7535-01-U

**NATIONAL CREDIT UNION ADMINISTRATION**

**12 CFR Parts 701, 703, 707, 710, 722, 723, and 742**

RIN \# 3133 - AD36

**Technical Amendments**

**AGENCY:** National Credit Union Administration (NCUA).

**ACTION:** Final Rule.

**SUMMARY**: NCUA is amending a number of its regulations by making
minor technical corrections, clarifications and grammatical changes.
Among those amendments is the addition of a cross-reference between two
regulations addressing credit union borrowing authority; addition of a
statement in the provision on insurance coverage for volunteer officials
to note, when a federal credit union (FCU) cancels coverage, it must
comply with any other applicable laws allowing an official to continue
coverage at his or her own expense; and clarification that
indemnification for dual employees is limited to activities on behalf of
the FCU. NCUA is also removing certain regulatory references to NCUA's
FCU Bylaws that are no longer accurate due to revisions to the Bylaws.

The amendments generally are improvements alerting users to other
relevant provisions, responsibilities, or limitations.

**DATES**: This rule is effective June 1, 2007.

**FOR FURTHER INFORMATION CONTACT**: Annette Tapia or Frank Kressman,
Staff Attorneys, Office of General Counsel, National Credit Union
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428 or
telephone: (703) 518-6540.\
\
**SUPPLEMENTARY INFORMATION**:\
 \
**A. Background**\
NCUA continually reviews its regulations to \"update, clarify and
simplify existing regulations and eliminate redundant and unnecessary
provisions.\" NCUA Interpretive Rulings and Policy Statement (IRPS)
87-2, Developing and Reviewing Government Regulations. Under IRPS 87-2,
NCUA conducts a rolling review of one-third of its regulations every
year, involving both internal review and public comment. NCUA's 2006
review revealed that minor revisions to certain regulations would be
helpful.

[]{.mark}

**B. Regulatory Changes**

[Section 701.33]{.underline}

NCUA's regulations implement the statutory provisions permitting FCUs to
provide certain insurance for volunteer directors and committee members.
12 U.S.C 1761a; 12 CFR 701.33(b)(2)(ii). With respect to insurance
coverage, the regulation provides that coverage must cease immediately
when an official is no longer serving in that capacity. The amendment to
§701.33(b)(2)(ii) serves as a reminder that, when an FCU cancels
insurance coverage for an official, other federal or state laws may
provide departing officials the right to maintain health insurance
coverage at their own expense.

The regulation also permits an FCU to indemnify its officials and
employees under certain conditions. 12 CFR 701.33(c). The amendment adds
a new subparagraph to §701.33(c) clarifying that an FCU may not
indemnify an FCU employee acting in a "dual employee" role for those
duties performed for an entity other than the credit union. For example,
an FCU employee who also performs duties for a credit union service
organization (CUSO) is a dual employee and the FCU may only indemnify
the employee for the functions performed for the FCU, not the CUSO.

[Section 701.38]{.underline}

NCUA's regulations permit an FCU to borrow funds from natural persons,
provided it uses a certificate of indebtedness, which sets forth the
terms and conditions of the repayment of the borrowing. 12 CFR 701.38.
This borrowing authority is subject to a statutory limitation
implemented in NCUA's regulations limiting an FCU's maximum borrowing
authority from any source to 50% of its paid-in and unimpaired capital
and surplus. 12 U.S.C. 1757(9); 12 CFR 741.2(a). NCUA is inserting a
cross-reference in §701.38 to the borrowing limitations in §741.2 to
alert users to the regulatory provision on maximum borrowing authority.

[FCU Bylaws]{.underline}

NCUA revised the FCU Bylaws in 1999 and 2006. The revised Bylaws provide
greater clarity and flexibility. Several Bylaw provisions include
fill-in-the-blank choices that enable an FCU's board of directors to
select from a range of options best suited to their credit union's
needs. As a result of those revisions, certain regulatory provisions
referencing the Bylaws are outdated. The technical amendments remove
those inaccurate references.

**C. Regulatory Procedures**

[Final Rule Under the Administrative Procedure Act]{.underline}

Generally, the Administrative Procedure Act (APA) requires a federal
agency to provide the public with notice and the opportunity to comment
on agency rulemakings. The amendments in this rule are not substantive
but technical in that they make minor corrections, merely provide
clarification or alert users of the regulations to other legal
requirements or limitations. The APA permits an agency to forego the
notice and comment period under certain circumstances, such as when a
rulemaking is technical and not substantive. NCUA finds good cause that
notice and public comment are unnecessary under Section 553(b)(3)(B) of
the APA. 5 U.S.C. 553(b)(3)(B). NCUA also finds good cause to dispense
with the 30-day delayed effective date requirement under Section
553(d)(3) of the APA. 5 U.S.C. 553(d)(3). The rule will, therefore, be
effective immediately upon publication.

[Regulatory Flexibility Act]{.underline}\
The Regulatory Flexibility Act requires NCUA to prepare an analysis to
describe any significant economic impact a rule may have on a
substantial number of small entities (those credit unions under ten
million dollars in assets). This rule provides minor, technical changes
and clarifications to certain sections of NCUA's regulations. This rule
will not have a significant economic impact on a substantial number of
small credit unions, and, therefore, a regulatory flexibility analysis
is not required.\
 

[Paperwork Reduction Act]{.underline}\
NCUA has determined that this rule will not increase paperwork
requirements under the Paperwork Reduction Act of 1995 and regulations
of the Office of Management and Budget.\
 \
[Executive Order 13132]{.underline}\
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, NCUA, an independent
regulatory agency as defined in [44 U.S.C.
3502](http://www.lexis.com/research/buttonTFLink?_m=6a971c9d890055e7a89186b5033192bb&_xfercite=<cite cc%3D"USA"><!%5BCDATA%5B66 FR 33211 %5D%5D><%2Fcite>&_butType=4&_butStat=0&_butNum=12&_butInline=1&_butinfo=44 USC 3502&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVtz-zSkAk&_md5=1c8323a9467e4b8f30a00da420ef71a6)(5),
voluntarily complies with the executive order. This rule will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government. NCUA has
determined that this rule does not constitute a policy that has
federalism implications for purposes of the executive order.\
 \
[The Treasury and General Government Appropriations Act,
1999\--Assessment of Federal Regulations and Policies on
Families]{.underline}\
The NCUA has determined that this rule will not affect family well-being
within the meaning of section 654 of the Treasury and General Government
Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681 (1998).

[Small Business Regulatory Enforcement Fairness Act]{.underline}

The Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L.
104-121) (SBREFA) provides generally for congressional review of agency
rules. A reporting requirement is triggered in instances where NCUA
issues a final rule as defined by Section 551 of the APA. 5 U.S.C. 551.
The Office of Management and Budget has determined that this rule is not
a major rule for purposes of SBREFA. As required by SBREFA, NCUA will
file the appropriate reports with Congress and the General Accounting
Office so this rule may be reviewed.

 \
**List of Subjects**\
 

**12 CFR part 701**

Credit unions, indemnity payments, insurance.   

**12 CFR part 703**

Credit unions, investments.

**12 CFR part 707**

Advertising, consumer protection, credit unions, reporting and
recordkeeping requirements, truth in savings.

**12 CFR part 710**

Credit unions, liquidations.

**12 CFR part 722**

Appraisals, credit unions, reporting and recordkeeping requirements.

**12 CFR part 723**

Credit, credit unions, reporting and recordkeeping requirements.

**12 CFR part 742**

Credit unions, reporting and recordkeeping requirements.

By the National Credit Union Administration Board on May 24, 2007.\
 

> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
>
> Mary Rupp\
> Secretary of the Board

For the reasons discussed above, NCUA is amending 12 CFR parts 701, 703,
707, 710, 722, 723, and 742 as follows:\
 \
**PART 701\-- ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNIONS**

1\. The authority citation for part 701 continues to read as follows:

**Authority:** 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 1761b,
1766, 1767, 1782, 1784, 1787, and 1789. Section 701.6 is also authorized
by 31 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601
[et seq.]{.underline}, 42 U.S.C. 1861 and 42 U.S.C. 3601-3610. Section
701.35 is also authorized by 42 U.S.C. 4311-4312.\
\
2. Section 701.21(a) is amended by replacing the last word, "part," with
the word "chapter."

3\. Section 701.21(i)(1) is amended by removing the word "this."

4\. Section 701.33(b)(2)(ii) is amended by adding the phrase "except
that a credit union must comply with federal and state laws providing
departing officials the right to maintain health insurance coverage at
their own expense" after "if any;" and before "and" at the end.

5\. Section 701.33(c) is amended by adding a new paragraph (4) to read
as follows:

**§ 701.33 Reimbursement, Insurance, and Indemnification of Officials
and Employees.**

\* \* \* \* \*

\(4\) Notwithstanding subsections (1) through (3) of this section, a
federal credit union may not indemnify a dual employee for duties
performed for any employer other than the federal credit union. For
purposes of this subsection, a dual employee is a federal credit union
employee who also performs work functions for another entity as part of
a sharing arrangement between the federal credit union and the other
entity.

6\. Section 701.38 is amended by adding new paragraph (b) to read as
follows:

**§ 701.38 Borrowed Funds From Natural Persons.**

\* \* \* \* \*

\(b\) Federal credit unions must comply with the maximum borrowing
authority of section 741.2 of this chapter.

**PART 703---INVESTMENT AND DEPOSIT ACTIVITIES**

7\. The authority citation for part 703 continues to read as follows:

**Authority:** 12 U.S.C. 1757(7), 1757(8), 1757(15).

8\. Section 703.4 is amended by replacing references to "§701.12" with
references to "§715.4."

**PART 707 -- TRUTH IN SAVINGS**

9\. The authority citation for part 707 continues to read as follows:

**Authority:** 12 U.S.C. 4311.

10\. Section B-3 of Appendix B to part 707 is amended by replacing the
"d" with "c" in the topic heading.

11\. Section B-6, paragraph 9, of Appendix B to part 707 is amended by
removing the phrase ", but must be at least 6 months".

12\. Section B-6, paragraph 12, in the "Note:" portion of Appendix B to
part 707 is amended by removing the sentence, "If this were a passbook
account, then the requirements of Art. IV, Receipting for Money --
Passbooks, in the NCUA Standard FCU Bylaws would also be included in
item no. 9."

13\. Section B-6, paragraph 12, in the "Note:" portion of Appendix B to
part 707 is amended by removing the phrase ", and Art. XIV, §3 of the
NCUA Standard FCU Bylaws".

14\. Section B-7, paragraph 9 of Appendix B to part 707 is amended by
removing the phrase ", but must be at least 6 months".

15\. Section B-11 in the "Note:" portion of Appendix B to part 707 is
amended by removing the phrase ", except for the overdraft transfer fee
of \$1.00 per overdraft and the excessive share transfer fee of \$1.00
per item, which are set in the NCUA Standard FCU Bylaws, Art. III, §4
and §5(f), respectively".

16\. Section 707.4(b)(2)(ii)(1) of Appendix C to part 707 is amended by
removing the parenthetical "(members have at least six months to
replenish membership share before membership terminates and account is
deemed closed)".

17\. Section 707.7(b)(3) of Appendix C to part 707 is amended by
removing the parenthetical "(members have at least 6 months to replenish
membership share before membership can terminate and the account is
deemed closed)".

18\. Section 707.11(b)(5) of Appendix C to part 707 is amended by
removing the open quotation marks between the words "overdrafts" and
"created."

**PART 710 -- VOLUNTARY LIQUIDATION**

19\. The authority citation for part 710 continues to read as follows:

**Authority:** 12 U.S.C. 1766(a), 1786, and 1787.

20\. Section 710.3(a) is amended by removing the phrase ", in accordance
with the provisions of Article V of the Federal Credit Union Bylaws".

**PART 722\-- APPRAISALS**

21\. The authority citation for part 722 continues to read as follows:

**Authority:** 12 U.S.C. 1766, 1789, and 3339.

22\. Section 722.3(d) is amended by adding "and (a)(5)" after the words
"paragraphs (a)(1)."

**PART 723---MEMBER BUSINESS LOANS**

23\. The authority citation for part 723 continues to read as follows:

**Authority:** 12 U.S.C. 1756, 1757, 1757A, 1766, 1785, 1789.

24\. Section 723.7(a) is amended by changing the reference to "§723.4"
to "§723.3".

**PART 742 -- REGULATORY FLEXIBILITY PROGRAM**

25\. The authority citation for part 742 continues to read as follows:

**Authority:** 12 U.S.C. 1756 and 1766.

26\. Section 742.4(a)(3) is amended by removing references to 701.36 (b)
and (c).