Compliance Blog

Dec 23, 2013
Categories: Board and Governance

NCUA’s Final Rule on Charitable Donation Accounts; FHFA's Plan to Increase Mortgage Fees Delayed; Programming Note

Written by Alicia Nealon, Regulatory Compliance Counsel

Happy holidays compliance community!! 

‘Twas the week before Christmas,

When all through this place…

In came a new rule,

Actually bringing a smile to a credit union’s face……

In keeping with the season of giving, the NCUA board voted 3-0 last Thursday to approve its final rule on charitable donation accounts (“CDA”), which is set to take effect upon its publication in the Federal Register.

This final rule establishes new ways in which credit unions may use their preapproved investment powers to support charitable donations and contributions to the community. 

The rule defines CDA as a hybrid charitable investment vehicle that facilitates the charitable activities of federal credit unions by allowing for investments with a higher expected return, within the safe and sound parameters the rule establishes. 

As in the proposed rule, the final rule requires federal credit unions to ensure that:

  • A minimum of 51 percent of the total return from such an account must be distributed to one or more 501(c)(3) charities.
  • Distributions must be made to qualified charities no less frequently than every five years.
  • Assets in a charitable donation account must be held in segregated custodial accounts or special purpose entities regulated by the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission or other federal or state financial regulatory agency.

NCUA, however, has advised that a credit union may make distributions at any time. So, if the credit union is a “victim of success,” and is running the risk of piercing the 5% ceiling, it can make a distribution to the charity. Alternatively, the credit union can make a distribution back onto its books to hold as cash until it wants to put the distribution back into the CDA or make a distribution to charity. 

This new rule expands the charitable opportunities for credit unions within their communities. NCUA’s Rules and Regulations have long recognized an FCU’s authority to make charitable contributions. 12 C.F.R. 721.3(b). Charitable contributions and donations are gifts you provide to assist others through contributions of staff, equipment, money, or other resources. Examples of charitable contributions include donations to community groups, nonprofit organizations, other credit unions or credit union affiliated causes, political donations, as well as donations to create charitable foundations. Charitable contributions, however, must still be necessary or requisite to enabling the credit union to effectively carry on its business. 

Moral of this holiday story, the final rule gives credit unions an opportunity to be a little more jolly, and little less scrooge just in time for the holidays.

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Update on FHFA Plan to Increase Mortgage Fees.  Last Friday, we blogged on the FHFA’s plan to increase Fannie Mae and Freddie Mac's guarantee fees, but later that night, Rep. Mel Watt (D., N.C.), the incoming director of the FHFA, the WSJ reported Watt's announcement that he intends to delay the implementation of an increase in mortgage fees until further evaluation is completed.  This announcement came shortly after NAFCU’s President and CEO Dan Berger sent a letter to FHFA Acting Director Edward DeMarco expressing concerns about the negative impacts of these changes on credit unions and their members. 

Winning! It looks like it really is the season to be jolly! 

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Programming Note.  NAFCU’s offices will be closed this Tuesday, Wednesday, and Thursday (December 24-December 26) for the holidays, but we will be back to blogging on Friday, December 27.  To you and your family, happy holidays!