CUNA Comment Letter

Incidental Powers For Federal Credit Unions

February 23, 2000

Ms. Becky Baker
Secretary to the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

Via Fax: 703-518-6540

Dear Ms. Baker:

The Credit union National Association is pleased to respond to the agency’s Request for Comments on incidental powers for federal credit unions, which appeared in the Federal Register November 26, 1999. NCUA’s review of federal credit union incidental powers is a very important undertaking that is long overdue, and we commend the agency for initiating this process.

Summary of CUNA’s Recommendations


Incidental powers of federal credit unions are regulated under 12 CFR 721, which addresses group purchasing activities. Under such activities, federal credit unions may make products or services of third party vendors available to their members. Except for insurance, a federal credit union is generally limited to reimbursement only for its costs associated with making products available through group purchasing plans.

NCUA’s interpretations regarding incidental powers are currently based on whether such activities meet the test established in the 1972 case, Arnold Tours, Inc. v. Camp, which articulated the standards for national bank incidental powers.

However, more recent cases have expanded the concept of what is an acceptable incidental power for national banks. The U.S. Supreme Court continued this trend in VALIC in 1992 and held:

The "business of banking" is not limited to the enumerated powers in §24...and...the Comptroller therefore has discretion to authorize activities beyond those specifically enumerated. Id. at 259, n.2.

Recent OCC opinions regarding the permissibility of an activity as an incidental power have relied on three principles to make that determination:

NCUA’s Proposal

NCUA is proposing to amend its incidental powers and group purchasing regulations, which would have four components:

  • Incidental powers—this section would enumerate activities in which credit unions could engage without limits on compensation. The list would be illustrative only and would include examples such as electronic tax filing, raffles, and check clearing services for a sponsor or member. This section would also indicate how a credit union could apply for approval of an activity as an incidental power.
  • Group purchasing activities—this section would limit compensation for group purchasing activities to the credit union’s costs, as the current regulation provides.
  • Insurance products—this section would address insurance products that are permissible as incidental powers.
  • Conflict of interest—this section would restate the current conflict of interest restrictions that no director, senior management official or immediate family member of such an individual may receive any compensation or benefit in conjunction with activities permissible as group purchasing activities.

CUNA’s Recommendations

Thank you for the opportunity to comment on this critical regulatory issue for federal credit unions. CUNA urges NCUA to revise its approach on incidental powers as addressed above and to develop a proposed regulation designed to facilitate, rather than limit, the ability of federal credit unions to offer competitive and innovative products to their members.


Mary Mitchell Dunn
Associate General Counsel
and Senior Vice President