April 15, 2014

NCUA: FCUs can't include CUSOs in fidelity bonds

April 16, 2014 – A federally insured credit union may not include credit union service organizations as additional insureds under fidelity bonds, NCUA General Counsel Michael McKenna said in a recent legal opinion letter.

"NCUA rules require all federally insured credit unions to obtain fidelity bond coverage under an individual policy," McKenna wrote. "Further, in Legal Opinion Letter 04-0744, NCUA opined that a CUSO that provides management services for multiple credit unions could not purchase a single fidelity bond with each credit union named as an insured. While the earlier situation is different from the question that you ask, the same reasoning and requirement apply."

McKenna concluded that the requirement for federally insured credit unions to obtain individual fidelity bond policies would be violated by adding one or more CUSOs to the bond. He explained that the agency wants to avoid conflict with the individual credit union's coverage.