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ALEXANDRIA, Va.-NCUA recently ruled that performing loan processing services for a fee for the federal credit union’s sponsor and member is an authorized incidental powers activity. According to the legal opinion letter (04-0803), a federal credit union wrote asking whether it could process its sponsor University’s private loans to the schools students and their parents. For a fee, the credit union would provide a number of functions, including obtaining a credit report and score and ensuring compliance with the USA PATRIOT Act, among other things. While the processing is not a preapproved activity under the incidental powers rule, NCUA Associate General Counsel Sheila Albin wrote, it does meet the three-prong test for determining whether an activity is an incidental power of federal credit unions. The test asks: (1) Whether the activity is convenient or useful in carrying out the mission or business of credit unions consistent with the Federal Credit Union Act; (2) whether the activity is the functional equivalent or logical outgrowth of activities that are part of the mission or business of credit unions; and (3) whether the activity involves risks similar in nature to those already assumed as part of the business of credit unions. “The Board does not believe it is necessary to link an incidental power directly to an express power enumerated in the FCU Act but generally will consider an activity to be within an FCU’s incidental powers if it is “necessary or requisite to enable it to carry on effectively the business for which it is incorporated” 12 U.S.C. 1757(17),” Albin cited. Since the credit union is not making the loans itself, the students’ membership is immaterial, she noted. “Nevertheless, we appreciate that this loan processing relationship with the University will provide a financial service to a broad swath of its membership,” Albin wrote. “In addition, the FCU may be able to use the information it obtains from the loan processing relationship to market to potential natural person members and also help it refine other financial services that the credit union offers directly to its natural person members, subject to financial privacy and other applicable laws on the transfer of personal information.” However, Albin recommended that the credit union account for all associated risks. [email protected]

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