August 12, 1998
Vicki L. Stuart, V.P. Finance & Operations
Ste. Croix Regional Federal Credit Union
1000 Lisbon Street
P.O. Box 1746
Lewiston, Maine 04241-1746
Dear Ms. Stuart:
You have asked whether a federal credit union may sell its VISA
loan portfolio to a third party. The National Credit Union Administration's
regulations permit a federal credit union (FCU) to sell its loans
to any source, as long as the board of directors approves the
sale and the FCU retains the written agreement with the schedule
of the loans sold. 12 C.F.R. §701.23(c)(1).
You have also asked whether an FCU can continue to offer VISA
cards to its members through the entity that purchased the VISA
loan portfolio. You explained in a telephone conversation with
Mary Rupp, Staff Attorney, that the FCU will market the cards
to its members but that the purchasing entity is the one actually
providing the VISA loan. The names of the FCU and the entity
providing the loan will both be on the card. Without reviewing
the documents being provided to the member, we can say generally
that this practice is permissible if the loan documents are not
misleading. Region I is currently reviewing a VISA program similar
to the one you have described. We have some legal concerns with
the disclosures which may also apply to your FCU.
In addition, you should note that, under NCUA's regulation on
group purchasing activities, an FCU that makes the services of
a third party vendor available to its members may not receive
compensation in excess of its actual cost. 12 C.F.R. §721.2(b)(3).
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MFR:bhs
SSIC 3000
98-0802
cc: Larry Blankenberger, Reg. I, Dir. Of Sup.