Endorsing Vendors OK for FCUs

ALEXANDRIA, Va.-Federal credit unions are permitted to endorse the products and services of third-party vendors, according to a recent NCUA legal opinion letter (05-1223). “Although an FCU should be alert to the potential risk to its reputation, nothing in the Federal Credit Union Act or NCUA’s regulations prohibits this activity,” NCUA Associate General Counsel Sheila Albin wrote to Glendale Area Schools Federal Credit Union in response to their inquiry. She explained, “We believe a recommendation based on an FCU’s experience with a vendor can be useful to other credit unions in making their own determinations about a product or service. Endorsements from satisfied customers are common in the marketplace and, assuming they are offered in good faith, present minimal risk.” “The practice is analogous to finder activity on behalf of an FCU’s membership, which is expressly authorized in our incidental powers rule.Although the present circumstances differ from a finder activity, we think the risks to the credit union are, if anything, even less, since an institution rather than a consumer will be considering the recommendation,” Albin wrote. She still recommended performing “adequate due diligence” before endorsing a product.