September 10, 1998
John J. Taddeo
President & General Manager
USAA Federal Credit Union
9800 Fredericksburg Road, C-1-W
San Antonio, Texas 78288-0601
Dear Mr. Taddeo:
You have requested an opinion from this office
on the permissibility of USAA Federal Credit Union (FCU) receiving
insurance payments from members and nonmembers for its sponsor
and, then, distributing the funds to the sponsor. Such a service
would be permissible if the sponsor is an FCU member with a share
account.
The FCU has been requested by USAA, its sponsor,
to accept insurance payments from USAA customers. Only some of
USAA customers are members of the FCU. The FCU would collect
the insurance payment and disburse it to USAA. The FCU and USAA
are currently developing operational procedures to account for
and distribute collected funds related to these transactions.
The Federal Credit Union Act (the Act) expressly authorizes FCUs to engage in certain activities and, also, authorizes them, under the incidental powers provision, to engage in activities that are incidental to one of the express powers. 12 U.S.C. §1757. The incidental powers provision permits an FCU "to exercise such incidental powers as shall be necessary or requisite to enable it to carry on effectively the business for which it is incorporated." 12 U.S.C. §1757(17). This authority includes the power to do that which is "convenient or useful" in connection with the performance of one of the bank's established activities pursuant to its express powers under the National Bank Act." Arnold Tours, Inc. v. Camp, 472 F.2d 427 (1st Cir. 1972); See also American Bankers
Association v. Connell,
447 F. Supp. 296 (D.D.C. 1978)(made the "convenient and useful"
test of Arnold Tours applicable to FCUs). Acceptance of
the insurance payment from members and nonmembers and disbursal
of the funds to a members is incidental to the FCU's authority
to accept shares from members. 12 U.S.C. §1757.
John J. Taddeo
Page 2
If the sponsor were a member, the FCU would
be able to provide the proposed service. An employer may be included
in an occupational common bond group, and it is our understanding
that the sponsor is in the process of becoming a member of the
FCU. Chapter 1, Section II, A.1, NCUA Chartering Manual and Field
of Membership Manual (IRPS 94-1, as amended by IRPS 96-1).
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MJMcK:bhs
SSIC 3601
98-0550