January 19, 1999
William F. Hannah, President/CEO
Dana Federal Credit Union
3102 Spring Street
Fort Wayne, Indiana 46808
Your credit union has been offered a cash inducement to transfer
its accident and disability insurance business to another insurance
provider. That provider will also pay a fee for a mailing list
of the credit union's members. You have asked whether accepting
the offer is an acceptable practice under NCUA regulations. As
long as there is no conflict of interest, the decision to select
a new insurance provider does not violate either the Federal Credit
Union Act or NCUA's regulations. Your local counsel should be
consulted regarding state law and any outstanding contracts that
may be affected by the selection of a new provider. Fees received
from the provider are subject to Part 721 of NCUA's regulations.
NCUA regulations permit an FCU to make insurance involving outside
vendors available to the membership. 12 C.F.R. §721.1.
The amount of compensation an FCU may receive is dependent upon
the type of insurance sales. 12 C.F.R. §721.2(b). The regulations
do not limit reimbursement or compensation for insurance sales
"directly related to an extension of credit by the credit
union or directly related to the opening or maintenance of a share,
share draft, or share certificate account at the credit union."
12 C.F.R. §721.2(b)(1). The regulations limit the fee for
other insurance sales to "the greater of the dollar amount
or the cost amount." 12 C.F.R. §721.2(b)(2). Section
5200.6 of the NCUA Accounting Manual addresses accounting for
reimbursement from group purchasing and insurance activities.
As part of its participation in a group purchasing plan, an FCU
may provide a mailing list to a vendor and receive reimbursement.
As discussed above, NCUA regulations limit the amount of the
reimbursement. 12 C.F.R. §721.2(b). State privacy or consumer
laws may place limitations on the release of a mailing list and
you should consult with local counsel. Finally, you may want
to consider placing restrictions on a vendor's use of the mailing
list such as limiting its use for a particular purpose and prohibiting
the vendor from selling the list to a third party.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/RMM:bhs
SSIC 3500/98-0901