial services; and representative activities.

Credit unions can already do all of that without NCUA’s approval. The proposal is about how you add something new to the list.

Two doors, and one word

There were two doors, or at least it read that way. Door one was asking General Counsel whether your proposed activity already fits a pre-approved category and getting an advisory opinion. Door two was petitioning the NCUA board directly to add a new activity or category. Door one was always optional.

The trouble was the text. In 2001, the preamble said a federal credit union is not required to get an OGC opinion. The rule said that before petitioning, a federal credit union should seek one. Not required, and should. Which one was it?

In practice, that should got credit unions to go to General Counsel first, and it kind of controlled what went to the board. The proposal strikes the sentence. If it becomes final, the rule says what the preamble said.

What stays the same

Plenty. The pre-approved categories stay. The application contents, what you submit to the board in support of your request, stay. The rule still doesn’t apply to corporate credit unions. And approval still helps everyone: if the board approves an activity for one federal credit union, every federal credit union can do it.

General Counsel’s door also stays open. You can call, say you’re thinking about doing something, and pick their brain on the best approach: whether someone else is contemplating it, whether NCUA has already rejected a similar request. It’s always good to reach out and see what you can learn so your package is put together in the best possible way.

The practical points

You can go straight to the board. A call to OGC can still be a smart thing to do.

If you’re a state charter, this is not your rule. You apply through your state regulator, and your state may have reciprocity rules. Check with your state on how that works.

And it’s still a proposal, not final. The comment period runs 60 days from October 15 publication, which puts the deadline on or about December 14. The Federal Register notice lists a contact at NCUA’s Office of General Counsel for questions. If anything here raises questions for your credit union, reach out to me.