Final Rule on Eligible Obligations

CUNA
January 2, 2008 | COMMENTS

The National Credit Union Administration (NCUA) Board has issued a final rule that will change its rule governing the purchase, sale, and pledge of eligible obligations by adding a conflict of interest provision similar to the one in the general lending rule.

NCUA's current rule provides that a federal credit union (FCU) may purchase its members' eligible obligations (loans and groups of loans it is authorized to make) from any source, subject to certain limitations, provided the loans are ones that the FCU is empowered to grant, with a limitation of 5% of the FCU's unimpaired capital and surplus. NCUA maintains that similar to situations in which a federal credit union is the original lender to its member, eligible obligation transactions may present the same types of conflict of interest concerns.

The final rule, issued as part of the agency's ongoing review of its regulations each year, will prohibit an official, employee, or immediate family members of such individuals from receiving, directly or indirectly, any commission, fee or other compensation in connection with an eligible obligation transaction.

The rule will be effective as of December 21, 2007.

If you have questions or need a copy of the rule, please feel free to contact Senior Vice President and Deputy General Counsel Mary Dunn by e-mail at mdunn@cuna.com or by telephone at (800) 356-9655, extension 6736, or contact Senior Assistant General Counsel Jeff Bloch by e-mail at jbloch@cuna.com or by telephone at (800) 356-9655, extension 6732. You may also access the rule here.