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NCUA opines on third party other issues
ALEXANDRIA, Va. (4/23/08)—The National Credit Union Administration (NCUA) Tuesday released three legal opinion letters: one addresses third-party relationships, another clarifies that a federal credit union cannot pay for its CUSO’s employees’ benefits, and the last spells out that credit unions meet the definition for “depository institutions.” The letter clarifying earlier information on third-party arrangements specifies that a credit union’s in-house counsel may perform the legal review recommended by the NCUA for a credit union’s third-party arrangements and contracts. The answer is intended to eliminate any confusion that could have been caused by the agency’s December 2007 Letter to Credit Unions, “Evaluating Third Party Relationships,” No. 07-13 (07-CU-13). That guidance included a discussion of due diligence considerations for third-party relationships and, among other recommendations, suggested credit unions have “qualified external legal counsel review prospective third-party arrangements and contracts.” In the new NCUA General Counsel Opinion 08-0218, the agency states, “We have consulted with NCUA’s Office of Examination and Insurance and have confirmed that the reference to external legal counsel was intended to recommend that legal counsel reviewing these relationships should be independent of the third party. “The guidance, by referring to ‘external’ counsel, was not intended to suggest that in-house counsel should not perform the recommended legal review.” Regarding benefits for CUSO employees, NCUA’s Legal Opinion No. 08-0218 said that a federal credit union may obtain and administer benefits to the employees of a CUSO that is wholly-owned or majority-owned by the FCU, but only the CUSO may pay for them. However, the letter notes, a joint arrangement is subject to certain conditions. For instance, it must be “accomplished in a manner that will not affect the legal separateness of the FCU and CUSO, preserving the corporate veil; the CUSO pays in advance for its share of the cost of the benefits attributable to its employees or reimburses the FCU within a reasonable time after the fact; and the CUSO complies with state insurance and other applicable law.” The final legal opinion letter made public by the agency, No. 08-0232, declares that a section of Federal Reserve Act includes in the definition of “depository institution” any insured credit union as defined in section 101 of the Federal Credit Union Act. That, the letter says, includes all federal credit unions and state-chartered credit unions insured by NCUA, or any credit union which is eligible to apply to become an insured credit union under section 201 of the FCU Act. 12 U.S.C. 461(b)(1)(A)(iv), 12 U.S.C. 1752(7), 12 U.S.C. 1781.
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