Interpretive Rulings and Policy Statements

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Chapter VII

Interpretive Rulings and Policy Statements

AGENCY: National Credit Union Administration (NCUA).

ACTION: Withdrawal of outdated and unnecessary Interpretive Rulings and

Policy Statements (IRPS).

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SUMMARY: NCUA is withdrawing several of its Interpretative Rulings and

Policy Statements (IRPS) that have become outdated or unnecessary or

have been superseded by other IRPS or NCUA regulations. This is the

first step in NCUA's ongoing project to update and streamline its IRPS.

The intended purpose of withdrawing these IRPS is to ease the

compliance burden on federally chartered and federally insured credit

unions and provide more valuable guidance by eliminating IRPS that no

longer effectively advance NCUA's regulatory goals or statutory

responsibilities.

EFFECTIVE DATE: September 25, 1997.

ADDRESSES: National Credit Union Administration, 1775 Duke Street,

Alexandria, Virginia 22314-3428.

FOR FURTHER INFORMATION CONTACT: Nicole Sippial Williams, Staff

Attorney, Division of Operations, Office of the General Counsel, (703)

518-6540, or at the above address.

SUPPLEMENTARY INFORMATION:

A. Background

As part of its Regulatory Review Program, NCUA conducted a review

of its IRPS to determine their current effectiveness. Several of the

IRPS were found to be outdated and unnecessary and, thus, could be

withdrawn. On March 13, 1997, the NCUA Board issued an advance notice

of proposed rulemaking soliciting comments on a proposal to revise

NCUA's existing IRPS. As part of the proposal, NCUA recommended

withdrawing 17 IRPS, redesignating 9 IRPS into the NCUA Rules and

Regulations, transferring 1 IRPS into a NCUA instructional manual or

directive, and preserving 12 IRPS.

NCUA received a total of 17 comments from federal credit unions,

state-chartered credit unions, trade organizations, state leagues, and

state credit union regulators. The commenters were overwhelmingly in

support of NCUA's efforts to revise and streamline its IRPS and the

proposed action to be taken with regard to each IRPS, but suggested a

few specific changes.

One commenter suggested that IRPS 80-10, When Federal Credit Unions

Can Charge More Than 15% Per Annum on Government Insured or Guaranteed

Loans, should not be withdrawn. We disagree. The guidance provided in

this IRPS is adequately addressed in Section 701.21(e) of NCUA Rules

and Regulations. One commenter suggested that IRPS 82-6, Corporate

Federal Credit Union Chartering Guidelines, should not be withdrawn,

but should remain for credit unions that believe they would be better

served by a new corporate credit union or for state chartered credit

unions that want to convert to federal charters. We disagree. The

guidance provided in IRPS 82-6 is no longer relevant to chartering

corporate credit unions. Applications for new corporate charters will

be handled on a case-by-case basis with the NCUA Chartering and Field

of Membership Manual (IRPS 94-1, as amended by IRPS 96-1) used as

guidance where applicable.

NCUA thoroughly evaluated the comments and has incorporated some of

the suggested changes into this

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withdrawal of IRPS and will continue to do so as the IRPS are further

revised.

IRPS that were marked for redesignation into NCUA Rules and

Regulations, according to the March 13, 1997, proposal, will be

redrafted as proposed rules and submitted to the public for notice and

comment at a later date. IRPS to be preserved, will be further reviewed

for possible revision, and if any changes are made, the IRPS will be

reissued.

B. IRPS To Be Withdrawn

At this time NCUA is withdrawing 18 IRPS that it considers either

outdated, since they no longer provide relevant or useful guidance, or

unnecessary, since the guidance provided has already been incorporated

into NCUA regulations or manuals. In addition, 10 IRPS are being

withdrawn because they have been superseded by other IRPS or NCUA

regulations and NCUA wants to reemphasize to the public that these IRPS

are no longer viable.

IRPS No. 79-1, Statement of Policy Regarding Relationship of Credit

Union Service Corporations and Existing Accounting Service Centers, 44

FR 21762, Apr. 12, 1979, provides that in order to assist existing

accounting service centers and ``leeway'' organizations in complying

with a new CUSO rule implemented by NCUA, NCUA agrees to forego taking

any action for a period of one year. IRPS 79-1 is outdated because it

addresses a specific NCUA policy to allow a one-year phase-in period

for a new CUSO rule implemented by NCUA at that time.

IRPS No. 79-2, Share Accounts, 44 FR 39382, July 6, 1979, provides

that as a result of a rule change deregulating share accounts, NCUA no

longer requires share draft accounts to be identical to regular share

accounts and confirms that share draft accounts are regular share

accounts with terms and dividend rates that can vary from other regular

share accounts. IRPS 79-2 is unnecessary because the guidance provided

is restated in Section 701.35 of NCUA Rules and Regulations.

IRPS No. 79-3, Amortization of Long Term Real Estate Loans, 44 FR

39182, July 5, 1979, states that absent NCUA approval, federal credit

unions must amortize real estate loans by ``substantially equal monthly

installments'' with two exceptions. The total of principal and interest

for the first and last monthly installment may differ slightly from the

total of the other installments. IRPS 79-3 is outdated because it is

superseded by Sections 5040.5.2.1.1 and 5040.5.2.1.2 of the NCUA

Accounting Manual. The Accounting Manual establishes two methods of

amortizing loans that may be used by federal credit unions.

IRPS No. 79-4, Investment Activities, 44 FR 51195, Aug. 31, 1979,

established certain accounting procedures for permissible investment

activities. IRPS 79-4 is unnecessary because the guidance provided is

restated in the current, as well as, the newly revised version of Part

703 NCUA of Rules and Regulations and in the NCUA Accounting Manual.

IRPS No. 79-5, Insurance Activities, 44 FR 43711, July 26, 1979,

provides that participation in a draft payment system that involves the

presentment and settlement of claims by a federal credit union, with

subsequent reimbursement to the federal credit union by the insurer is

impermissible. Thus, a federal credit union's involvement with an

insurance vendor is limited to the forwarding of claim forms to the

vendor for processing. IRPS 79-5 is outdated because it interprets an

obsolete provision. In addition Part 721 of NCUA Rules and Regulations,

addressing rules governing insurance, limits a federal credit union's

insurance activities to performing administrative functions on behalf

of a vendor.

IRPS No. 79-7, Liquidity Reserve, 44 FR 61172, Oct. 24, 1979,

provides guidance on NCUA's position on (1) provisions of Part 742, (2)

the calculation and disclosure of liquidity reserves, and (3)

procedures for requesting additional time to meet the liquidity

reserve. IRPS 79-7 is outdated because Part 742 has been removed from

NCUA Rules and Regulations. The NCUA Board believed that efficient

liquidity management varies among credit unions, and liquidity

decisions should be the responsibility of individual credit unions

boards of directors.

IRPS No. 79-8, Public Observance and Availability of Information

Regarding Board Meetings; Interim Sunshine Act Policy Statement, 44 FR

70709, Dec. 10, 1979, sets forth NCUA's policy governing the

implementation of the Sunshine Act. IRPS 79-8 is unnecessary because

the guidance provided is restated in Secs. 791.9-791.18 of NCUA Rules

and Regulations.

IRPS No. 79-9, Rate of Interest, 44 FR 74799, Dec. 18, 1979,

provides that the effect of a compensating balance must be considered

in determining usury limits on federal credit union member loans. IRPS

79-9 is outdated because the permissible interest rate that credit

union may charge has changed from 12% to 15%, and the practice of

requesting compensating balances is no longer prevalent among credit

unions. Any potential questions from a federal credit union, relating

to compensating balances, can be handled without the continuing need

for this IRPS.

IRPS No. 79-10, Notice of Proposed Consumer Program, 45 FR 7738,

Feb. 4, 1980, sets forth NCUA's proposed consumer program as requested

by Executive Order 12160. IRPS 79-10 is outdated because it is

superseded by IRPS 80-7, the Final Notice of Consumer Program, 45 FR

50260, July 28, 1980.

IRPS No. 80-7, Final Notice of Consumer Program, 45 FR 50260, July

28, 1980, sets forth NCUA's final consumer program which was to be

governed by the Office of Consumer Affairs. IRPS 80-7 is outdated

because it is superseded by NCUA Instruction 12400.2, Compliance

Activities: Complaint Handling and Documentation of Violations, which

sets forth NCUA's current policy for handling consumer affairs.

IRPS No. 80-10, When Federal Credit Unions Can Charge More Than 15

Percent Per Annum on Government Insured or Guaranteed Loans, 45 FR

71353, Oct. 28, 1980, provides that government insured and guaranteed

loans may exceed the federal usury rate for federal credit unions. IRPS

80-10 is unnecessary because the guidance provided is restated in

Sec. 701.21(e) of NCUA Rules and Regulations.

IRPS No. 80-11, State Chartered Federally Insured Credit Unions as

Most Favored Lenders, 45 FR 78624, Nov. 26, 1980, sets forth the

conditions upon which federally insured state chartered credit unions

(FISCUs) are granted most favored lender status pursuant to the Federal

Credit Union Act. IRPS 80-11 is outdated because it has been superseded

by IRPS 81-3, State Chartered Federally Insured Credit Unions as ``Most

Favored Lenders,'' 45 FR 78624, Nov. 26, 1980, which removed the

conditions set forth in IRPS 80-11 so that most favored lender status

would apply to any loan that an FISCU grants.

IRPS No. 80-12, Verification of Member Accounts, 46 FR 9919, Jan.

30, 1981, provides that federal credit unions are allowed to use

statistical sampling in satisfaction of statutory and regulatory member

account verification requirements. IRPS 80-12 is unnecessary because

the guidance provided is restated in Chapter 24 of NCUA's Supervisory

Committee Guide.

IRPS No. 81-1, Definitions--Exclusions from Gross Income in

Computing Reserve Requirements, 46 FR 13204, Feb. 20, 1981, provides

that credit unions receiving Central Liquidity Fund dividends may

exclude those dividends in computing federally-imposed reserve

requirements. IRPS 81-

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1 is unnecessary because the guidance provided is restated in Section

6090.5 of the NCUA Accounting Manual.

IRPS No. 81-2, Federal Funds, 46 FR 14887, Mar. 3, 1981, authorizes

certain federal funds transactions for federal credit unions and

establishes guidelines and accounting procedures for the same. IRPS 81-

2 is unnecessary because the guidance provided is restated in

Sec. 703.100(g) of NCUA Rules and Regulations.

IRPS No. 81-4, Developing Government Regulations, 46 FR 29248, June

1, 1981, sets forth NCUA's procedures for developing and reviewing its

regulations. IRPS 81-4 was drafted in response to the passage of the

Financial Simplification Act of 1980, the Regulatory Flexibility Act of

1980, 5 U.S.C. et seq., and the Paperwork Reduction Act of 1980, 44

U.S.C. 3501 et seq. IRPS 81-4 is now outdated due to changes in the

law, including the repeal of the Financial Simplification Act of 1980,

and is superseded by IRPS 87-2 which sets forth NCUA's current

procedures for developing and reviewing its regulations.

IRPS No. 81-5, Proposed Policy Statement Release of Consumer

Examination Reports, 46 FR 29575, June 2, 1981, sets forth conditions

under which individual federal credit unions may release consumer

compliance examination reports to third parties. IRPS 81-5 is outdated

because consumer compliance examinations are no longer performed as

separate examinations, but are performed in conjunction with safety and

soundness examinations producing one examination report. This

examination report is an exempt document. The release of an exempt

document is addressed in Part 792 of NCUA Rules and Regulations.

IRPS No. 81-8, Full and Fair Disclosure Requirements, 47 FR 23685,

June 1, 1982, provides that compliance with Section 2000 of the

Accounting Manual will place a federal credit union in compliance with

the full and fair disclosure requirements of Part 702 of the NCUA

Regulations. IRPS 81-8 is unnecessary because the guidance provided is

restated in Sec. 702.3 of NCUA Rules and Regulations and Section 1000

of the NCUA Accounting Manual.

IRPS No. 81-9, Share, Share Draft and Share Certificate Accounts,

46 FR 57668, Nov. 25, 1981, sets forth NCUA's position regarding the

calculation and assessment of premature withdrawal penalties for

variable-rate and multiple-addition share certificate accounts. IRPS

81-9 is outdated because NCUA deregulated Sec. 701.35 of the NCUA Rules

and Regulations, 47 FR 17979, Apr. 27, 1982, giving a federal credit

union's board of directors the responsibility for determining the terms

and conditions governing share, share draft, and share certificate

accounts, including premature withdrawal penalties.

IRPS No. 82-1, Membership in Federal Credit Unions, 47 FR 16775,

Apr. 20, 1982, provides that federal credit unions may offer membership

to borrowers whose loans have been purchased from a liquidated credit

union and that they may serve multiple occupational group. IRPS 82-1 is

outdated because it is superseded by IRPS 82-3, Membership in Federal

Credit Unions, 47 FR 26808, June 22, 1982.

IRPS No. 82-3, Membership in Federal Credit Unions, 47 FR 26808,

June 22, 1982, provides further guidance on field of membership issues

and authorizes multiple associational group charters. IRPS 82-3 is

outdated because it is superseded by IRPS 89-1, Chartering and Field of

Membership Policy, 54 FR 31165, July 27, 1989.

IRPS No. 83-2, Membership in Federal Credit Unions, 48 FR 22899,

May 23, 1983, clarified that the definition of a ``well-defined area''

stated in IRPS 82-3 includes home offices and branch offices for

purposes of adding additional associational and occupational groups.

IRPS 83-2 is outdated because it is superseded by IRPS 89-1, Chartering

and Field of Membership Policy, 54 FR 31165, July 27, 1989.

IRPS No. 84-1, Membership in Federal Credit Unions, 49 FR 46536,

Nov. 27, 1984, combines IRPS 82-3 and IRPS 83-2, sets out modifications

made since the two IRPS were published, incorporates several unwritten

policies, and sets forth a new policy on service to senior citizens and

retirees. IRPS 84-1 is outdated because it is superseded by IRPS 89-1,

Chartering and Field of Membership Policy, 54 FR 31165, July 27, 1989.

IRPS No. 85-1, Trustees and Custodians of Pension Plans, 50 FR

48176, Nov. 22, 1985, provides guidelines for federal credit unions

involved with self-directed IRA and Keogh accounts. IRPS 85-1 is

unnecessary because the guidance provided is restated in Part 724 of

NCUA Rules and Regulations.

IRPS No. 86-2, Joint Policy Statement on Basic Financial Services,

51 FR 42083, Nov. 21, 1986, provides that NCUA has adopted FFIEC's

recommendation encouraging credit unions to offer basic financial

services accessible to low and moderate-income members. IRPS 86-2 is

unnecessary because it restates the basic mission of credit unions. As

stated in the Federal Credit Unions Act, 12 U.S.C. 1751, the Act was

established ``to make more available to people of small means credit

for provident purposes through a national system of cooperative credit,

thereby helping stabilize the credit structure of the United States.''

IRPS No. 88-1, Policy on Selection of Securities Dealers and

Unsuitable Investment Practices, 53 FR 18268, May 23, 1988, provides

that NCUA will adopt a modified version of the FFIEC's Supervisory

Policy containing guidance to federal credit unions concerning

selection of securities brokers and the avoidance of unsound investment

practices. IRPS 88-1 is outdated because it is superseded by IRPS 92-1,

Supervisory Policy Statement on Securities Activities, 57 FR 22157, May

27, 1992, which provides additional information on the development of a

portfolio policy and strategies for securities and on securities

practices that are inappropriate for an investment account.

IRPS No. 89-1, Chartering and Field of Membership Policy, 54 FR

31165, July 27, 1989, provides membership and chartering policies. IRPS

89-1 is outdated because it is superseded by IRPS 94-1, Chartering and

Field of Membership Policy, 59 FR 29066, June 3, 1994, as amended by

IRPS 96-1, 61 FR 11721, Mar. 22, 1996.

By the National Credit Union Administration Board on September

17, 1997.

Becky Baker,

Secretary to the Board.

[FR Doc. 97-25261 Filed 9-24-97; 8:45 am]

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