August 12, 1997
Vicki L Stuart, Vice President Finance & Information Systems
Ste. Croix Regional Federal Credit Union
P.O. Box 1746
Lewiston, ME 04241-1746
Dear Ms. Stuart:
You have asked for clarification of whether Section 205(f)(2)
of the Federal Credit Union Act (the Act) prohibits payment of
dividends on business share draft accounts. 12 U.S.C. §1785(f)(2).
It does not.
The Act authorizes federally chartered credit unions to pay dividends on all members' share draft accounts. 12 U.S.C. §§1752(5), 1763. Section 205(f)(1) provides that "[e]xcept as provided in paragraph (2), an insured credit union may pay dividends on share draft accounts." 12 U.S.C. §1785(f)(1). Section 205(f)(2) states that dividends may be paid on:
[S]hare draft accounts in which the entire beneficial interest
is held by one or more individuals or members or by an organization
which is operated primarily for religious, philanthropic, charitable,
educational, or other similar purposes and which is not operated
for profit.
12 U.S.C. §1785(f)(2). The provision in Section 205(f)(2)
for certain nonprofit organizations permits payment of dividends
on the share draft accounts of such nonprofit organizations but
it does not otherwise restrict payment to business share draft
accounts owned by members. The restriction against the payment
of dividends implied in Section 205(f)(2) applies to organizations
which are not members of the credit union but which can otherwise
legally establish share draft accounts. These organizations are,
for example, other credit unions or businesses that establish
accounts at low-income designated credit unions but that are not
actually members.
Sincerely,
Sheila A. Albin
Associate General Counsel
GC/MSC:sg
SSIC 4630
97-0705
cc: Region I