Compliance Blog

I get it. You know your members very well. You know that when Mr. Greenleaf walks in for his weekly withdrawal, he prefers at least one hundred-dollar bill broken down into 5 twenty-dollar bills. You know Mr. Greenleaf wants to give his 5 grandkids “just-because” funds. Your stellar customer service skills have put Princeton Federal Credit Union (FCU) on the map because you have made it your business to KNOW YOUR MEMBERS.

So, when someone wearing a Princeton FCU jacket walks into the credit union to receive cash advances on his credit card, your member senses tingle. This man is an IMPOSTER! And while this nonmember may be a Talented Mr. Ripley to Mr. Greenleaf, he cannot fool you. Such a big phony!

It’s true. There are services that nonmembers cannot have access to, because the Federal Credit Union Act does not allow it. However, can the FCU refuse to service cash advances from nonmembers? I hate to be this attorney, but… it depends. It depends on whether your credit union has agreed (by your credit card service contract) to provide cash advances to the public at large because you provide this service to your membership.

See this NAFCU FAQ (member-only). For those who cannot access this FAQ, the question appears to confirm that VISA service contracts mandate credit unions honor cash advances for cards that were not issued by the credit union. In other words, some credit card service contracts require credit unions to service nonmember requests for cash advances.

Just because you contracted with your credit card service provider to honor cash advances of nonmembers, does federal law allow the federal credit union to actually service the nonmember in this way? Well, based on the information below, it appears the credit union may be able to service Mr. Ripley, after all.

In a guidance letter, NCUA figures that providing cash disbursements to the public is likely authorized through a credit union’s incidental power, subject to a few conditions:

“You also mentioned providing cash advances from Visa credit cards to nonmembers. It is our understanding that your FCU is currently a credit participant member in the VISA program. The NCUA has deemed services to nonmembers as an incidental FCU power when: 1) the primary purpose of an FCU’s permissible member service is to extend the service to its members; and 2) when the service offered to the membership requires that it also be made available to the public. The VISA program mandates that credit participant members provide cash disbursement services to cardholders. Therefore, if your FCU offers its members the opportunity to obtain cash advances on VISA cards, it may provide cash disbursements to nonmembers who request this service at the credit union’s office.” (Emphasis added).

In conclusion, you may want to consult with counsel to determine if your credit card service agreement mandates credit participants to provide cash disbursement services to all cardholders (public access). If there is such a clause within the credit card service contract, the credit union may be bound by contract/state law to provide cash advances to Mr. Ripley, which is likely within the FCU’s incidental power.

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