August 6, 1998
Gretchen L. Jones, General Counsel
Maine Credit Union League
P.O. Box 1236
Portland, Maine 04104-1236
You have asked whether a federal credit union (FCU) may invest
in the debentures of a CUSO. As explained below, the answer is
yes.
Maine credit unions and the Maine Credit Union League own stock
in MECUL Service Corporation (the CUSO). Maine credit unions
also hold the CUSO's debentures. In addition, some of these credit
unions have made loans to the CUSO up to their 1% maximum. You
have raised the issue of debentures as a permissible investment
because of language added to the final regulation that states
"[a]n FCU can only invest in a CUSO as an equityholder
of a corporation, as a member of a limited liability company,
or as a limited partner of a limited partnership." 12 C.F.R.
§712.2(a) (emphasis added). We do not believe this language
was intended to prohibit credit unions from investing in the debentures
of a CUSO. In fact, the Federal Credit Union Act permits FCUs
to invest in the obligations of a CUSO. 12 U.S.C. §1757(7)(I).
The regulatory language was added as a clarification, and there
is no indication that it was intended to prohibit a previously
permissible investment.
We plan to propose clarifications to Part 712 before the end of
the year. This section will be addressed at that time.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MFR:bhs
SSIC 3000
98-0701