79380 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

1 12 U.S.C. 1785(d)(1). 

[FR Doc. 2024–22081 Filed 9–27–24; 8:45 am] 

BILLING CODE 6450–01–C 

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. 

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: 

• Become, or continue as, an 

institution-affiliated party (IAP) with 

respect to any insured credit union; or 

• Otherwise participate, directly or 

indirectly, in the conduct of the affairs 

of any insured credit union.1


ddrumheller on DSK120RN23PROD with RULES1ER30SE24.001</GPH>

departments about the effect of a program on competition has been delegated to the 

Assistant Attorney General for the Antitrust Division in 28 CFR § 0.40(g). The Assistant 

Attorney General for the Antitrust Division has authorized me, as the Policy Director for 

the Antitrust Division, to provide the Antitrust Division's views regarding the potential 

impact on competition of proposed energy conservation standards on his behalf. 

In conducting its analysis, the Antitrust Division examines whether a proposed 

standard may lessen competition, for example, by substantially limiting consumer choice, 

by placing certain manufacturers at an unjustified competitive disadvantage, or by 

inducing avoidable inefficiencies in production or distribution of particular products. A 

lessening of competition could result in higher prices to manufacturers and consumers. 

We have reviewed the proposed standards contained in the Notice of Proposed 

Rulemaking (89 Fed. Reg. 43770, May 20, 2024), the Direct Final Rule (89 Fed. Reg. 

44052, May 20, 2024), and the related Technical Support Documents (TSD) that 

accompanied them. We have also reviewed the Docket and public comments filed in 

response to the related Request for Information. 

Based on this review, our conclusion is that the proposed energy conservation 

standards for air-cooled commercial package air conditions and heat pumps are unlikely 

to have a significant adverse impact on competition. 

Sincerely, 

/s/ 

David G .B. Lawrence 

Policy Director 
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79381 

2The 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). 

4 Id. 

5The 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. 

6Two 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. 

7 84 FR 65907 (Dec. 2, 2019). 

8Public Law 117–263 (Dec. 23, 2022). 

9Under 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). 

10 12 U.S.C. 1829(a). 

11See 84 FR 68353 (Dec. 16, 2019). 

12 Id.; 85 FR 51312 (Aug. 20, 2020) (FDIC 2020 

final rule). 

13 88 FR 77906 (Nov. 14, 2023). 

14 89 FR 64353 (Aug. 7, 2024). 

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

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

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. 

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. 

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. 

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

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

Coordination With the FDIC 

In the past, the NCUA has drawn on 

the FDIC’s guidance related to section 


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79382 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

15 12 U.S.C. 1785(d)(5)(I), and 12 U.S.C. 

1829(f)(9). 16The proposed rule was published in the 

Federal Register on November 7, 2023. 88 FR 76702 

(Nov. 7, 2023). 17The 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. 

18One 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. 

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. 

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

The NCUA requested comments on all 

aspects of its approach to section 205(d) 

and, specifically, the following topics: 

• the date on which a criminal 

offense ‘‘occurred’’ or was ‘‘committed;’’ 

• the date on which ‘‘sentencing 

occurred;’’ 

• whether section 205(d) 

encompasses foreign convictions and 

pretrial diversions; 

• the standard for expungements, 

sealings, and dismissals; 

• ‘‘offenses involving controlled 

substances;’’ and 

• 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 pretrialdiversion 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 

§ 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 


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Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79383 

19See 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. 

20The 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. 

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. 

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 § 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, § 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. 

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 § 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 


ddrumheller on DSK120RN23PROD with RULES1
79384 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

21See 12 U.S.C. 1785(d)(6)(B)(iii) (emphasis 

added). 

22See 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. 

24 12 U.S.C. 1785(d)(6)(B)(iii)(I). 

25See 12 U.S.C. 1785(d)(4)(A). 

26Note that these exceptions do not apply to the 

offenses described under 12 U.S.C. 1785(d)(2). 

27See 12 U.S.C. 1785(d)(4)(A)(i)(II). 28 12 U.S.C. 1785(d)(4)(A)(ii). 

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 simplepossession 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

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. 

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

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. 

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). 

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 


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

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 nonexhaustive 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 § 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 nonsubstantive modifications to § 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

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 § 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. 


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30 12 U.S.C. 1785(d)(5)(E)(i). 

31 12 U.S.C. 1785(d)(5)(E)(ii). 

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

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

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

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 § 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. 

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. 

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

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 § 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

To improve the clarity of this section, 

the final rule adds a sentence explaining 

that designated lesser offenses need not 


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Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79387 

35See proposed §§ 752.8(a)(4), (b)(2), (b)(3). 36See 12 U.S.C. 1785(d)(4)(C)(iii). 

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. 

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 

§ 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. 

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 

§ 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 

§ 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 § 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 


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79388 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

37Federally 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. 

38See 12 U.S.C. 1785(d)(5)(F). 

39 Id. 

40Under 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. 

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 § 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

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 unionsponsored 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 unionsponsored 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. 

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. 

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 


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41While 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. 

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

43 12 U.S.C. 1785(d)(5)(D). 

44 12 CFR 308.158(d). 

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

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

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 § 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

Technical or Non-Substantive 

Modifications 

In addition to the modifications to the 

proposal described above, the final rule 

includes a few minor, technical, or nonsubstantive 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 drugrelated 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 


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45 12 CFR 748, App. B. 

46The 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). 

47 12 U.S.C. 1790a. 

48 12 CFR 701.14. 

49 77 FR 45285 (July 31, 2012). 

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

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 

§ 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. 

Amendments to § 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 

§ 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 § 701.14 since 2012 when the 

Board revised the definition of troubled 

condition.49 The Board proposed to 

make minor amendments to § 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: 

• 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; 

• Increase the amount of time for 

NCUA to initially review a notice after 

its receipt from 10 calendar to 15 

calendar days; 50

• Specify that Regional Director and 

ONES Director communications under 

§ 701.14 may be done through email; 

and 

• 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 § 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 § 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 


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51See 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). 

52See 88 FR 77906. 

53 44 U.S.C. 3507(d); 5 CFR part 1320. 54NCUA IRPS 15–1, 80 FR 57512 (Sept. 24, 2015). 

possible, irrespective of whether 

additional information is requested. 

The agency did not receive any 

comments on the other amendments to 

§ 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

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. 

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 thirdparty 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. 

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 informationcollection 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 § 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: Notfor-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. 

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 


ddrumheller on DSK120RN23PROD with RULES1
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55Public Law 105–277, 112 Stat. 2681 (1998). 

56 5 U.S.C. 551. 

57 Id. 

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

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. 

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 

■ 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. 

■ 2. Amend § 701.14 by revising 

paragraphs (c)(1), (c)(3)(iii), and the 

second sentence in paragraph (e) to read 

as follows: 

§ 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 


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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. 

■ 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 

■ 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. 

■ 5. Amend § 741.3 by revising the 

second sentence of paragraph (c) to read 

as follows: 

§ 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 

■ 6. The authority citation for part 746 

continues to read as follows: 

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

§ 746.201 [Amended] 

■ 7. Amend § 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 

■ 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. 

■ 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 

* * * * * 7Credit 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). 

* * * * * 

■ 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). 

§ 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 


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79394 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

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. 

§ 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. 

§ 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. 

§ 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 § 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 § 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. 


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(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 § 752.8. 

§ 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 § 752.8. 

(c) Expungements, dismissals, or 

sealings of program entries will be 

treated the same as those for 

convictions. 

§ 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. 

§ 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. 

§ 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; 


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79396 Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 

(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. 

§ 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. 

§ 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. 

§ 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 

§ 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 


ddrumheller on DSK120RN23PROD with RULES1
Federal Register / Vol. 89, No. 189 / Monday, September 30, 2024 / Rules and Regulations 79397 

1See 12 U.S.C. 1752(5). 

2 12 U.S.C. 1787(k)(1)(A), (k)(6). 

3 12 U.S.C. 1787(k)(1)(A). 

4 12 U.S.C. 1787(k)(1)(B). The FCU Act states that 

‘‘[d]etermination of the net amount of share 

insurance . . . ‘‘shall be in accordance with such 

regulations as the Board may prescribe.’’ 

5 12 U.S.C. 1787(k)(1)(B). 

6 12 U.S.C. 1787(k)(1)(C). 

7 12 CFR part 745. 

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 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Part 745 

[NCUA–2023–0082] 

RIN 3133–AF53 

Simplification of Share Insurance 

Rules 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Final rule. 

SUMMARY: The NCUA Board (Board) is 

amending its regulations governing 

share insurance coverage. The final rule 

simplifies the share insurance 

regulations by establishing a ‘‘trust 

accounts’’ category that will provide for 

coverage of funds of both revocable 

trusts and irrevocable trusts deposited at 

federally insured credit unions (FICUs), 

provides consistent share insurance 

treatment for all mortgage servicing 

account balances held to satisfy 

principal and interest obligations to a 

lender, and increases flexibility for the 

NCUA to consider various records in 

determining share insurance coverage in 

liquidations. The changes also increase 

consistency between the FDIC’s Federal 

deposit insurance rules and the NCUA’s 

share insurance rules. 

DATES: This rule is effective on 

December 1, 2026, except for the 

amendments to 12 CFR 745.2(c)(2) 

(instruction 5), 745.3 (instruction 7), 

and 745.14 (instruction 13), which are 

effective October 30, 2024. 

FOR FURTHER INFORMATION CONTACT: 

Office of General Counsel: Thomas Zells 

and Rachel Ackmann, Senior Staff 

Attorneys; or Robert Leonard, 

Compliance Officer at (703) 518–6540 or 

by mail at National Credit Union 

Administration, 1775 Duke Street, 

Alexandria, Virginia 22314. Office of 

Credit Union Resources and Expansion 

(CURE): Paul Dibble, Consumer Access 

Program Officer; or Rita Woods, Director 

of Consumer Access at (703) 518–1150 

or by mail at National Credit Union 

Administration, 1775 Duke Street, 

Alexandria, Virginia 22314. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. General Background and Legal Authority 

A. General Background 

B. Legal Authority 

II. Simplification of Share Insurance Trust 

Rules 

A. Notice of Proposed Rulemaking 

B. Policy Objectives 

C. Background and Need for Rulemaking 

1. Evolution of Insurance Coverage of 

Funds Held in Trust Accounts 

2. Current Rules for Coverage of Funds 

Held in Trust Accounts 

3. Need for Further Rulemaking 

D. Final Rule 

E. Examples Demonstrating Coverage 

Under Current and Final Rules 

F. Discussion of Comments 

III. Amendments to Mortgage Servicing 

Account Rule 

A. Policy Objectives 

B. Background and Need for Rulemaking 

C. Final Rule 

D. Discussion of Comments 

IV. Recordkeeping Requirements 

A. Policy Objectives 

B. Background and Need for Rulemaking 

C. Final Rule 

D. Discussion of Comments 

V. Regulatory Procedures 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

C. Executive Order 13132 on Federalism 

D. Assessment of Federal Regulations and 

Policies on Families 

E. Small Business Regulatory Enforcement 

Fairness Act (Congressional Review Act) 

I. General Background and Legal 

Authority 

A. General Background 

The NCUA is an independent Federal 

agency that insures funds maintained in 

accounts of members or those otherwise 

eligible to maintain insured accounts 

(member accounts) at FICUs, protects 

the members who own FICUs, and 

charters and regulates Federal credit 

unions (FCUs). The NCUA protects the 

safety and soundness of the credit union 

system by identifying, monitoring, and 

reducing risks to the National Credit 

Union Share Insurance Fund (Share 

Insurance Fund). Backed by the full 

faith and credit of the United States, the 

Share Insurance Fund provides Federal 

share insurance to account holders in all 

FCUs and the majority of state-chartered 

credit unions. 

B. Legal Authority 

The Board has issued this final rule 

pursuant to its authority under the FCU 

Act. Under the Federal Credit Union Act 

(FCU Act), in the event of a FICU’s 

failure the NCUA is responsible for 

paying share insurance to any member, 

or to any person with funds lawfully 

held in a member account,1 up to the 

standard maximum share insurance 

amount (SMSIA), which is currently set 

at $250,000.2 The FCU Act provides that 

the NCUA Board must determine the 

amount payable consistently with 

actions taken by the FDIC under its 

deposit insurance rules.3 The FCU Act 

also grants the NCUA express authority 

to issue regulations on the 

determination of the net amount of 

share insurance paid.4 The FCU Act 

further provides that ‘‘in determining 

the amount payable to any member, 

there shall be added together all 

accounts in the credit union maintained 

by that member for that member’s own 

benefit, either in the member’s own 

name or in the names of others.’’ 5

However, the FCU Act also specifically 

authorizes the Board to ‘‘define, with 

such classifications and exceptions as it 

may prescribe, the extent of the share 

insurance coverage provided for 

member accounts, including member 

accounts in the name of a minor, in 

trust, or in joint tenancy.’’ 6

The NCUA has implemented these 

requirements by issuing regulations 

recognizing particular categories of 

accounts, such as single ownership 

accounts, joint ownership accounts, 

revocable trust accounts, and 

irrevocable trust accounts.7 If an 

account meets the requirements for a 

particular category, the account is 

insured, up to the $250,000 limit, 

separately from shares held by the 

member in a different account category 

at the same FICU. For example, 

provided all requirements are met, 

shares in the single ownership category 

will be separately insured from shares 

in the joint ownership category held by 

the same member at the same FICU. 

The NCUA’s share insurance 

categories have been defined through 

both statute and regulation. Certain 

categories, such as the accounts held by 


ddrumheller on DSK120RN23PROD with RULES1