[Federal Register Volume 89, Number 189 (Monday, September 30, 2024)]
[Rules and Regulations]
[Pages 79380-79397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21887]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Parts 701, 741, 746, 748, and 752

[NCUA-2023-0023]
RIN 3133-AF55


Fair Hiring in Banking

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board (Board) is issuing this final rule to 
incorporate Interpretive Ruling and Policy Statement (IRPS) 19-1 and 
the Fair Hiring in Banking Act (FHBA) into its regulations. The Federal 
Credit Union Act (FCU Act) generally prohibits, except with the Board's 
prior written consent, any person who has been convicted of or has a 
program entry for certain criminal offenses involving dishonesty or 
breach of trust from participating in the affairs of an insured credit 
union. The final rule will expand career opportunities for individuals 
to work and volunteer at insured credit unions. The Board also rescinds 
IRPS 19-1.

DATES: The final rule is effective October 30, 2024.

FOR FURTHER INFORMATION CONTACT: Rachel Ackmann, Senior Staff Attorney, 
Office of General Counsel, and Pamela Yu, Special Counsel to the 
General Counsel, Office of General Counsel, at the above address or by 
calling (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I. Background

Section 205(d) of the Federal Credit Union Act (Section 205(d))

    Prior to December 23, 2022, section 205(d)(1) of the Federal Credit 
Union Act (FCU Act) provided that, except with the prior written 
consent of the Board (the NCUA refers to applications for such consent 
as ``consent applications''), a person who has been convicted of any 
criminal offense involving dishonesty or breach of trust, or has agreed 
to enter into a pretrial diversion or similar program in connection 
with the prosecution for such offense (collectively, covered offenses), 
may not:
    <bullet> Become, or continue as, an institution-affiliated party 
(IAP) with respect to any insured credit union; or
    <bullet> Otherwise participate, directly or indirectly, in the 
conduct of the affairs of any insured credit union.\1\
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    \1\ 12 U.S.C. 1785(d)(1).

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[[Page 79381]]

    Section 205(d)(1)(B) further provides that an insured credit union 
may not allow any person described above to participate in the conduct 
of the affairs of the credit union without Board consent. Section 
205(d)(2) restricts the Board from approving a consent application 
related to a person convicted of certain crimes enumerated in Title 18 
of the United States Code (U.S.C.) for 10 years, absent a motion by the 
Board and approval by the sentencing court. Finally, section 205(d)(3) 
states that ``whoever knowingly violates'' section (d)(1)(A) or 
(d)(1)(B) commits a felony, punishable by up to 5 years in prison or a 
fine of up to $1,000,000 a day, or both. Section 205(d) prohibitions 
have existed in some form since 1970, and since then federally insured 
credit unions have been required to make a diligent inquiry as to 
whether prospective employees or IAPs \2\ are subject to a section 
205(d) prohibition.\3\
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    \2\ The NCUA has made its administrative orders against IAPs 
available in a searchable database on the agency's website. See 
https://ncua.gov/news/enforcement-actions/administrative-orders.
    \3\ 73 FR 48399, 48401 (Aug. 19, 2008).
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    In 2008, the Board adopted IRPS 08-1 to provide direction and 
guidance to federally insured credit unions and those persons who may 
be affected by section 205(d).\4\ The Board specifically sought 
comments as to whether the format of the guidance as an IRPS was 
appropriate or whether a regulation would be more suitable.\5\ The 
Board received some comments supporting guidance in the form of an IRPS 
and others supporting a regulation, but ultimately chose to issue the 
guidance through an IRPS.\6\
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    \4\ Id.
    \5\ The Board had not previously adopted any policies or 
regulations on section 205(d), as the statute at that time imposed 
no guidance or limitations on the information that the Board may 
consider, and the Board received a limited number of applications 
under section 205(d). However, due to an increasing number of 
applications requesting the Board's consent under section 205(d), 
the Board believed it was appropriate to issue guidance on the 
topic.
    \6\ Two commenters believed that a regulation was the more 
appropriate format for the guidance. One of the commenters who 
favored a regulation thought a regulation provided greater 
protection to a credit union that might be challenged by a 
prospective employee. Another commenter believed a regulation was 
preferable because it would help reinforce a credit union's right to 
appeal an adverse decision and subject future changes to public 
notice and comment. The Board concluded that the source of the 
requirement stems from Federal statute, namely section 205(d). 
Therefore, the Board believed that the need to comply with Federal 
law, as augmented by guidance in the form of an IRPS, was sufficient 
to protect a credit union. The Board believed that credit union 
officials should be able to adequately understand and apply the 
guidance styled as an IRPS and that the right to request a hearing 
contained in the IRPS provided a credit union a sufficient right to 
appeal a denial of consent by the Board. Additionally, the Board 
noted that it would not amend its IRPS without providing the public 
notice and an opportunity to comment. For all these reasons, the 
Board believed it appropriate to issue the final guidance in the 
form of an IRPS.
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    IRPS 08-1 outlined the actions prohibited under the FCU Act and the 
procedures for applying the Board's consent on a case-by-case basis. 
Recognizing that certain offenses are so minor and dated that they 
would not presently pose a substantial risk to the insured credit 
union, IRPS 08-1 excluded certain de minimis offenses that met 
specified requirements and juvenile offenses from the need to request 
consent from the Board. In effect, the IRPS gave automatic consent for 
these offenses without requiring a consent application or any notice.
    In 2019, the Board rescinded IRPS 08-1 and issued IRPS 19-1, a 
revised and updated IRPS to reduce regulatory burden (also known as the 
Second Chance IRPS).\7\ IRPS 19-1 amended IRPS 08-1 to expand the 
definition of de minimis offenses to reduce the scope and number of 
offenses that would require submission of a consent application to the 
Board. Specifically, the IRPS did not require a consent application for 
convictions involving insufficient funds checks of moderate aggregate 
value, small-dollar simple theft, false identification, simple drug 
possession, and isolated minor offenses committed by covered persons as 
young adults. The Board recognized that many Americans faced hiring 
barriers due to a criminal record, a great number of whom are not 
violent or career criminals, but rather people who made poor choices 
early in life who have since paid their debt to society. The Board 
found that offering second chances for career opportunities to those 
who are truly penitent was consistent with our nation's shared values 
of forgiveness and redemption.
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    \7\ 84 FR 65907 (Dec. 2, 2019).
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    On December 23, 2022, Congress passed the National Defense 
Authorization Act for Fiscal Year 2023 (NDAA), which amended section 
205(d).\8\ The NDAA included the FHBA--which became immediately 
effective on December 23, 2022. The FHBA amends section 205(d) to 
expand employment opportunities for those with a previous minor or 
older criminal offense, among other provisions. Generally, the 
amendments codify a number of elements already contained in the NCUA's 
current policy regarding section 205(d) but also extend greater relief 
than what is currently available to certain individuals with prior 
convictions seeking employment with an insured credit union, 
particularly individuals with older convictions, expunged convictions, 
or prior convictions for a misdemeanor, any drug-related possession 
offense, or certain designated ``lesser offenses.'' The FHBA also 
clarifies several definitions and the procedures for processing a 
consent application.\9\ The specific provisions of the FHBA are 
discussed in detail later in this preamble.
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    \8\ Public Law 117-263 (Dec. 23, 2022).
    \9\ Under the FHBA, a ``consent application'' means ``an 
application filed with [the] Board by an individual (or by an 
insured credit union on behalf of an individual) seeking the written 
consent of the Board under [12 U.S.C. 1785(d)(1)(A).'' 12 U.S.C. 
1785(d)(6)(A).
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Section 19 of the Federal Deposit Insurance Act

    Section 19 of the Federal Deposit Insurance Act (section 19) 
contains a prohibition provision similar to section 205(d) of the FCU 
Act.\10\ Before 2020, the Federal Deposit Insurance Corporation (FDIC) 
provided the public with guidance relating to section 19 and the FDIC's 
application thereof through a Statement of Policy similar to the NCUA's 
IRPS 19-1.\11\ Similar to the NCUA's IRPS, the FDIC's Statement of 
Policy, among other things, instituted a set of criteria to provide for 
blanket approval of certain low-risk crimes and for persons convicted 
of such de minimis crimes to forgo filing a section 19 consent 
application.
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    \10\ 12 U.S.C. 1829(a).
    \11\ See 84 FR 68353 (Dec. 16, 2019).
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    In 2020, the FDIC revised and incorporated its then existing 
Statement of Policy into its regulations to, among other purposes, 
provide for greater transparency as to its section 19 application, 
provide greater certainty as to the FDIC's application process, and to 
assist both insured depository institutions and individuals who may be 
affected by section 19 with understanding its impact and potentially 
seek relief from its provisions.\12\
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    \12\ Id.; 85 FR 51312 (Aug. 20, 2020) (FDIC 2020 final rule).
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    In December 2022, the FHBA made amendments to section 19 that are 
comparable to the amendments made in section 205(d). The FDIC proposed 
to implement these changes through a notice-and-comment rulemaking in 
November 2023.\13\ The FDIC finalized its rulemaking on August 7, 
2024.\14\
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    \13\ 88 FR 77906 (Nov. 14, 2023).
    \14\ 89 FR 64353 (Aug. 7, 2024).
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Coordination With the FDIC

    In the past, the NCUA has drawn on the FDIC's guidance related to 
section

[[Page 79382]]

19 due to the FDIC's greater experience processing section 19 consent 
applications. Further, in the Board's view it is beneficial to both 
insured financial institutions and covered individuals for the NCUA's 
section 205(d) related requirements to be consistent, to the extent 
possible, with the FDIC's section 19 requirements. Consistent 
guidelines between the two agencies with respect to these parallel 
statutory provisions help streamline the consent application process, 
particularly for those individuals seeking consent from both the NCUA 
and the FDIC to allow for potential employment at federally insured 
financial institutions. The FHBA formalizes the expectation that the 
agencies implement these comparable statutory provisions similarly and 
requires the NCUA and the FDIC to consult and coordinate to promote 
consistent procedures, where appropriate.\15\ The Board finds that 
adopting similar definitions, terminology, and procedures in this final 
rule will promote consistent implementation of consent applications 
because even those provisions that fall outside the scope of consent 
applications are likely to affect how the agency administers those 
applications. The NCUA and the FDIC have consulted and coordinated on 
this rulemaking as directed by the FHBA. Additionally, the NCUA has 
consulted with the Board of Governors of the Federal Reserve System and 
the Office of the Comptroller of the Currency.
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    \15\ 12 U.S.C. 1785(d)(5)(I), and 12 U.S.C. 1829(f)(9).
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II. Proposed Rule and Public Comments

    At its October 19, 2023, meeting, the Board issued a proposed rule 
\16\ to add new part 752 to chapter VII of title 12 of the U.S. Code of 
Federal Regulations (CFR) to codify IRPS 19-1, along with significant 
changes that are consistent with the FHBA amendments to section 205(d) 
and the FDIC's comparable implementing regulations.\17\ The proposed 
rule addressed, among other topics, the individuals and types of 
offenses covered by section 205(d), as well as the NCUA's procedures 
for reviewing a consent application. The proposed rule provided for a 
60-day comment period, which ended on January 8, 2024. The Board 
received 10 public comments on the proposal from individuals, a 
fidelity bond provider, a faith-based association advocating for the 
rights of the accused and incarcerated, and national, state, and 
regional organizations representing credit unions.\18\
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    \16\ The proposed rule was published in the Federal Register on 
November 7, 2023. 88 FR 76702 (Nov. 7, 2023).
    \17\ The NCUA is issuing a final rule to codify its policy 
regarding section 205(d) consent applications due to the FDIC's 
recent codification of its similar section 19 Statement of Policy. 
The NCUA believes codifying IRPS 19-1 will provide for greater 
transparency as to its application, provide greater certainty as to 
the NCUA's application process, and help both credit unions and 
individuals who may be affected by section 205(d) to understand its 
impact and potentially seek relief from its provisions.
    \18\ One comment was indecipherable and included an attachment 
with no relevance to the proposed rule. This submission was counted 
in the total number of comments received.
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    The NCUA requested comments on all aspects of its approach to 
section 205(d) and, specifically, the following topics:
    <bullet> the date on which a criminal offense ``occurred'' or was 
``committed;''
    <bullet> the date on which ``sentencing occurred;''
    <bullet> whether section 205(d) encompasses foreign convictions and 
pretrial diversions;
    <bullet> the standard for expungements, sealings, and dismissals;
    <bullet> ``offenses involving controlled substances;'' and
    <bullet> de minimis offenses.
    Most commenters opted to provide general comments rather than 
address the specific questions posed in the preamble. Only one 
commenter specifically addressed each of the eight questions presented.
    Four commenters expressed broad support for providing second 
chances and expanding employment opportunities to those with criminal 
offense backgrounds but did not provide substantive comments on the 
proposed rule. Of those commenters that provided substantive comments, 
all were generally supportive of the proposed rule. One commenter noted 
that the proposed rule enhances the ability of credit unions to make 
their own hiring decisions and decreases the instances where a consent 
application would need to be submitted. Two commenters wrote that by 
modifying and expanding the current de minimis offenses deemed 
automatically approved by the Board, the proposal expands opportunities 
for individuals seeking employment in the financial services sector. 
Further, they noted that by expanding the category of de minimis 
offenses, the NCUA better aligns itself with the FDIC.
    Several of the commenters indicated their support for the proposed 
rule but suggested changes to particular provisions or asked for 
clarification on certain aspects of the proposal. The comments and the 
Board's responses are addressed in the section-by-section discussion 
below.

III. Final Rule

    The Board is now rescinding IRPS 19-1 and issuing a final rule to 
incorporate IRPS 19-1 and the FHBA into its regulations. The final rule 
addresses, among other topics, the types of offenses covered by section 
205(d), the effect of the completion of sentencing or pretrial-
diversion program requirements in the context of section 205(d), and 
the NCUA's procedures for reviewing applications filed under section 
205(d). The final rule also makes conforming changes and adopts 
amendments to Sec.  701.14 on changes in official or senior executive 
officer in credit unions that are newly chartered or are in troubled 
condition.
    Substantive comments on specific aspects of the proposed rule are 
discussed in detail in the following sections of the preamble. For the 
reasons described, the Board is adopting the proposal with some 
modifications.

Section-by-Section Discussion

1. Section 752.1--What is section 205(d) of the FCU Act?
    This section sets out the scope of new part 752. Paragraph (a) 
generally describes the requirements of section 205(d). Paragraph (b) 
of this section clarifies that insured credit unions must make a 
reasonable, documented inquiry regarding an applicant's history to 
ensure that a person who is subject to the prohibition provision of 
section 205(d) is not hired or permitted to participate in the conduct 
of credit unions' affairs without the written consent of the NCUA.
    The Board reiterates that, consistent with the NCUA's current 
policy, a federally insured credit union's reasonable, documented 
inquiry should, at a minimum, establish a screening process to obtain 
information about convictions and program entries from job applicants. 
If a federally insured credit union learns a prospective employee has a 
prior conviction or program entry for a de minimis offense, the credit 
union should document in its files that an application is not required 
because the covered offense is considered de minimis and meets the 
criteria for the exception.
    Paragraph (b) provides that insured credit unions are permitted to 
make conditional offers of employment to prospective applicants. As per 
the NCUA's existing policy, an insured credit union choosing to adopt a 
policy to extend conditional offers of employment may establish its own 
procedures to make criminal record inquiries at any stage of its 
choosing in its hiring process, so long as applicants

[[Page 79383]]

do not commence work for or be employed by the credit union until the 
applicant is determined to not be prohibited under section 205(d) or 
receives consent from the Board.
    Paragraph (c) addresses the need for a consent application and 
establishes the standard for an application's approval. The NCUA will 
evaluate a consent application to determine if a person is fit to 
participate in the conduct of the affairs of an insured credit union 
without posing a risk to its safety and soundness or impairing public 
confidence in that credit union. The burden is upon the applicant to 
establish that the application warrants approval.
    The Board noted in the proposal that the FHBA uses the terms 
``national office'' and ``regional office,'' which are inconsistent 
with the NCUA's organization.\19\ To address those technical 
inconsistencies in the final rule, the Board has replaced references to 
the NCUA's regional offices and the Office of National Examinations and 
Supervision (ONES) with the term ``field office'' throughout. The Board 
has also added paragraph (d) to define the term ``field office'' as a 
Regional Office or the Office of National Examinations and Supervision, 
as described in 12 CFR 790.2.
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    \19\ See 12 CFR 790.2. The NCUA is currently composed of the 
Board with a Central Office; Field Offices, consisting of three 
Regional Offices and ONES; the Asset Management and Assistance 
Center; the Community Development Revolving Loan Program; and the 
NCUA Central Liquidity Facility.
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    Section 752.1 is otherwise adopted generally as proposed.
2. Section 752.2--Who is covered by section 205(d)?
    This section identifies who is covered by section 205(d). Paragraph 
(a) states that IAPs, as defined by 12 U.S.C. 1786(r), are covered. 
Similar to IRPS 19-1, volunteer and de facto employees are deemed 
covered under section 205(d) as well. Whether other persons who are not 
IAPs, such as certain independent contractors, are covered depends upon 
their degree of influence or control over the management or affairs of 
an insured credit union. For example, directors and officers of 
affiliates, or joint ventures of an insured credit union, are covered 
if they participate in the conduct of affairs of the insured credit 
union or are able to influence or control the management or affairs of 
the insured credit union. Generally, those who exercise major 
policymaking functions of an insured credit union are covered by 
section 205(d).
    Paragraph (b) defines the term ``person'' for the purposes of 
section 205(d) as an individual only and not a legal entity.
    One commenter indicated that the principles-based definition for 
covered persons in Sec.  752.2 was sufficiently clear as proposed, 
particularly when read in conjunction with the statutory definition of 
``institution-affiliated party.'' The commenter noted that any 
potential gray areas that arise can be resolved through legal opinions 
on a case-by-case basis.
    The Board is adopting this section largely as proposed. As noted in 
the proposal, Sec.  752.2 includes less detail than IRPS 19-1 regarding 
how the NCUA will determine whether a person participates in the 
conduct of the affairs of an insured credit union. The NCUA intends to 
publish guidance that further clarifies its intent about other persons 
who are not IAPs. The guidance will include language similar to IRPS 
19-1.
3. Section 752.3--Which offenses qualify as ``Covered Offenses'' under 
section 205(d)?
    This section addresses what constitutes a covered offense under 
section 205(d).\20\ Paragraph (a) states that a conviction or program 
entry must have been for a criminal offense involving dishonesty or 
breach of trust. The paragraph defines criminal offenses involving 
dishonesty and breach of trust. The FHBA defines ``criminal offense 
involving dishonesty'' as ``an offense under which an individual, 
directly or indirectly, cheats or defrauds or wrongfully takes property 
belonging to another in violation of a criminal statute.'' The FHBA 
further provides that the term includes an offense that Federal, state, 
or local law defines as dishonest or for which dishonesty is an element 
of the offense. However, the term does not include a misdemeanor 
criminal offense committed more than 1 year before the date on which an 
individual files a consent application, excluding any period of 
incarceration, or an offense involving the possession of controlled 
substances.
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    \20\ The Board notes that the approach to criminal offenses 
mandated by the statute and rulemaking would not have an impact on 
other processes related to criminal convictions. For example, the 
NCUA may consider a more expansive scope of convictions related to 
controlled substances under section 212 of the Federal Credit Union 
Act in disapproving directors, committee members, and senior 
executive officers of troubled or newly chartered insured credit 
unions. See 12 CFR 701.14 for the NCUA's implementation of this 
provision, also addressed elsewhere in this final rule.
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    The FHBA does not define breach of trust. Under this section, 
breach of trust means a wrongful act, use, misappropriation, or 
omission with respect to any property or fund that has been committed 
to a person in a fiduciary or official capacity, or the misuse of one's 
official or fiduciary position to engage in a wrongful act, use, 
misappropriation, or omission. This definition is identical to the 
definition in IRPS 19-1.
    As discussed previously, the FHBA excludes from the scope of such 
offenses ``an offense involving the possession of controlled 
substances.'' The Board interprets this phrase concerning controlled 
substances to exclude from the scope of the prohibition, at a minimum, 
criminal offenses involving the simple possession of controlled 
substances and possession with intent to distribute a controlled 
substance. This exclusion may also apply to other drug-related offenses 
depending on the statutory elements of the offenses or from court 
determinations that the statutory provisions of the offenses do not 
involve dishonesty or breach of trust, as noted in paragraph (b) of 
Sec.  752.3. The Board notes that in processing other applications, 
such as change in official or senior executive officer in credit unions 
that are newly chartered or are in troubled condition, the NCUA may 
still consider excluded offenses as appropriate. For example, an 
offense that is not covered under section 205(d) may bear on an 
individual's competence, experience, character, or integrity under 12 
U.S.C. 1790a and 12 CFR 701.14. Potential applicants may contact their 
appropriate NCUA field office if they have questions about whether 
their offenses are covered under section 205(d).
    This new regulatory language marks a shift from IRPS 19-1, which 
requires consent applications for certain simple misdemeanor drug 
possession offenses. Under IRPS 19-1, a consent application for a 
simple misdemeanor drug possession offense is required except if the 
conviction or program entry was classified as a misdemeanor at the time 
of conviction or program entry, the person had no other conviction or 
program entry described in section 205(d), and it had been 5 years 
since the conviction or program entry (or 30 months in the case of a 
person 21 years or younger at the time of the conviction or program 
entry), and the conviction did not involve the illegal distribution 
(including an intent to distribute), sale, trafficking, or manufacture 
of a controlled substance or other related offense.
    Commenters were generally supportive of the Board's proposal 
concerning controlled substances. One

[[Page 79384]]

commenter wrote that credit unions in rural areas with high addiction 
rates have indicated that the classification of possession of an 
illegal substance as a de minimis offense would increase the pool of 
potential employment candidates. The same commenter noted studies have 
shown employment has therapeutic effects in drug addiction treatment 
and, in the spirit of assisting communities in reaching their fullest 
potential, credit unions should have the ability to offer employment 
opportunities to more eligible candidates, including those battling 
addiction. Another commenter supported the NCUA's review of its 
interpretation of crimes involving possession.
    The Board believes that the final rule is consistent with the text 
and purposes of the FHBA and will align the Board's interpretation of 
section 205(d) as to offenses involving controlled substances more 
closely with other Federal banking regulators. The FHBA explicitly 
excludes from the category of ``criminal offense involving dishonesty'' 
``an offense involving the possession of controlled substances,'' not 
just the offense of ``possession of controlled substances.'' \21\ The 
modifier ``involving,'' in the Board's view, expands that exclusion 
beyond simple-possession offenses. The regulatory language, however, 
will continue to recognize that a drug-related offense could 
potentially involve dishonesty, breach of trust, or money 
laundering.\22\ Moreover, while section 205(d) provides statutory 
barriers to the employment of certain individuals due to their criminal 
history, insured credit unions otherwise retain the discretion, under 
that statute, as to which applicants they want to hire. The Board also 
notes that this provision does not affect its ability to consider drug-
related offenses as they pertain to the suitability of an individual 
under other statutory provisions, including section 212 of the FCU 
Act.\23\
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    \21\ See 12 U.S.C. 1785(d)(6)(B)(iii) (emphasis added).
    \22\ See House Rpt. No. 117-314 (May 10, 2022), available at 
https://www.congress.gov/congressional-report/117th-congress/house-report/314/1.
    \23\ 12 U.S.C. 1790a.
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    Paragraph (b) requires that, to determine if the criminal offense 
is one of dishonesty or breach of trust, the NCUA will look to the 
statutory elements of the criminal offense or to court decisions in the 
relevant jurisdiction that have interpreted these statutory elements. 
This provision is similar to the policy under IRPS 19-1 and is 
unchanged from the proposed rule.
    The FHBA also states that the term ``criminal offense involving 
dishonesty'' does not include ``a misdemeanor criminal offense 
committed more than one year before the date on which an individual 
files a consent application, excluding any period of incarceration.'' 
\24\ The Board interprets the term ``offense committed'' to mean the 
``last date of the underlying misconduct,'' based on the plain text of 
the statute. In instances with multiple offenses, ``offense committed'' 
means the last date of any of the underlying offenses.
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    \24\ 12 U.S.C. 1785(d)(6)(B)(iii)(I).
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    Paragraph (c) includes language reflecting the FHBA's exclusion of 
certain older offenses from the scope of section 205(d).\25\ The FHBA 
provides that individuals are not subject to a prohibition under 
section 205(d) if they committed a covered offense and it has been 7 
years or more since the offense occurred; or if the individual was 
incarcerated with respect to the offense, it has been 5 years or more 
since the individual was released from incarceration; or the individual 
committed the offense when they were 21 years of age or younger, and it 
has been more than 30 months since the sentencing occurred.\26\
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    \25\ See 12 U.S.C. 1785(d)(4)(A).
    \26\ Note that these exceptions do not apply to the offenses 
described under 12 U.S.C. 1785(d)(2).
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    The Board considers the phrases ``offense committed''--noted 
previously--and ``offense occurred'' to be substantially similar. 
Accordingly, the Board interprets the term ``offense occurred'' to mean 
the ``last date of the underlying misconduct.'' In instances with 
multiple offenses, ``offense occurred'' means the last date of any of 
the underlying offenses.
    One commenter supported the Board's proposal, noting its 
interpretation of the term ``offense occurred'' is reasonable and 
logical.
    Paragraph (c) contains another FHBA exception: section 205(d)'s 
restrictions do not apply to an offense if ``the individual was 
incarcerated with respect to the offense and it has been 5 years or 
more since the individual was released from incarceration.'' \27\ While 
the language of the statute is clear, the Board notes that there could 
be situations in which an individual who was incarcerated with respect 
to an offense would be permitted to work at an insured credit union 
before a similarly situated individual who was not incarcerated in 
connection with an offense. This difference is due to the FHBA's use of 
a shorter time period for individuals who were incarcerated for an 
offense than for individuals who did not serve jail time.
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    \27\ See 12 U.S.C. 1785(d)(4)(A)(i)(II).
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    Paragraph (c) also tracks the FHBA's language concerning offenses 
committed by individuals 21 years of age or younger. The FHBA states 
that, for individuals who committed an offense when the individual was 
21 years of age or younger, section 205(d) shall not apply to the 
offense if it has been more than 30 months since the sentencing 
occurred.\28\ The Board interprets ``sentencing occurred'' to mean the 
date on which a court imposed the sentence (as indicated by the date on 
the court's sentencing order), not the date on which all conditions of 
sentencing were completed. Moreover, paragraph (c) notes that its 
exclusions--which are derived from the FHBA--do not apply to the 
enumerated offenses described under 12 U.S.C. 1785(d)(2).
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    \28\ 12 U.S.C. 1785(d)(4)(A)(ii).
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    One commenter suggested that the term ``sentencing occurred'' 
should mean the date that appears on the applicable sentencing order, 
instead of the date the court's clerk entered the order on the docket, 
which often occurs days after the order is signed by the judge. The 
commenter pointed out that the date on the sentencing order can be 
easily and definitively ascertained from the court records. The Board 
agrees with this commenter and has modified this paragraph to add a 
clarifying parenthetical, as indicated previously.
    Proposed paragraph (d) added parallel language reflecting the 
FDIC's long-held position that individuals who are convicted of, or 
enter into a pretrial diversion program for, a criminal offense 
involving dishonesty or breach of trust in foreign jurisdictions are 
subject to section 19, unless the offense is otherwise excluded by 12 
CFR 303, subpart L, as stated in the FDIC's rule.
    One commenter agreed that section 205(d) should include foreign 
criminal convictions and pretrial diversions for offenses in foreign 
jurisdictions involving dishonesty, like fraud and embezzlement, unless 
the conviction has been expunged, dismissed, or pardoned. Another 
commenter noted that, as a fidelity bond carrier, it will continue to 
require full disclosure of all pertinent, known facts in the bond 
application and renewal process, and all facts related to current or 
prospective employees will remain relevant to its underwriting 
decisions.
    The Board has not previously had a position on foreign offenses; 
however, given the congressional mandate to

[[Page 79385]]

consult and coordinate to promote consistent implementation on consent 
application procedures where appropriate, the Board is adopting the 
FDIC's interpretation, as proposed. Employers may be unaware of an 
applicant's foreign offenses without conducting their own inquiry, and 
many countries have their own application processes to conduct criminal 
background checks.
    The Board notes several non-exhaustive ways in which insured credit 
unions could comply with this requirement. For credit union operations 
outside the United States, the insured credit union could conduct a 
reasonable, documented inquiry to verify an applicant's history by 
inquiring about potential covered offenses that may have occurred in 
that foreign country (or countries) in which the credit union conducts 
operations, as well as the United States. As another example of such an 
inquiry, if an insured credit union plans to hire someone in the United 
States who is from a foreign country, the credit union could inquire 
about potential covered offenses that may have occurred in the United 
States and in that foreign country. And if a foreign jurisdiction 
forbade background investigations by an insured credit union, the 
credit union could note this restriction as part of its reasonable, 
documented inquiry.
4. Section 752.4--What constitutes a conviction under section 205(d)?
    Paragraph (a) states that there must have been a conviction of 
record for section 205(d) to apply, and that section 205(d) does not 
apply to arrests, pending cases not brought to trial (unless the person 
has a program entry as set out in Sec.  752.5), or any conviction 
reversed on appeal unless the reversal was for the purpose of re-
sentencing. The Board is generally adopting paragraph (a) as proposed, 
with non-substantive modifications to Sec.  752.4(a) to change the 
tense of the final sentence for consistency with the preceding 
sentence.
    Paragraph (b) clarifies that, absent a program entry, when an 
individual is charged with a covered offense but is subsequently 
convicted of an offense that is not a covered offense, that conviction 
is not subject to section 205(d). IRPS 19-1 does not have this 
clarification; however, it is included in the FDIC's current part 303. 
The final rule clarifies that the conviction, not the originally 
charged offense, is relevant under section 205(d).
    Paragraph (c) of this section reflects statutory language related 
to the treatment of orders of expungement, sealing, or dismissal of 
criminal records. Under IRPS 19-1, a conviction that has been 
completely expunged is not considered a conviction of record and does 
not require a consent application. However, IRPS 19-1 further noted 
that where an order of expungement has been issued and is intended to 
be a complete expungement, the jurisdiction cannot allow the conviction 
or program entry to be used for any subsequent purpose including, but 
not limited to, an evaluation of a person's fitness or character. Also, 
the failure to destroy or seal the records will not prevent the 
expungement from being considered complete for the purposes of section 
205(d).
    The FHBA provides a two-pronged test to determine whether a covered 
offense should be considered expunged, dismissed, or sealed and 
therefore excluded from the scope of section 205(d). First, there must 
be an ``order of expungement, sealing, or dismissal that has been 
issued in regard to the conviction in connection with such offense''; 
second, it must be ``intended by the language in the order itself, or 
in the legislative provisions under which the order was issued, that 
the conviction shall be destroyed or sealed from the individual's 
state, Tribal, or Federal record, even if exceptions allow the 
conviction to be considered for certain character and fitness 
evaluation purposes.'' \29\
---------------------------------------------------------------------------

    \29\ 12 U.S.C. 1785(d)(4)(B)(ii).
---------------------------------------------------------------------------

    The FHBA does not address expungements, sealings, or dismissals by 
operation of law, and the Board has sought to provide a more 
comprehensive framework as to such records. The Board proposed to add 
language to the second (intent) prong of the expungement framework to 
encompass the language in the expungement order itself, the legislative 
provisions under which the order was issued, and other legislative 
provisions. The Board believes that the additional language is 
consistent with the purposes of the statute and congressional intent to 
provide relief to individuals with older or minor offenses. One 
commenter agreed that the proposed interpretation of expungement to 
include those by application of law is reasonable and supported 
finalizing that provision as proposed.
    The proposal noted that, similar to IRPS 19-1, covered offenses 
that have been pardoned--and which are not otherwise excluded by Sec.  
752.8--would still require a consent application.
    One commenter suggested that pardons should also qualify as an 
expungement by operation of law. The commenter observed that requiring 
a consent application for a conviction that has been pardoned seems 
inconsistent with congressional intent and the presidential pardon 
power. The commenter suggested that if a conviction has been officially 
nullified due to a pardon by the President or a state governor, that 
conviction should be nullified in all respects, including pursuant to 
the NCUA's regulations. The commenter asked that the Board exclude 
pardons from the scope of section 205(d) and suggested that pardoned 
offenses should be treated similarly to expungements, dismissals, or 
the sealing of a conviction.
    The Board declines to adopt this recommendation and notes its 
longstanding position that covered offenses that have been pardoned, 
and which are not otherwise excluded from the scope of section 205(d), 
will still require an application. A pardon typically cancels the 
punishment for a criminal offense, not the underlying finding of guilt. 
In contrast, an expungement or sealing is significantly more likely to 
result, by applicable statute or court order, in the removal of the 
finding of guilt or otherwise result in a legal determination that the 
offense should not be used against an individual for employment 
purposes. Accordingly, in the Board's view, a person with such an 
expunged or sealed offense tends to present less of a risk to the 
credit union system than a person whose same offense has been pardoned. 
The Board notes, however, that while a covered offense that has been 
pardoned but not expunged will still require an application, in most 
cases the pardon would generally weigh in favor of approval.
    Paragraph (d) excludes ``youthful offender'' judgments for minors 
from the scope of section 205(d). Paragraph (d) clarifies that it 
encompasses the term ``youthful offender'' and ``juvenile delinquent'' 
and similar terms, since a court does not have to specifically use 
these terms in an adjudication in order for paragraph (d)'s provisions 
to apply.
5. Section 752.5--What constitutes a pretrial diversion or similar 
program under section 205(d)?
    Paragraph (a) defines what constitutes a pretrial diversion or 
similar program (a program entry). A pretrial diversion or similar 
program means a program characterized by a suspension or eventual 
dismissal or reversal of charges or criminal prosecution upon agreement 
by the accused to restitution, drug or alcohol rehabilitation, anger 
management, or community service. The FHBA establishes this definition.

[[Page 79386]]

    Paragraph (b) clarifies that when a covered offense either is 
reduced by a program entry to an offense that would otherwise not be 
covered by section 205(d) or is dismissed upon successful completion of 
a program entry, the offense remains a covered offense for purposes of 
section 205(d). The covered offense will require a consent application 
unless it is de minimis as provided by Sec.  752.8. This language is 
new as compared to IRPS 19-1 and comes from the FDIC's part 303.
    Paragraph (c) states that expungements or sealings of program entry 
records will be treated the same as expungements or sealings of 
convictions. This language is new as compared to IRPS 19-1 and comes 
from the FDIC's part 303.
    No commenters objected to these provisions, which the Board 
generally adopts as proposed.
6. Section 752.6--What are the types of consent applications that can 
be filed?
    The FHBA codifies procedures for consent applications filed with 
the NCUA. The statute removes the NCUA's existing policy that an 
insured credit union sponsor a consent application or that an 
individual seek a waiver of the credit union filing requirement. 
Specifically, the proposed rule provides that the NCUA will accept 
applications from an individual or an insured credit union applying on 
behalf of an individual.
    Paragraph (b) provides that an individual consent application or a 
credit union-sponsored consent application may be filed separately or 
contemporaneously with the appropriate NCUA field office.
7. Section 752.7--When may an application be filed?
    This section notes that before a consent application may be filed, 
``all of the sentencing requirements associated with a conviction, or 
conditions imposed by the program entry, including but not limited to, 
imprisonment, fines, conditions of rehabilitation, and probation 
requirements must be completed, and the case must be considered final 
by the procedures of the applicable jurisdiction.'' The Board includes 
this language to accord with several of the FHBA's exclusions from 
section 205(d) that are not tied to the completion of sentencing 
requirements.
    Furthermore, the FHBA requires the NCUA to ``make all forms and 
instructions related to consent applications available to the public, 
including on [its] website.'' \30\ These forms and instructions ``shall 
provide a sample cover letter and a comprehensive list of items that 
may accompany the consent application, including clear guidance on 
evidence that may support a finding of rehabilitation.'' \31\ While the 
final rule does not codify these requirements, the agency will comply 
with the statutory mandate to make appropriate forms and instructions 
available to the public. The final rule provides generally that the 
NCUA's consent application forms as well as additional information 
concerning section 205(d) can be accessed on the NCUA's website. One 
commenter noted that the availability of forms on the agency's public 
website will be helpful.
---------------------------------------------------------------------------

    \30\ 12 U.S.C. 1785(d)(5)(E)(i).
    \31\ 12 U.S.C. 1785(d)(5)(E)(ii).
---------------------------------------------------------------------------

    No commenters objected to these provisions, which the Board 
generally adopts as proposed.
8. Section 752.8--What is the de minimis exemption?
    The Board has made a number of changes to this section based on the 
statutory revisions and helpful comments received. One commenter--to 
the FDIC's parallel notice of proposed rulemaking under the FHBA \32\--
requested that this section be revised to exempt de minimis offenses 
from the scope of the statutory prohibition, to align with the FHBA. 
The Board agrees, and this section has been revised in the final rule 
to treat de minimis offenses, a category that includes the sub-category 
``designated lesser offenses,'' as offenses that are excluded from the 
prohibitions of section 205(d) (assuming certain conditions are met) 
and for which offenses no application is required. This is a 
substantive departure from the Board's longstanding treatment of de 
minimis offenses, in which potential applicants with such offenses on 
their records did not need to file an application with the Board 
because the NCUA deemed their (potential) application automatically 
approved. In other words, the NCUA considered such offenses covered 
under section 205(d), while the FHBA exempts those offenses entirely 
from section 205(d). Accordingly, this section of the final rule 
includes additional language to clarify that the prohibitions of 
section 205(d) will not apply, and an application will therefore not be 
required, as to offenses meeting the conditions to qualify for the de 
minimis exemption.
---------------------------------------------------------------------------

    \32\ See 88 FR 77906 (Nov. 14, 2023).
---------------------------------------------------------------------------

    The FHBA removed the use of fake identification from the scope of 
section 205(d), and paragraphs (a)(1) and (b)(4) reflect this 
exclusion.\33\
---------------------------------------------------------------------------

    \33\ See 12 U.S.C. 1785(d)(4)(C)(iv).
---------------------------------------------------------------------------

    Paragraph (a)(1) states an individual who has been convicted of two 
or fewer covered offenses need not file if the individual could have 
been sentenced to a term of confinement in a correctional facility of 3 
years or less and/or a fine of $2,500 or less, and the individual 
actually served 3 days or less of jail time for each, provided that all 
of the sentencing requirements associated with the conviction have been 
completed, each conviction or program entry was entered at least 3 
years prior to the date of a consent application (assuming there are 
two convictions or program entries for a covered offense), and each 
covered offense was not committed against an insured depository 
institution or insured credit union.
    One commenter suggested that the maximum potential fine amount for 
the de minimis criterion in paragraph (a)(1) should be increased from 
$2,500 to $5,000, in keeping with a certain Federal criminal statute 
that provides for fines up to $5,000 for certain misdemeanors or 
infractions. The commenter noted that under the statutory provision 
there are very few violations of Federal criminal laws for which the 
potential fine for a violation would be less than $5,000, making many 
Federal offenses ineligible for de minimis treatment. The Board 
declines to expand the de minimis framework as suggested because it 
considers the current threshold appropriate. The $2,500 amount is 
comparable to the $2,000 de minimis threshold for insufficient-fund 
offenses under the FHBA.
    While the Board acknowledges that offenses falling under the 
statute the commenter cited may require an application, two factors 
mitigate this concern. First, some of the offenses or infractions may 
not involve dishonesty or a breach of trust, which would make them 
irrelevant under section 205(d). Second, many of those offenses are 
likely to be misdemeanors, which receive significant relief under Sec.  
752.3. Thus, the Board finds the rule gives appropriate relief for 
minor offenses with the $2,500 threshold.
    Paragraph (a)(2) reflects the FHBA's confinement criteria as to the 
Board's determination of de minimis offenses.\34\
---------------------------------------------------------------------------

    \34\ See 12 U.S.C. 1785(d)(4)(C)(ii).
---------------------------------------------------------------------------

    To improve the clarity of this section, the final rule adds a 
sentence explaining that designated lesser offenses need not

[[Page 79387]]

meet the other criteria that apply to de minimis offenses.
    For greater ease of reference, proposed paragraphs (a)(2)(i)-(iii) 
have been reorganized in the final rule. Under redesignated paragraph 
(a)(3), jail time is calculated based on the time an individual spent 
incarcerated as a punishment or a sanction--not as pretrial detention--
and does not include probation or parole where an individual was 
restricted to a particular jurisdiction or was required to report 
occasionally to an individual or a specific location. Jail time 
includes confinement to a psychiatric treatment center in lieu of a 
jail, prison, or house of correction on mental competency grounds. The 
definition is not intended to include any of the following: persons who 
are restricted to a substance-abuse treatment program facility for part 
or all of the day; and persons who are ordered to attend outpatient 
psychiatric treatment.
    Paragraph (a)(4), redesignated from proposed paragraph (a)(3), 
requires that if there are two convictions or program entries for a 
covered offense, each conviction or program entry must have been 
entered at least 3 years prior to the date a consent application would 
otherwise be required.
    Paragraph (a)(5) (redesignated from proposed paragraph (a)(4)) 
requires that, in order for an offense or offenses to qualify under the 
general de minimis framework, each offense ``must not have been'' 
committed against an insured depository institution or insured credit 
union. This language aligns with the current FDIC regulations.
    Under the proposed rule, several de minimis criteria had qualifiers 
for offenses committed against ``insured'' credit unions.\35\ Two 
commenters noted that the proposal's references to covered offenses 
committed against ``insured credit unions'' or ``insured depository 
institutions'' for determining whether a given offense is de minimis 
was too narrowly focused on whether an institution is insured. One 
commenter suggested that if an offense is committed against any credit 
union or financial institution, it should not be considered a de 
minimis offense irrespective of the institution's insurance status. 
Another commenter noted that any prior offense by a covered individual 
committed against a financial institution, insured or not, increases 
risks to insured credit unions. Both commenters suggested eliminating 
the ``insured'' qualifier so that the de minimis exemption would not be 
available for offenses committed against any depository institution or 
credit union--not just insured depository institutions and insured 
credit unions. After careful consideration, the Board declines to adopt 
this recommendation. The FHBA and its legislative history indicate 
lawmakers' preference for broad relief and granting second chances. 
Adopting the commenters' recommendation would provide less relief for 
individuals with minor offenses committed against non-federally insured 
credit unions or depository institutions. While this approach to the de 
minimis framework marks a departure from IRPS 19-1, in the Board's 
view, providing greater relief for de minimis offenses--not less--is 
consistent with the FHBA and congressional intent.
---------------------------------------------------------------------------

    \35\ See proposed Sec. Sec.  752.8(a)(4), (b)(2), (b)(3).
---------------------------------------------------------------------------

    Paragraph (b)(1) (age of person at time of covered offense) 
provides that a consent application is not required if there are two 
convictions or program entries for a covered offense, and the actions 
that resulted in both convictions or program entries all occurred when 
the individual was 21 years of age or younger and the convictions or 
program entries were entered at least 18 months prior to the date of a 
consent application. For a reduced waiting period to apply before an 
individual may qualify for the de minimis exemption, the underlying 
convictions or program entries must meet the other de minimis criteria 
in paragraph (a) of Sec.  752.8.
    The Board has revised the de minimis requirement related to the 
aggregate total face value of all ``bad'' or insufficient funds checks 
from $1,000 to $2,000, to conform with the statute.\36\ Under paragraph 
(b)(2), a consent application is not required if an individual has 
convictions or program entries of record based on the writing of 
``bad'' or insufficient funds checks and the following conditions 
apply: (i) the aggregate total face value of all ``bad'' or 
insufficient funds checks cited across all the convictions or program 
entries for ``bad'' or insufficient funds checks is $2,000 or less; 
(ii) no depository institution or credit union was a payee on any of 
the ``bad'' or insufficient funds checks that were the basis of the 
convictions or program entries; and (iii) the individual has no more 
than one other de minimis offense.
---------------------------------------------------------------------------

    \36\ See 12 U.S.C. 1785(d)(4)(C)(iii).
---------------------------------------------------------------------------

    The FHBA and the final rule do not require a consent application 
for convictions or program entries for small-dollar, simple theft. 
Under paragraph (b)(3), convictions or program entries based on the 
simple theft of goods, services, or currency (or other monetary 
instrument) are considered de minimis offenses if the following 
conditions apply: (i) the value of the currency, goods, or services 
taken is $1,000 or less; (ii) the theft was not committed against an 
depository institution or credit union; (iii) the individual has no 
more than one other de minimis offense under this section; and (iv) if 
there are two de minimis offenses under this section, each conviction 
or program entry was entered at least 3 years prior to the date a 
consent application would otherwise be required, or at least 18 months 
prior to the date a consent application would otherwise be required if 
the actions that resulted in the conviction or program entry all 
occurred when the individual was 21 years of age or younger. This 
exception excludes burglary, forgery, robbery, identity theft, and 
fraud.
    Finally, the Board notes that the FHBA includes ``designated lesser 
offenses'' in addition to de minimis offenses. Designated lesser 
offenses, including use of fake identification, shoplifting, trespass, 
fare evasion, or driving with an expired license or tag, are described 
in the FHBA as low-risk offenses statutorily excluded from the scope of 
section 205(d). Redesignated paragraph (b)(4), which appeared as Sec.  
752.3(d) in the proposed rule, excludes from the scope of covered 
offenses ``designated lesser offenses,'' (for example, using fake 
identification), as specified in 12 U.S.C. 1785(d)(4)(C)(iv), if 1 year 
or more has passed since the applicable conviction or program entry. As 
explained in paragraph (a) in the final rule, these offenses do not 
need to meet the other criteria specified for de minimis offenses.
    The Board has deleted proposed Sec.  752.8(c) concerning fidelity 
bond coverage and disclosure of de minimis offenses to insured credit 
unions. This now-deleted paragraph had required that, ``Any person who 
meets the criteria under this section shall be covered by a fidelity 
bond to the same extent as others in similar positions and shall 
disclose the presence of the conviction(s) or program entry(ies) to all 
insured credit unions in the affairs of which he or she intends to 
participate.''
    One commenter expressed concern that Sec.  752.8(c), as proposed, 
could be misinterpreted as imposing a mandate on fidelity bond carriers 
to provide coverage to individuals meeting the de minimis criteria. 
Specifically, the use of the phrase ``shall be covered by a fidelity 
bond'' could be read to imply that the burden for fidelity coverage is 
on bond providers to provide the required coverage, rather than on the 
credit union to obtain the required

[[Page 79388]]

coverage. This commenter's concern was seemingly borne out in another 
comment that recommended that the same ``mandate'' for fidelity bond 
coverage for individuals meeting the de minimis criteria should also be 
extended to individuals whose consent applications have been approved. 
This commenter's recommendation illustrated that a misunderstanding of 
the phrase ``shall be covered by a fidelity bond'' could occur as 
suggested.
    Additionally, one commenter responding to the FDIC's parallel 
notice asked for clarification concerning de minimis offenses and 
another commenter suggested that de minimis offenses should be treated 
the same way as ``designated lesser offenses'' by excluding both types 
of offenses from the scope of the statutory prohibition.
    Since the FHBA has excluded de minimis offenses from the scope of 
section 205(d), the Board believes that these requirements should no 
longer attach to individuals who have committed such offenses and has 
removed this provision from the final rule. Deleting proposed Sec.  
752.8(c) also removes the ambiguity of the phrase ``shall be covered by 
a fidelity bond.'' The Board emphasizes, however, that all federally 
insured credit union employees and officials continue to be subject to 
the fidelity bond and insurance coverage rules under 12 CFR 713 and 
must be bondable to work for or participate in the conduct of the 
affairs of the credit union.\37\
---------------------------------------------------------------------------

    \37\ Federally insured, state-chartered credit unions are 
required by 12 CFR 741.201 to comply with the fidelity bond coverage 
requirements of part 713. Corporate credit unions must comply with 
12 CFR 704.18 in lieu of part 713.
---------------------------------------------------------------------------

    Paragraph (c), redesignated from proposed paragraph (d), states 
that any conviction or program entry for specific criminal offenses 
under Title 18 set out in 12 U.S.C. 1785(d)(2) cannot qualify for a de 
minimis exemption.
9. Section 752.9--How does an individual or a credit union file an 
application?
    This section, adopted as proposed, eliminates the credit union 
filing requirement and waiver process and indicates that an insured 
credit union may file an application on behalf of an individual. The 
individual may also file an application. This section also provides 
that applications filed by a credit union should be filed with the NCUA 
field office where the credit union's home office is located (or with 
ONES for credit unions that office supervises), and applications filed 
by an individual should be filed with the NCUA field office where the 
person lives. States covered by each NCUA field office are listed in 12 
CFR 790.2.
    Along with this final rule, the Board is revising its delegations 
of authority related to consent applications. Formerly, the Regional 
Directors and the ONES Director only had delegated authority to act on 
credit union-sponsored applications, and the Board had retained the 
authority to approve or disapprove individual applications. Under the 
revised delegations, the Regional Directors and the ONES Director will 
have authority to act on both individual and credit union-sponsored 
applications. Any disapproval of an individual or credit union-
sponsored application for consent, including a disapproval of a request 
for reconsideration, will require the prior concurrence of the General 
Counsel. Consistent with the FHBA, the General Counsel's concurrence 
must certify that the denial is consistent with section 205(d). Under 
the revised delegation, the Board will retain authority to approve or 
disapprove individual applications for consent involving an offense 
described under section 205(d)(2)(A) and such other high-level security 
cases it designates.
10. Section 752.10--How will the NCUA evaluate an application?
    Paragraph (a) sets out the factors the NCUA will assess to 
determine the level of risk the applicant poses to an insured credit 
union and whether the NCUA will consent to the person's participation 
in a credit union's affairs. The paragraph reflects new statutory 
requirements related to the NCUA's review process, including the 
requirement that the NCUA primarily rely on the criminal history record 
of the Federal Bureau of Investigation (FBI) in its review and provide 
such record to the applicant to review for accuracy.\38\ The Board 
interprets the term ``criminal history record'' to mean ``identity 
history summary checks,'' which are commonly known as ``rap sheets.'' 
Under paragraph (a)--and in accordance with the FHBA--the NCUA, in 
reviewing an application, will provide ``such record'' (a copy of the 
rap sheet) to the individual to review for accuracy.\39\ The NCUA will 
not provide it to the credit union, but only to the individual who is 
the subject of the application. One commenter stated that the 
requirement to rely primarily on FBI rap sheets will help improve the 
consent application process.
---------------------------------------------------------------------------

    \38\ See 12 U.S.C. 1785(d)(5)(F).
    \39\ Id.
---------------------------------------------------------------------------

    One commenter, to the FDIC's parallel FHBA notice of proposed 
rulemaking, requested that the FDIC establish a deadline to evaluate 
the application once received and a deadline of 5 days to return the 
copy of the criminal history record once received from the FBI. The 
FDIC has adopted this recommendation in part; \40\ however, the Board 
declines to adopt the suggested deadlines in this final rule. While the 
Board remains mindful that the consent application process may impose 
inconveniences and uncertainties to covered individuals and credit 
unions as they await the agency's determination, the Board maintains it 
is impracticable to establish a timetable for action on applications 
because each application is fact specific and varies in complexity. 
Past applications submitted to the NCUA have generally been adjudicated 
within 60 days from receipt, and often the processing time was 
significantly less. The Board remains committed to processing consent 
applications as promptly as practicable. In addition, the NCUA will 
make reasonable efforts to communicate with the subject of the 
application within 15 calendar days of receipt of the criminal history 
record from the FBI to inform the individual that the NCUA will be 
providing them with a copy of the report and to verify the individual's 
contact information. The NCUA will also make reasonable efforts to send 
the report to the individual within 5 business days of successful 
verification of the individual's contact information. If the individual 
believes that there are any inaccuracies in the report, the NCUA will 
direct the individual to the FBI, where the individual can seek 
corrections.
---------------------------------------------------------------------------

    \40\ Under revised 12 CFR 303.229(a)(2), the FDIC will make 
reasonable efforts to communicate with the subject of the 
application within 15 calendar days of receipt of this record from 
the FBI to inform the individual that the FDIC will be providing 
them with a copy of the report and to verify the individual's 
contact information. The FDIC will also make reasonable efforts to 
send the report to the individual within 5 business days of 
successful verification of the individual's contact information. If 
the individual believes that there are any inaccuracies in the 
report, the FDIC will direct the individual to an appropriate 
contact at the FBI, where the individual can seek corrections.
---------------------------------------------------------------------------

    Paragraph (b) states that the NCUA will not require an applicant to 
provide certified copies of criminal history records unless the NCUA 
determines that there is a clear and compelling justification to 
require additional information to verify the accuracy of the criminal 
history record of the FBI.
    Paragraph (c) states that the determining factors in assessing an 
application are whether the person has demonstrated their fitness to 
participate in the conduct of the affairs of an

[[Page 79389]]

insured credit union, and whether the affiliation, or participation by 
the person in the conduct of the affairs of the credit union, may 
constitute a threat to the safety and soundness of the credit union or 
the interests of its members or threaten to impair public confidence in 
the credit union.
    Paragraph (d) sets forth the considerations the NCUA will evaluate 
in conducting an individualized assessment. These considerations are 
substantively similar to factors under IRPS 19-1. The final rule also 
clarifies how the NCUA will evaluate evidence of rehabilitation and 
other evidence, as required by the FHBA.\41\
---------------------------------------------------------------------------

    \41\ While the statute uses the terms ``rehabilitation'' and 
``mitigating'' as separate categories of evidence, the terms appear 
to be substantially similar in the context of section 205(d) consent 
applications, and the use of both terms in these regulations may 
create confusion. Therefore, the final rule uses the term 
rehabilitation, not mitigating.
---------------------------------------------------------------------------

    Paragraph (e) provides that the question of whether a person, who 
was convicted of a crime or who agreed to a program entry, was guilty 
of that crime shall not be at issue in a proceeding under this subpart 
or under 12 CFR part 746, subpart B.
    Paragraph (f) provides that the NCUA will also apply the 
considerations in paragraph (d) to determine whether the interests of 
justice are served in seeking an exception in the appropriate court 
when a consent application is made prior to 10 years after the final 
conviction or agreement to program entry for certain Federal 
offenses.\42\
---------------------------------------------------------------------------

    \42\ See 12 U.S.C. 1785(d)(2)(A).
---------------------------------------------------------------------------

    Paragraph (g) provides that all approvals or orders will be subject 
to the condition that the person be covered by a fidelity bond to the 
same extent as others in similar positions. The final rule clarifies 
that paragraph (g) applies whether the approval is conferred by order 
or less formal means, such as an approval letter from a field office.
    Paragraph (h) includes statutory language explaining when a new 
credit union-sponsored application would be necessary due to changes in 
the scope of an applicant's employment. It provides that when deemed 
appropriate by the NCUA, credit union-sponsored applications are 
intended to allow the individual to work for the same employer and 
across positions. NCUA consent will be required for any proposed 
significant changes in the individual's security-related duties or 
responsibilities, such as promotion to an officer or other positions 
that the employer determines will require higher security-screening 
credentials (that is, any position with higher level access or 
responsibility, not only security personnel or individuals in the 
security field).
    Paragraph (i) provides that when a person who has received approval 
under section 205(d) subsequently seeks to participate in the conduct 
of the affairs of another insured credit union, another application 
must be submitted.
11. Section 752.11--What will the NCUA do if the application is denied?
    Paragraph (a) provides that the NCUA will provide a written denial 
that will summarize or cite the relevant factors from Sec.  752.10. 
Paragraph (b) provides that the applicant (either the insured credit 
union or the subject individual, or both, as a consolidated request) 
may file a written request for reconsideration or appeal under the 
administrative review process contained in 12 CFR part 746, subpart B. 
That subpart includes uniform procedures by which petitioners may 
appeal initial agency determinations to the Board.
    Under part 746, subpart B, prior to submitting an appeal to the 
Board, the petitioner may make a written request to the appropriate 
field office to reconsider an initial agency determination within 30 
calendar days of the date of that determination. Within 60 calendar 
days of the date of an initial agency determination or, as applicable, 
a determination by the field office on any request for reconsideration, 
a petitioner may file an appeal seeking review of the determination by 
the Board. Under part 746, subpart B, a petitioner may also request an 
oral hearing before the Board. These procedures meet the statutory 
requirement for ``national office review'' of any consent application 
that is denied by a ``regional office,'' if the individual requests a 
review by the Board.\43\ This option is also substantially similar to 
the FDIC's current parts 303 and 308, except that under those 
regulations, an oral hearing is conducted unless the applicant or the 
insured depository institution waives it in writing and instead makes a 
written submission.\44\
---------------------------------------------------------------------------

    \43\ 12 U.S.C. 1785(d)(5)(D).
    \44\ 12 CFR 308.158(d).
---------------------------------------------------------------------------

Technical or Non-Substantive Modifications

    In addition to the modifications to the proposal described above, 
the final rule includes a few minor, technical, or non-substantive 
revisions. For example, the Board has updated subject headings for 
clarity and for consistency with the FDIC's final rule. Several 
paragraphs have also been combined and redesignated for efficiency. 
Additionally, some adjustments to terminology and for plain language 
have been adopted in the final rule, such as using ``will'' instead of 
``shall'' when explaining actions the NCUA will take.

NCUA Practice on Section 205(d)

    In general, the final rule mirrors the FDIC's part 303, and the 
FDIC's separate rulemaking to implement the FHBA, with minimal, non-
substantive changes. Additionally, while there were a few differences 
between the FDIC's part 303 and IRPS 19-1 before the FHBA, such as some 
details on de minimis offenses, expungements, and treatment of drug-
related offenses, the enactment of the FBHA resolved most differences 
between the two agencies' rules and created a more uniform standard. 
However, there are a few areas in which IRPS 19-1 provided additional 
context and discussion on policy and procedures related to section 
205(d) compared to part 303. In general, the additional information 
does not provide any substantive difference from part 303 and instead 
provides additional clarifying information.
    The Board has chosen to omit much of the clarifying information in 
the final rule to ensure its consistency with part 303; however, the 
Board also believes credit unions may generally have less experience 
with section 205(d) than insured depository institutions and are 
typically smaller in size with fewer resources, so additional guidance 
may help insured credit unions to discharge their responsibilities 
under section 205(d). One commenter was supportive of the NCUA issuing 
guidance to go along with the final rule and suggested that examples be 
given in the guidance.
    Accordingly, after finalizing and implementing this rule, the NCUA 
intends to issue guidance that provides insured credit unions with 
additional information about section 205(d). The guidance will include 
portions of IRPS 19-1 that were not incorporated into the final rule.
    For example, IRPS 19-1 provided that when the credit union learns 
that a prospective employee has a prior conviction or entered into a 
pretrial diversion program for a covered offense, the credit union 
should document in its files that a consent application is not required 
because the covered offense is considered de minimis and meets all of 
the criteria for the exception, or--if the credit union is willing to 
sponsor the prospective employee's consent application--submit an 
application requesting the Board's consent. The credit union could also 
extend a conditional offer of employment and notify the prospective 
employee that it

[[Page 79390]]

is contingent upon a satisfactory background check to determine whether 
the individual is prohibited under section 205(d). The Board intends no 
change of position regarding these policies even though they are not 
included in the final rule.
    IRPS 19-1 also stated that persons who will occupy clerical, 
maintenance, service, or purely administrative positions generally can 
be approved without an extensive review. A more detailed analysis, 
however, would be performed in the case of persons who will be able to 
influence or control the management or affairs of the insured credit 
union. The final rule does not include a similar delineation between 
how the NCUA intends to approve consent applications for different 
types of positions. However, the Board continues to believe that 
applications for clerical, maintenance, service, or purely 
administrative positions do not require the same review as applications 
for other positions that have access to more of the day-to-day 
financial operations of a credit union. The NCUA plans to address this 
issue in the guidance.

Other Conforming Amendments

    Both the standard FCU Bylaws in appendix A of part 701 and the 
criteria for determining the insurability of a credit union in 12 CFR 
741.3(c) reference section 205(d). In general, both sections prohibit a 
person who has been convicted of any criminal offense involving 
dishonesty or breach of trust from serving at an insured credit union, 
except with the written consent of the Board. The Board believes these 
references are incomplete because not all convictions of criminal 
offenses involving dishonesty or breach of trust now serve as the valid 
basis for a section 205(d) prohibition. Therefore, the final rule 
replaces the current reference to ``any crime involving dishonesty or a 
breach of trust'' to refer to the specific crimes covered under section 
205(d). Referring directly to the FCU Act also automatically 
incorporates future statutory changes to section 205(d).
    Additionally, as required by the Gramm-Leach-Bliley Act, appendix B 
to part 748 (Appendix B) contains guidance on creating an effective 
incident response plan in the event of unauthorized access to member 
information and the requirements of the notices distributed to the 
affected members.\45\ Appendix B states that credit unions should also 
conduct background checks of employees to ensure that the credit union 
does not violate 12 U.S.C. 1785(d). The final rule requires a 
background check in Sec.  752.1(b), which is consistent with current 
expectations.\46\ Therefore, the final rule amends this footnote to 
state that insured credit unions must also conduct background checks of 
employees.
---------------------------------------------------------------------------

    \45\ 12 CFR 748, App. B.
    \46\ The Board notes that insured credit unions may extend a 
conditional offer of employment contingent on the completion of a 
background check satisfactory to the credit union to determine if 
the applicant is barred under section 205(d).
---------------------------------------------------------------------------

Amendments to Sec.  701.14 on Change in Official or Senior Executive 
Officer in Credit Unions That Are Newly Chartered or Are in Troubled 
Condition

    In addition to the prohibition on certain individuals participating 
in the conduct of the affairs of a credit union included in section 
205(d), the FCU Act also sets forth conditions under which certain 
insured credit unions must notify the NCUA in writing of any proposed 
changes in its board of directors, committee members, or senior 
executive staff (section 212).\47\ The Board implements section 212 
through Sec.  701.14 of its rules.\48\ Section 701.14 requires 
generally that insured credit unions that are newly chartered or 
troubled file notice with the NCUA before adding, replacing, or 
changing the duties of a board or committee member or a senior 
executive officer. The Board has not substantively amended Sec.  701.14 
since 2012 when the Board revised the definition of troubled 
condition.\49\ The Board proposed to make minor amendments to Sec.  
701.14 to clarify when a notice is required, how the NCUA would process 
the notice, and what information must be included in the NCUA's notice 
of disapproval to the applicant. Specifically, the Board proposed to:
---------------------------------------------------------------------------

    \47\ 12 U.S.C. 1790a.
    \48\ 12 CFR 701.14.
    \49\ 77 FR 45285 (July 31, 2012).
---------------------------------------------------------------------------

    <bullet> Clarify when notice is required by specifying that a 
credit union must provide notice when adding or replacing any member of 
its board of directors or committees, employing any person as a senior 
executive officer of the credit union, or changing the responsibilities 
of a board member, committee member, or a senior executive officer so 
that the person would assume a different position;
    <bullet> Increase the amount of time for NCUA to initially review a 
notice after its receipt from 10 calendar to 15 calendar days; \50\
---------------------------------------------------------------------------

    \50\ See 12 CFR 701.14(c)(3)(iii).
---------------------------------------------------------------------------

    <bullet> Specify that Regional Director and ONES Director 
communications under Sec.  701.14 may be done through email; and
    <bullet> Explicitly state that the notice of disapproval will 
identify the reason(s) for the denial.
    One commenter supported the proposed amendment to clarify that a 
notice is required when a newly chartered or troubled credit union is 
adding or replacing any member of its board of directors or committees, 
employing any person as a senior executive officer of the credit union, 
or changing the responsibilities of a board member, committee member, 
or senior executive officer if the person is assuming a different 
position. The commenter stated that the amendment would provide a 
necessary clarification but encouraged the NCUA to ensure federally 
insured state-chartered credit unions remain aware of the notification 
requirement to their respective state supervisory authority, as 
currently required under Sec.  701.14(c)(3).
    The same commenter, however, was opposed to increasing the amount 
of time for the agency to initially review a notice for a change in 
official or senior executive officer from the current 10 calendar day 
limit to 15 calendar days under Sec.  701.14(c)(3)(iii). While the 
commenter agreed it is important to conduct a thorough review of each 
request, the commenter felt that the current timeframe is sufficient 
and did not support extending the time for NCUA's initial review 
because of the time sensitivity in these situations, particularly for a 
troubled credit union.
    After careful consideration, the Board is adopting the amendment to 
the notification requirement as proposed. As discussed in the notice of 
proposed rulemaking, the 10-day notification requirement is not 
specified in the statute, and the NCUA has found the 10-day timeframe 
difficult to meet, as additional information to analyze the request may 
be required. The Board continues to believe that the additional 5 
calendar days will not unduly delay the start or change in position of 
board members, committee members, or senior executive officers. In 
making this change, the Board emphasizes that the increase from 10 to 
15 days applies only to the amount of time the NCUA has to either 
determine an application is complete or request additional information. 
The current 30-day approval timeline remains the same, unless the 
agency is waiting on additional requested information. An applicant can 
mitigate any delay by producing requested information expeditiously. 
The NCUA endeavors to process all applications as quickly as

[[Page 79391]]

possible, irrespective of whether additional information is requested.
    The agency did not receive any comments on the other amendments to 
Sec.  701.14 and the Board is finalizing those changes as proposed. The 
Board notes that other authorities bear on an individual's ability to 
work for or participate in the conduct of the affairs of a federally 
insured credit union.\51\
---------------------------------------------------------------------------

    \51\ See 12 U.S.C. 1786(i)(1)(A); 12 U.S.C. 5101 et seq.; 12 
U.S.C. 5104; Public Law 116-283, codified at 31 U.S.C. 5321(g).
---------------------------------------------------------------------------

IV. Other Alternatives Considered

Comments Received by the FDIC

    On November 14, 2023, the FDIC published a notice of proposed 
rulemaking to conform the FDIC's section 19 regulations with the FHBA 
\52\ and the FDIC received several comments and recommendations on its 
proposal. The NCUA considered these other comments as part of its 
statutory obligation to consult and coordinate with the FDIC to promote 
consistent implementation of the FHBA. Aside from the modifications 
described earlier in this preamble, the Board has decided not to 
incorporate those recommendations into the final rule.
---------------------------------------------------------------------------

    \52\ See 88 FR 77906.
---------------------------------------------------------------------------

    As discussed previously, almost all of the substantive requirements 
incorporated into the agency's regulations stem from the FHBA's 
revisions to section 205(d). The Board had limited discretion in 
adopting alternatives to those statutory revisions. The Board 
considered other recommendations that were submitted by the commenters 
but believes that the final rule represents the most appropriate option 
for covered entities and individuals.

V. Regulatory Procedures

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency creates a new or amends existing information collection 
requirements.\53\ For purposes of the PRA, an information collection 
requirement may take the form of a reporting, recordkeeping, or a 
third-party disclosure requirement. The NCUA may not conduct or 
sponsor, and the respondent is not required to respond to, an 
information collection, unless it displays a valid Office of Management 
and Budget (OMB) control number.
---------------------------------------------------------------------------

    \53\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------

    The NCUA will revise its section 205(d) application form to conform 
with the changes to section 205(d) under the FHBA. These changes amend 
the NCUA's existing information collection associated with this rule, 
entitled ``Application Pursuant to Section 205(d) of the Federal Credit 
Union Act'' (3133-0203). For this reason, the information-collection 
requirements contained in this final rule will be submitted by the NCUA 
to OMB for review and approval under section 3507(d) of the PRA (44 
U.S.C. 3507(d)) and Sec.  1320.11 of the OMB's implementing regulations 
(5 CFR part 1320). The final rule extends greater relief than what was 
formerly available to certain individuals with prior convictions 
seeking employment with an insured credit union, thereby eliminating 
the need to submit consent applications for certain offenses, 
particularly older or expunged convictions, prior misdemeanors, drug 
possession offenses, and other lesser offenses. The final rule should 
reduce the number of respondents applying for consent, but it may also 
increase the number of applications because of a renewed awareness of 
the statutory prohibition. Thus, the estimated number of respondents 
applying for consent remains at one. The final rule requires credit 
unions to make a reasonable, documented, inquiry to verify an 
applicant's history to ensure that a person who has a conviction or 
program entry covered by the provisions of section 205(d) is not hired 
or permitted to participate in its affairs without the written consent 
of the NCUA. This recordkeeping requirement is minimal.
    These program changes would revise the information collection 
requirement currently approved OMB control number 3133-0203, as 
follows:
    Title of Information Collection: Part 752, Application Pursuant to 
Section 205(d) of the Federal Credit Union Act.
    Estimated Number of Respondents: 4.
    Estimated Number of Responses per Respondent: 1.
    Estimated Annual Frequency of Response: 1.
    Estimated Hours per Response: 0.75.
    Estimated Total Annual Burden Hours: 3.
    Affected Public: Private Sector: Not-for-profit institutions; 
Individual or Household.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires that when 
an agency issues a proposed rule or a final rule pursuant to the 
Administrative Procedure Act or another law, the agency must prepare a 
regulatory flexibility analysis that meets the requirements of the RFA 
and publish such analysis in the Federal Register. Specifically, the 
RFA normally requires agencies to describe the effect of a rulemaking 
on small entities by providing a regulatory impact analysis. For 
purposes of the RFA, the Board considers credit unions with assets less 
than $100 million to be small entities.\54\ A regulatory flexibility 
analysis is not required, however, if the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities and publishes its certification and a short, 
explanatory statement in the Federal Register together with the rule.
---------------------------------------------------------------------------

    \54\ NCUA IRPS 15-1, 80 FR 57512 (Sept. 24, 2015).
---------------------------------------------------------------------------

    The Board does not believe the final rule will have a significant 
economic impact on a substantial number of small entities. In the 
period from 2019 through 2023, the NCUA received four consent 
applications. This averages out to one application a year. Therefore, 
on average, only about one small entity--at most--will be affected by 
the proposed rule annually.
    As discussed in the SUPPLEMENTARY INFORMATION section, the final 
rule will align the NCUA's regulations with the FHBA's provisions and 
more closely align the NCUA's section 205(d) regulations with those of 
other Federal financial regulators. Most of the changes were 
precipitated by the FHBA--which was effective immediately upon 
passage--and the final rule aligns the NCUA's regulations with these 
elements of the FHBA; therefore, most of the associated changes in the 
final rule will have no direct effect on individuals or credit unions. 
Further, since the NCUA estimates that on average approximately one 
NCUA-insured institution could be affected by the final rule annually, 
any direct effects realized because of the final rule are likely to be 
small and affect a relatively small number of entities.
    In light of the foregoing, the NCUA certifies that the final rule 
will not have a significant economic impact on a substantial number of 
small entities.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their actions on state and local interests. The 
NCUA, an independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order to adhere to fundamental 
federalism principles.
    This final rule will apply to all insured credit unions, including 
federally insured, state-chartered credit unions. The Board has 
determined that the final amendments will not have a substantial direct 
effect on the states, on the connection between the national

[[Page 79392]]

government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Further, the 
final rule implements a statutory amendment, and the NCUA does not have 
discretion in implementing the statutory changes to section 205(d). In 
particular, the Board does not believe that these changes will affect 
its existing agreements and division of supervisory responsibilities 
with state regulatory agencies. The Board expects to continue to 
coordinate with these agencies as appropriate in carrying out its 
responsibilities under section 205(d) and related provisions. 
Therefore, the Board has determined that this rule does not constitute 
a policy that has federalism implications for purposes of the executive 
order.

Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this final rule may affect family 
well-being positively within the meaning of section 654 of the Treasury 
and General Government Appropriations Act, 1999, Public Law 105-277, 
112 Stat. 2681 (1998). In particular, the NCUA has reviewed the 
criteria specified in section 654(c)(1) of that act, by evaluating 
whether this final regulatory action (1) affects the stability or 
safety of the family, particularly in terms of marital commitment; (2) 
affects the authority of parents in the education, nurture, and 
supervision of their children; (3) helps the family perform its 
functions; (4) affects disposable income or poverty of families and 
children; (5) only financially impacts families, if at all, to the 
extent such impacts are justified; (6) may be carried out by state or 
local government or by the family; or (7) establishes a policy 
concerning the relationship between the behavior and personal 
responsibility of youth and the norms of society. Under this statute, 
if the agency determines the regulation may negatively affect family 
well-being, then the agency must provide an adequate rationale for its 
implementation.
    The final rule implements legislative amendments that increase 
employment opportunities for individuals with certain older or minor 
criminal offenses involving dishonesty or breach of trust. These 
increased employment opportunities may strengthen the stability of 
families, help families perform their functions, and increase 
disposable income. These changes are not likely to affect the rights of 
parents in the education or nurture of their children. The changes call 
for Federal rather than state or local government action because the 
legislation affects the Federal statute governing all federally insured 
credit unions. The Board also notes that it has limited discretion in 
whether and how to implement the legislative amendments and thus cannot 
substantially vary from the legislation. The Board has determined that 
this final rule may affect family well-being positively within the 
meaning of this statute.\55\
---------------------------------------------------------------------------

    \55\ Public Law 105-277, 112 Stat. 2681 (1998).
---------------------------------------------------------------------------

Small Business Regulatory Enforcement Fairness Act--Congressional 
Review Act

    The Congressional Review chapter of the Small Business Regulatory 
Enforcement Fairness Act of 1996 generally provides for congressional 
review of agency rules.\56\ A reporting requirement is triggered in 
instances where the NCUA issues a final rule as defined in the 
Administrative Procedure Act.\57\ Besides being subject to 
congressional oversight, an agency rule may also be subject to a 
delayed effective date if it is a ``major rule.'' The NCUA does not 
believe this rule is a ``major rule'' within the meaning of the 
relevant sections of the statute. As required by the statute, the NCUA 
will submit this final rule OMB for it to determine if this final rule 
is a ``major rule'' for purposes of the statute. The NCUA also will 
file appropriate reports with Congress and the U.S. Government 
Accountability Office so this rule may be reviewed.
---------------------------------------------------------------------------

    \56\ 5 U.S.C. 551.
    \57\ Id.
---------------------------------------------------------------------------

List of Subjects

12 CFR Part 701

    Administrative practice and procedure, Credit, Credit unions.

12 CFR Part 741

    Bank deposit insurance, Credit unions, Reporting and recordkeeping 
requirements.

12 CFR Part 746

    Administrative practice and procedure, Claims, Credit unions, 
Investigations.

12 CFR Part 748

    Computer technology, Confidential business information, Credit 
unions, Internet, Personally identifiable information, Privacy, 
Reporting and recordkeeping requirements, Security measures.

12 CFR Part 752

    Administrative practice and procedure.

    By the NCUA Board on September 19, 2024.
Melane Conyers-Ausbrooks,
Secretary of the Board.

    For the reasons discussed in the preamble, the Board amends 12 CFR 
chapter VII as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

0
1. The authority citation for part 701 continues to read as follows:

    Authority:  12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 
1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789. 
Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 
is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 
3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.


0
2. Amend Sec.  701.14 by revising paragraphs (c)(1), (c)(3)(iii), and 
the second sentence in paragraph (e) to read as follows:


Sec.  701.14  Change in official or senior executive officer in credit 
unions that are newly chartered or are in troubled condition.

* * * * *
    (c) * * *
    (1) Prior notice requirement. An insured credit union must give the 
NCUA written notice at least 30 days before the effective date of 
adding or replacing any member of its board of directors or committee 
member, employing any person as a senior executive officer of the 
credit union, or changing the responsibilities of a board member, 
committee member, or a senior executive officer so that the person 
would assume a different position if:
    (i) The credit union has been chartered for less than 2 years; or
    (ii) The credit union meets the definition of troubled condition in 
paragraph (b)(3) or (4) of this section.
* * * * *
    (3) * * *
    (iii) Processing. Within 15 calendar days after receiving the 
notice, the Regional Director will inform the credit union either that 
the notice is complete or that additional, specified information is 
needed and must be submitted within 30 calendar days. If the initial 
notice is complete, the Regional Director will issue a written decision 
of approval or disapproval to the individual and the credit union 
within 30 calendar days of receipt of the notice. If the initial notice 
is not complete, the Regional Director will issue a written decision 
within 30 calendar days of receipt of the original notice plus the 
amount of time the credit union takes to provide the

[[Page 79393]]

requested additional information. If the additional information is not 
submitted within 30 calendar days of the Regional Director's request, 
the Regional Director may either disapprove the proposed individual or 
review the notice based on the information provided. If the credit 
union and the individual have submitted all requested information and 
the Regional Director has not issued a written decision within the 
applicable time period, the individual is approved. Regional Director 
communications may be done through electronic mail.
* * * * *
    (e) * * * The Notice of Disapproval will identify the reason(s) for 
the denial and advise the parties of their rights to request 
reconsideration from the Regional Director and/or file an appeal with 
the NCUA Board in accordance with the procedures set forth in 12 CFR 
part 746, subpart B.

0
3. Amend appendix A to part 701, under the heading ``Official NCUA 
Commentary--Federal Credit Union Bylaws,'' under ``Article V. 
Elections,'' by revising paragraph i.(b) to read as follows:

Appendix A to Part 701--Federal Credit Union Bylaws

* * * * *

Official NCUA Commentary--Federal Credit Union Bylaws

* * * * *

Article V. Elections

    i. * * *
    (b) The individual cannot have been convicted of a crime covered 
under section 205(d) of the Federal Credit Union Act (12 U.S.C. 
1785(d)) unless the NCUA Board has waived the prohibition for the 
conviction; and
* * * * *

PART 741--REQUIREMENTS OF INSURANCE

0
4. The authority citation for part 741 continues to read as follows:

    Authority: 12 U.S.C. 1757, 1766(a), 1781-1790, and 1790d; 31 
U.S.C. 3717.


0
5. Amend Sec.  741.3 by revising the second sentence of paragraph (c) 
to read as follows:


Sec.  741.3  Criteria.

* * * * *
    (c) * * * No person shall serve as a director, officer, committee 
member, or employee of an insured credit union who has been convicted 
of a crime covered under section 205(d) of the Federal Credit Union Act 
(12 U.S.C. 1785(d)), except with the written consent of the Board.
* * * * *

PART 746--APPEALS PROCEDURES

0
6. The authority citation for part 746 continues to read as follows:

    Authority: 12 U.S.C. 1766, 1787, and 1789.


Sec.  746.201  [Amended]

0
7. Amend Sec.  746.201, in paragraph (c), by adding ``752.11(b),'' 
between ``745.201(c),'' and ``subpart J to part 747 of this chapter,''.

PART 748--SECURITY PROGRAM, SUSPICIOUS TRANSACTIONS, CATASTROPHIC 
ACTS, CYBER INCIDENTS, AND BANK SECRECY ACT COMPLIANCE

0
8. The authority citation for part 748 continues to read as follows:

    Authority:  12 U.S.C. 1766(a), 1786(b)(1), 1786(q), 1789(a)(11); 
15 U.S.C. 6801-6809; 31 U.S.C. 5311 and 5318.


0
9. Amend appendix B to part 748 by revising footnote 7 to read as 
follows.

Appendix B to Part 748--Guidance on Response Programs for Unauthorized 
Access to Member Information and Member Notice

* * * * *
    \7\ Credit unions must also conduct background checks of 
employees to ensure that the credit union does not violate 12 U.S.C. 
1785(d), which prohibits a credit union from hiring an individual 
convicted of certain criminal offenses or who is subject to a 
prohibition order under 12 U.S.C. 1786(g).
* * * * *

0
10. Add part 752 to read as follows:

PART 752--CONSENT TO SERVICE OF PERSONS CONVICTED OF, OR WHO HAVE 
PROGRAM ENTRIES FOR, CERTAIN CRIMINAL OFFENSES

Sec.
752.1 What is section 205(d) of the FCU Act?
752.2 Who is covered by section 205(d)?
752.3 Which offenses qualify as ``Covered Offenses'' under section 
205(d)?
752.4 What constitutes a conviction under section 205(d)?
752.5 What constitutes a pretrial diversion or similar program under 
section 205(d)?
752.6 What are the types of applications that can be filed?
752.7 When may an application be filed?
752.8 What is the de minimis exemption?
752.9 How does an individual or a credit union file an application?
752.10 How will the NCUA evaluate an application?
752.11 What will the NCUA do if the application is denied?

    Authority: 12 U.S.C. 1785(d).


Sec.  752.1.  What is section 205(d) of the Federal Credit Union Act?

    (a) This part covers applications under section 205(d) of the 
Federal Credit Union Act (FCU Act), 12 U.S.C. 1785(d). The NCUA refers 
to such applications as ``consent applications.'' Under section 205(d), 
any person who has been convicted of any criminal offense involving 
dishonesty or breach of trust, or has agreed to enter into a pretrial 
diversion or similar program (program entry) in connection with a 
prosecution for such offense (collectively, Covered Offenses), may not 
become, or continue as, an institution-affiliated party (IAP) of an 
insured credit union; or otherwise participate, directly or indirectly, 
in the conduct of the affairs of any insured credit union without the 
prior written consent of the NCUA. Section 205(d) imposes a ten-year 
ban against the Board granting consent for a person convicted of 
certain crimes enumerated in title 18 of the United States Code 
(U.S.C.). In order for the Board to grant consent during the 10-year 
period, the Board must file a motion with, and obtain the approval of, 
the sentencing court.
    (b) In addition, the law prohibits an insured credit union from 
permitting such a person to engage in any conduct or to continue any 
relationship prohibited by section 205(d). Insured credit unions must 
therefore make a reasonable, documented, inquiry to verify an 
applicant's history to ensure that a person who has a Covered Offense 
under section 205(d) is not hired or permitted to participate in its 
affairs without the written consent of the NCUA issued under this 
subpart. Insured credit unions may extend a conditional offer of 
employment contingent on the completion of a background check 
satisfactory to the credit union to determine if the applicant is 
prohibited under section 205(d), but the applicant may not work for, be 
employed by, or otherwise participate in the affairs of the insured 
credit union until the credit union has determined that the applicant 
is not prohibited under section 205(d) (including persons who have had 
a consent application approved).
    (c) If there is a conviction or program entry covered by the 
prohibitions of section 205(d), an application under this subpart must 
be filed seeking the NCUA's consent to become, or to continue as, an 
IAP; or to otherwise participate, directly or indirectly, in the 
affairs of the insured credit union. The application must be filed, and 
consented to, prior to serving in any of the foregoing capacities 
unless such application is not required under the subsequent provisions 
of this subpart. The purpose of an application is to provide the 
applicant an opportunity to

[[Page 79394]]

demonstrate that, notwithstanding the prohibition, a person is fit to 
participate in the conduct of the affairs of an insured credit union 
without posing a risk to its safety and soundness or impairing public 
confidence in that credit union. The burden is upon the applicant to 
establish that the application warrants approval.
    (d) The term field office, for purposes of this subpart, means a 
Regional Office or the Office of National Examinations and Supervision, 
as described in 12 CFR 790.2.


Sec.  752.2  Who is covered by section 205(d)?

    (a) Persons covered by section 205(d) include IAPs, as defined by 
12 U.S.C. 1786(r), and others who are participants in the conduct of 
the affairs of an insured credit union. Therefore, all directors, 
officers, and employees of an insured credit union who fall within the 
scope of section 205(d), including de facto employees, as determined by 
the NCUA based upon generally applicable standards of employment law, 
will also be subject to section 205(d). Whether other persons are 
covered by section 205(d) depends upon their degree of influence or 
control over the management or affairs of an insured credit union. For 
example, section 205(d) would apply to directors and officers of 
affiliates, subsidiaries, or joint ventures of an insured credit union 
if they participate in the affairs of the insured credit union or are 
able to influence or control the management or affairs of the insured 
credit union. Typically, an independent contractor does not have a 
relationship with the insured credit union other than the activity for 
which the credit union has contracted. However, an independent 
contractor who also influences or controls the management or affairs of 
the insured credit union would be covered by section 205(d).
    (b) The term person, for purposes of section 205(d), means an 
individual and does not include a corporation, firm, or other business 
entity.


Sec.  752.3  Which offenses qualify as ``Covered Offenses'' under 
section 205(d)?

    (a) Categories of Covered Offenses. The conviction or program entry 
must be for a criminal offense involving dishonesty or breach of trust.
    (1) The term criminal offense involving dishonesty--
    (i) Means an offense under which an individual, directly or 
indirectly--
    (A) Cheats or defrauds; or
    (B) Wrongfully takes property belonging to another in violation of 
a criminal statute;
    (ii) Includes an offense that Federal, state, or local law defines 
as dishonest, or for which dishonesty is an element of the offense; and
    (iii) Does not include--
    (A) A misdemeanor criminal offense committed more than 1 year 
before the date on which an individual files a consent application, 
excluding any period of incarceration; or
    (B) An offense involving the possession of controlled substances. 
At a minimum, this exclusion applies to criminal offenses involving the 
simple possession of a controlled substance and possession with intent 
to distribute a controlled substance. This exclusion may also apply to 
other drug-related offenses depending on the statutory elements of the 
offenses or from court determinations that the statutory provisions of 
the offenses do not involve dishonesty or breach of trust as noted in 
paragraph (b) of this section. Potential applicants may contact their 
appropriate NCUA field office if they have questions about whether 
their offenses are covered under section 205(d).
    (iv) The term offense committed in paragraph (a)(1)(iii)(A) of this 
section means the last date of the underlying misconduct. In instances 
with multiple offenses, offense committed means the last date of any of 
the underlying offenses.
    (2) The term breach of trust means a wrongful act, use, 
misappropriation, or omission with respect to any property or fund that 
has been committed to a person in a fiduciary or official capacity, or 
the misuse of one's official or fiduciary position to engage in a 
wrongful act, use, misappropriation, or omission.
    (b) Elements of the offense. Whether a crime involves dishonesty or 
breach of trust will be determined from the statutory elements of the 
offense itself or from court determinations that the statutory 
provisions of the offense involve dishonesty or breach of trust.
    (c) Certain older offenses excluded--(1) Exclusions for certain 
older offenses. Section 205(d) does not apply to an offense if--
    (i) It has been 7 years or more since the offense occurred; or
    (ii) The individual was incarcerated with respect to the offense, 
and it has been 5 years or more since the individual was released from 
incarceration.
    (iii) The term offense occurred means the last date of the 
underlying misconduct. In instances with multiple Covered Offenses, 
offense occurred means the last date of any of the underlying offenses.
    (2) Offenses committed by individuals 21 years of age or younger. 
For individuals who committed an offense when they were 21 years of age 
or younger, section 205(d) does not apply to the offense if it has been 
more than 30 months since the sentencing occurred. The term sentencing 
occurred means the date on which a court imposed the sentence (as 
indicated by the date on the court's sentencing order), not the date on 
which all conditions of sentencing were completed.
    (3) Limitation. This paragraph (c) does not apply to an offense 
described under 12 U.S.C. 1785(d)(2).
    (d) Foreign convictions. Individuals who are convicted of, or enter 
into a pretrial diversion program for, a criminal offense involving 
dishonesty or breach of trust in any foreign jurisdiction are subject 
to section 205(d), unless the offense is otherwise excluded by this 
subpart.


Sec.  752.4  What constitutes a conviction under section 205(d)?

    (a) Convictions requiring an application. There must be a 
conviction of record. Section 205(d) does not cover arrests or pending 
cases not brought to trial, unless the person has a program entry as 
set out in Sec.  752.5. Section 205(d) does not cover acquittals or any 
conviction that has been reversed on appeal, unless the reversal was 
for the purpose of re-sentencing. A conviction with regard to which an 
appeal is pending requires an application. A conviction for which a 
pardon has been granted requires an application.
    (b) Convictions not requiring an application. When an individual is 
charged with a Covered Offense and, in the absence of a program entry 
as set out in Sec.  752.5, is subsequently convicted of an offense that 
is not a Covered Offense, the conviction is not subject to section 
205(d).
    (c) Expungement, dismissal, and sealing. A conviction is not 
considered a conviction of record and does not require an application 
if--
    (1) There is an order of expungement, sealing, or dismissal that 
has been issued regarding the conviction in connection with such 
offense, or if a conviction has been otherwise expunged, sealed, or 
dismissed by operation of law; and
    (2) It is intended by the language in the order itself, or in the 
legislative provisions under which the order was issued, or in other 
legislative provisions, that the conviction shall be destroyed or 
sealed from the individual's state, Tribal, or Federal record, even if 
exceptions allow the conviction to be considered for certain character 
and fitness evaluation purposes.

[[Page 79395]]

    (d) Youthful offenders. An adjudication by a court against a person 
as a ``youthful offender'' (or similar term) under any youth-offender 
law applicable to minors as defined by state law, or any judgment as a 
``juvenile delinquent'' (or similar term) by any court having 
jurisdiction over minors as defined by state law, does not require an 
application. Such an adjudication does not constitute a matter covered 
under section 205(d) and is not a conviction or program entry for 
determining the applicability of Sec.  752.8.


Sec.  752.5  What constitutes a pretrial diversion or similar program 
under section 205(d)?

    (a) The term ``pretrial diversion or similar program'' (program 
entry) means a program characterized by a suspension or eventual 
dismissal or reversal of charges or criminal prosecution upon agreement 
by the accused to restitution, drug or alcohol rehabilitation, anger 
management, or community service. Whether the outcome of a case 
constitutes a program entry is determined by relevant Federal, state, 
or local law, and, if not so designated under applicable law, then the 
determination of whether a disposition is a program entry will be made 
by the Board on a case-by-case basis.
    (b) When a Covered Offense either is reduced by a program entry to 
an offense that would otherwise not be covered by section 205(d) or is 
dismissed upon successful completion of a program entry, the offense 
remains a Covered Offense for purposes of section 205(d). The Covered 
Offense will require an application unless it is de minimis as provided 
by Sec.  752.8.
    (c) Expungements, dismissals, or sealings of program entries will 
be treated the same as those for convictions.


Sec.  752.6  What are the types of applications that can be filed?

    (a) The NCUA will accept applications from--
    (1) An individual; or
    (2) An insured credit union applying on behalf of an individual.
    (b) An individual or an insured credit union may file applications 
at separate times. Under either approach, the application(s) must be 
filed with the appropriate NCUA field office, as required by this part.


Sec.  752.7  When may an application be filed?

    Except for situations in which no application is required under 
section 205(d) and this subpart, an application must be filed when 
there is a conviction by a court of competent jurisdiction for a 
Covered Offense by any adult or minor treated as an adult or when such 
person has a program entry regarding that offense. Before an 
application may be filed, all of the sentencing requirements associated 
with a conviction, or conditions imposed by the program entry, 
including but not limited to, imprisonment, fines, conditions of 
rehabilitation, and probation requirements, must be completed, and the 
case must be considered final by the procedures of the applicable 
jurisdiction. The NCUA's application forms as well as additional 
information concerning section 205(d) can be accessed on the NCUA's 
website.


Sec.  752.8  What is the de minimis exemption?

    (a) In general. The prohibitions of section 205(d) will not apply, 
and an application will therefore not be required, where all of the 
following de minimis criteria are met. (Paragraph (b)(4) of this 
section contains separate exemption criteria from paragraphs (a) 
through (b)(3) of this section, and an offense that qualifies for 
exemption under paragraph (b)(4) is excluded from consideration in the 
criteria of paragraphs (a) through (b)(3).)
    (1) The individual has been convicted of, or has program entries 
for, no more than two Covered Offenses, including those subject to 
paragraphs (b)(1) through (3) of this section; and for each Covered 
Offense, all of the sentencing requirements associated with the 
conviction, or conditions imposed by the program entry, have been 
completed (the sentence- or program-completion requirement does not 
apply under paragraph (b)(2) of this section).
    (2) For each Covered Offense, the individual could have been 
sentenced to a term of confinement in a correctional facility of 3 
years or less and/or a fine of $2,500 or less, and the individual 
actually served 3 days or less of jail time for each Covered Offense.
    (3) Jail time under paragraph (a)(2) of this section is calculated 
based on the time an individual spent incarcerated as a punishment or a 
sanction--not as pretrial detention--and does not include probation or 
parole where an individual was restricted to a particular jurisdiction 
or was required to report occasionally to an individual or a specific 
location. Jail time includes confinement to a psychiatric treatment 
center in lieu of a jail, prison, or house of correction on mental-
competency grounds. The definition is not intended to include either of 
the following: persons who are restricted to a substance-abuse 
treatment program facility for part or all of the day; or persons who 
are ordered to attend outpatient psychiatric treatment.
    (4) If there are two convictions or program entries for a Covered 
Offense, each conviction or program entry was entered at least 3 years 
prior to the date an application would otherwise be required, except as 
provided in paragraph (b)(1) of this section.
    (5) Each Covered Offense must not have been committed against an 
insured depository institution or insured credit union.
    (b) Other types of offenses for which the de minimis exemption 
applies and no application is required--(1) Age of person at time of 
Covered Offense. If there are two convictions or program entries for a 
Covered Offense, and the actions that resulted in both convictions or 
program entries all occurred when the individual was 21 years of age or 
younger, then the de minimis criteria in paragraph (a)(4) of this 
section will be met if the convictions or program entries were entered 
at least 18 months prior to the date an application would otherwise be 
required. For this reduction in waiting time to apply, the convictions 
or program entries must meet the other de minimis criteria in paragraph 
(a) of this section.
    (2) Convictions or program entries for insufficient funds checks. 
The prohibitions of section 205(d) will not apply, and an application 
will therefore not be required, as to convictions or program entries of 
record based on the writing of ``bad'' or insufficient funds check(s) 
if the following conditions apply:
    (i) The aggregate total face value of all ``bad'' or insufficient 
funds check(s) cited across all the conviction(s) or program entry(ies) 
for ``bad'' or insufficient funds checks is $2,000 or less;
    (ii) No insured depository institution or insured credit union was 
a payee on any of the ``bad'' or insufficient funds checks that were 
the basis of the conviction(s) or program entry(ies); and
    (iii) The individual has no more than one other de minimis offense 
under this section.
    (3) Convictions or program entries for small-dollar, simple theft. 
The prohibitions of section 205(d) will not apply, and an application 
will therefore not be required, as to convictions or program entries 
based on the simple theft of goods, services, or currency (or other 
monetary instrument) if the following conditions apply:
    (i) The value of the currency, goods, or services taken was $1,000 
or less;
    (ii) The theft was not committed against an insured depository 
institution or insured credit union;

[[Page 79396]]

    (iii) The individual has no more than one other offense that is 
considered exempt under this section; and
    (iv) If there are two offenses--each of which, by itself, is 
considered exempt under this section, each conviction or program entry 
was entered at least 3 years prior to the date an application would 
otherwise be required, or at least 18 months prior to the date an 
application would otherwise be required if the actions that resulted in 
the conviction or program entry all occurred when the individual was 21 
years of age or younger.
    (v) Simple theft excludes burglary, forgery, robbery, identity 
theft, and fraud.
    (4) Convictions or program entries for using fake identification, 
shoplifting, trespassing, fare evasion, or driving with an expired 
license or tag. The prohibitions of section 205(d) will not apply, and 
an application will therefore not be required, as to the following 
offenses, if 1 year or more has passed since the applicable conviction 
or program entry: using fake identification; shoplifting; trespassing; 
fare evasion; and driving with an expired license or tag.
    (c) Non-qualifying convictions or program entries. No conviction or 
program entry for a violation of the Title 18 sections set out in 12 
U.S.C. 1785(d)(2) can qualify under any of the de minimis exemptions 
set out in this section.


Sec.  752.9  How does an individual or a credit union file an 
application?

    Forms and instructions can be obtained from the NCUA's website 
(www.ncua.gov), and the application(s) must be filed with the 
appropriate field office Director. An application may be filed by an 
individual or by an insured credit union on behalf of an individual, or 
by both. The appropriate field office for a credit union-sponsored 
application is the office covering the state where the insured credit 
union's home office is located, or the Office of National Examinations 
and Supervision. The appropriate field office for an application filed 
by an individual is the office covering the state where the person 
resides. States covered by each NCUA field office are listed in 12 CFR 
790.2.


Sec.  752.10  How will the NCUA evaluate an application?

    (a) Criminal history records. In reviewing an application, the NCUA 
will--
    (1) Primarily rely on the criminal history record provided by the 
Federal Bureau of Investigation (rap sheet); and
    (2) Provide such record to the subject of the application to review 
for accuracy.
    (b) Certified copies. The NCUA will not require an applicant to 
provide certified copies of criminal history records unless the NCUA 
determines that there is a clear and compelling justification to 
require additional information to verify the accuracy of the criminal 
history record provided by the Federal Bureau of Investigation.
    (c) Ultimate determinations. The ultimate determinations in 
assessing an application are whether the person has demonstrated their 
fitness to participate in the conduct of the affairs of an insured 
credit union, and whether the affiliation or participation by the 
person in the conduct of the affairs of the credit union may constitute 
a threat to the safety and soundness of the credit union or the 
interests of its members or threaten to impair public confidence in the 
credit union.
    (d) Individualized assessment. When evaluating applications, the 
NCUA will conduct an individualized assessment that will consider:
    (1) Whether the conviction or program entry is subject to section 
205(d) and the specific nature and circumstances of the offense;
    (2) Whether the participation directly or indirectly by the person 
in any manner in the conduct of the affairs of the insured credit union 
constitutes a threat to the safety and soundness of the credit union or 
the interests of its members or threatens to impair public confidence 
in the credit union;
    (3) Evidence of rehabilitation including the person's age at the 
time of the conviction or program entry, the time that has elapsed 
since the conviction or program entry, and the relationship of the 
individual's offense to the responsibilities of the applicable 
position;
    (4) The individual's employment history, letters of recommendation, 
certificates documenting participation in substance-abuse programs, 
successful participation in job preparation and educational programs, 
and other relevant evidence;
    (5) The ability of management of the insured credit union to 
supervise and control the person's activities;
    (6) The applicability of the insured credit union's fidelity bond 
coverage to the person; and
    (7) For state-chartered, federally insured credit unions, the 
opinion or position of the state regulator; and
    (8) Any additional factors in the specific case that appear 
relevant to the application or the individual.
    (e) No re-consideration of guilt. The question of whether a person, 
who was convicted of a crime or who agreed to a program entry, was 
guilty of that crime will not be at issue in a proceeding under this 
part or under 12 CFR part 746, subpart B.
    (f) Factors considered for enumerated offenses. The foregoing 
factors will also be applied by the NCUA to determine whether the 
interests of justice are served in seeking an exception in the 
appropriate court when an application is made to terminate the 10-year 
ban prior to its expiration date under 12 U.S.C. 1785(d)(2)(A) for 
certain Federal offenses.
    (g) Mandatory conditions of approval. All approvals or orders will 
be subject to the condition that the person be covered by a fidelity 
bond to the same extent as others in similar positions. If the NCUA has 
approved an application filed by an individual and has issued a consent 
order, the individual must disclose the presence of the conviction(s) 
or program entry(ies) to all insured credit unions in the affairs of 
which they wish to participate.
    (h) Credit union-sponsored consent applications: work at same 
employer. When deemed appropriate by the NCUA, credit union-sponsored 
applications are to allow the individual to work for the same employer 
(without restrictions on the location) and across positions, except 
that the prior consent of the NCUA (which may require a new 
application) will be required for any proposed significant changes in 
the individual's security-related duties or responsibilities, such as 
promotion to an officer or other positions that the employer determines 
will require higher security screening credentials.
    (i) Work at a different employer after certain approvals. In 
situations in which an approval has been granted for a person to 
participate in the affairs of a particular insured credit union and the 
person subsequently seeks to participate at another insured credit 
union, another application must be submitted and approved by the NCUA 
prior to the person participating in the affairs of the other insured 
credit union.


Sec.  752.11  What will the NCUA do if the application is denied?

    (a) The NCUA will inform the applicant in writing that the 
application has been denied and summarize or cite the relevant 
considerations specified in Sec.  752.10.
    (b) The denial will also notify the applicant of the right to 
request reconsideration from the field office, or to file an appeal 
with the Board, and will include a description of applicable

[[Page 79397]]

filing deadlines and time frames for agency responses. The field office 
and the Board will apply the review process contained in 12 CFR part 
746, subpart B, to any request for reconsideration or appeal. For 
credit union-sponsored applications, either the institution or the 
subject individual (or both, as a consolidated request) may file a 
request for reconsideration or appeal. The request for review must 
include a statement of the underlying facts that form the basis of the 
request for reconsideration or appeal, a statement of the basis for the 
denial to which the applicant objects and the alleged error in such 
denial, and any other support, materials, or evidence relied upon by 
the applicant that were not previously provided.

[FR Doc. 2024-21887 Filed 9-27-24; 8:45 am]
BILLING CODE 7535-01-P