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Jun 23, 2010
Categories: Home-Secured Lending Operations

This and That...

Posted by Anthony Demangone

Happy "Hump Day," everyone.  Here's a few tid-bits for your consumption.

NFIP.  There has been a good deal of guidance related to the lapse of the National Flood Insurance Program.  NCUA decided to join in the fun, issuing Letter to Credit Union 10-CU-08 to highlight FEMA guidance that addresses "lapse" related issues. 

Compensation.  Recently, the Fed, OCC, OTS, and FDIC issued guidance on "incentive compensation." The goal was to ensure that incentive compensation arrangements at financial organizations take into account risk and are consistent with safe and sound practices. NCUA did not sign on to the guidance, but it still might be useful to review if your credit union is reviewing its compensation policies and practices. 

Member assessment fee?  A member asked us if his credit union could assess a fee to the credit union's membership to pass on the cost of the 13.4 basis points corporate assessment.  The credit union didn't want to create a "account maintenance fee."  Rather, as mentioned above, they wanted to simply pass the costs along directly to the membership.  I'm not sure that is possible.  In 1993, NCUA was asked whether a federal credit union could directly pass along their league dues to the membership.  NCUA said no.   The letter is not long, so here it is in its entirety.

You requested an opinion concerning whether an FCU may pass along its League dues to its membership in the form of an annual assessment. This practice is impermissible.

ANALYSIS

Section 109 of the FCU Act permits FCUs to charge "a uniform entrance fee if required by the board of directors" when becoming a member of the FCU. 12 U.S.C. ~1759. No other membership fees are permitted by the FCU Act. Under the ancient legal maxim "expressio unius est exclusio alterius," where something is designated in a statute, all omissions should be interpreted as exclusions. See Sutherland Stat. Const. ~47.23 (5th ed., 1992). Therefore, no annual membership fees of FCU members may be assessed except for the initial entrance fee. This is a long-standing policy of the NCUA. See Letter from John L. Ostby, NCUA General Counsel, to Michael Marion, Assistant Counsel, Michigan Credit Union League, dated June 8, 1981.

Credit unions would be able to increase fee income in other ways to compensate for the assessment, but a direct fee to the membership does not appear possible based on this legal opinion letter.

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