April 7, 1998
Mark A. Drexler, Esq.
Drexler & Johnson, LLP
30 West Broad Street, Suite 301
Rochester, New York 14614
You have asked whether a law firm may discount its fees for legal
services provided to credit union personnel in two sets of circumstances.
In the first set of circumstances, the law firm would like to
discount the fee it charges the credit union to represent it in
connection with a mortgage closing, in those cases where the borrower
is a credit union employee. This is permissible as long as the
employee is not a credit union official, as defined in 12 C.F.R.
�1.21(d)(2). In the second set of circumstances, you
indicate that the law firm desires to offer a discount on all
fees charged to credit union employees represented by the firm.
The discount would apply to legal matters not related to credit
union business. This is also permissible, although those credit
union officials responsible for selecting the firm to represent
the credit union should be particularly aware of the provisions
of the Bank Bribery Act, 18 U.S.C. �5.
In connection with the fee discount you describe in your first
set of circumstances, we support our conclusion based on the following
analysis. NCUA regulations provide that no employee of a credit
union may receive, directly or indirectly, any commission, fee,
or other compensation in connection with a loan made by the credit
union. 12 C.F.R. �1.21(c)(8)(i). The purpose of �1.21(c)(8)(i),
called the prohibited fees regulation, 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. While a strict reading of the regulation
might lead one to assume it prohibited the fee discount you describe,
the circumstances under which your firm would offer the discount,
namely in connection with credit union employee's mortgage closings,
generally would not appear to create a risk of violation of the
regulation. Therefore, we conclude that the prohibited fees regulation
does not apply.
NCUA regulations also provide that no official, immediate family
member of an official, nor any individual having a common ownership,
investment or other pecuniary interest in a business enterprise
with an official or immediate family member, may receive more
favorable rates, terms or conditions on any loan or line of credit
he or she receives, endorses or guarantees. 12 C.F.R. �1.21(d)(5).
This regulation, which is intended to prevent insider dealing,
does apply and will prohibit the law firm from offering discounted
legal fees to officials and others as set forth in �1.21(d)(5)(i)
through (iii).
With regard to your second set of circumstances, we find no NCUA
regulation which directly addresses such an arrangement. However,
we do direct your attention to the Bank Bribery Act, 18 U.S.C.
�5, which prohibits the corrupt offer or acceptance of
anything of value to influence or reward an officer, director,
employee, agent or attorney for a financial institution in connection
with any business or transaction of the institution, as well as
provisions of state or federal law concerning conflicts of interest
or other ethical considerations. The credit union may find NCUA's
Interpretive Ruling and Policy Statement 87-1, which offers guidelines
for compliance with the Bank Bribery Act, a helpful resource.
All of NCUA's Interpretive Rulings and Policy Statements are
available on our web site at www.ncua.gov.
Sincerely,
Sheila A. Albin
Associate General Counsel
OGC/DMS:bhs
SSIC 3248/3501
97-1228