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NCUA opinion clarifies incidental powers
WASHINGTON (7/7/08)—It makes some sense that a recent National Credit Union Administration (NCUA) opinion letter originated from an inquiry from Texas—a state known for its love and support of school-level sports. In answering a question from Texas Tech FCU, Lubbock, the NCUA stated it is within a federal credit union’s incidental powers to receive payments for gift cards and track payments for one of its members. The Texas credit union was checking to see if it could perform those functions related to gift cards to be offered by Texas Tech University’s athletic department for purchases of athletic event tickets, concession goods and related apparel at the university’s athletic store. The NCUA letter signing off on the activity said: “Essentially, under this proposal, the FCU would receive and transfer funds on behalf of its member, which are traditional financial services credit unions perform for their members but, in this instance, through the electronic media represented by the gift cards, a type of stored value card product.” In a footnote, the NCUA brings up the following membership issues:
* A threshold issue for the FCU and the Athletic Department is establishing the Athletic Department as a member. We are not aware whether the Athletic Department would be considered a separate legal entity from Texas Tech University and, as an alternative, we suggest you consult with NCUA’s regional office regarding having the FCU’s sponsor, Texas Tech University, join as a member of the FCU if it has not done so already and have it be the issuer. Another option, if the Athletic Department is not a separate legal entity and eligible in its own right for membership, might be that it could be eligible under the provision in your charter for an organization of persons who are already enumerated as eligible in your charter.
In the proposed arrangement, fans would access information about gift cards on the athletic department’s web site. When a fan initiates a card purchase, he or she would be transferred by an electronic link to the credit union’s website. Also on the topic of incidental powers, credit unions are being asked to comment on a recent NCUA plan to update its rule on incidental powers for federal credit unions. The proposal would add illustrations of permissible activities under the categories of correspondent services, operational programs, and finder activities, and the Credit Union National Association seeks credit union comment by July 15. Comments are due to the NCUA by July 28.
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