October 24, 1997
Colonel (Ret) Geoffrey R. Louis, President
West Point Federal Credit Union
P.O. Box 105
West Point, New York 10996
Dear Colonel Louis:
You have asked whether it would be a conflict of interest for
the chairman of the board of West Point Federal Credit Union (the
Credit Union), who also serves as the President of the Alumni
Association of the United States Military Academy, to sign certain
promotional material related to a credit card program that the
Credit Union has with the Alumni Association. He would be signing
the material in his capacity as President of the Alumni Association,
a position for which he receives compensation. We do not believe
these circumstances present a conflict of interest.
BACKGROUND
The United States Military Academy is the sponsor of your credit
union and the members of the Alumni Association are within your
field of membership. In 1988, prior to your chairman becoming
president of the Alumni Association, the Credit Union had already
entered into an Affinity Mastercard Agreement with the Alumni
Association. Under the agreement, the Credit Union receives the
Alumni Association's current mailing list which it uses to solicit
credit union membership and new cardholders. In return, the Credit
Union "donates" a percentage of the average cardholder
balances to the Alumni Association. You have stated that the
President of the Alumni Association's compensation is not tied
to the money paid by the Credit Union to the Alumni Association.
The Alumni Association has a similar arrangement with another
financial institution and promotional material is sent to members
of the Alumni Association signed by your chairman in his capacity
as President of the Alumni Association.
ANALYSIS
We believe the underlying issue, which determines the specific
question you have raised about signing the promotional material,
is whether the receipt of compensation by the chairman of the
board as a result of his position as president of the Alumni Association
violates the conflict of interest provision in NCUA's lending
regulation. Because the credit card program involves the extension
of credit, we have reviewed �1.21(c)(8)(i) of NCUA's regulations
which prohibits a credit union official, and
certain others, from receiving compensation in connection with
any loan made by a federal credit union. 12 C.F.R. �1.21(c)(8)(i).
The purpose of this provision is to ensure that an individual
who is in a position of authority at a credit union does not put
his or her self interest ahead of the credit union's interest
in making good loans. Accordingly, �1.21(c)(8)(i) is applicable
to situations where an individual is compensated for an activity
performed outside the credit union in connection with a loan or
line of credit made by the credit union.
It is our understanding that the Alumni Association compensates
the chairman of the board strictly on a salary basis and that
no part of his compensation is based on the compensation the Alumni
Association receives from the credit union. Based on the above
facts, the chairman of the board's compensation from the Association
would not be considered connected to any loan or line of credit
made by the credit union. Thus, there would be no conflict of
interest situation created in violation of �1.21(c)(8)(i)
from the Credit Union's arrangement with the Alumni Association.
Accordingly, it is permissible for the chairman of the board
to sign his name to the credit union's promotional materials as
president of the Alumni Association.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/NSW:bhs
SSIC 3500
97-0826