FCU Can Provide Third-Party LoanProcessing

ALEXANDRIA, Va. - (09/30/04) -- In a decision that could have broadimplications, NCUA said Wednesday it has approved a request from anunnamed federal credit union to provide loan processing andunderwriting services for a major university under its incidentalpowers rule. In a new legal opinion letter, the agency said itsincidental powers rule will allow the credit union to do creditchecks, verify income and employment, ensure compliance with theUSA Patriot Act, provide decisions on loan suitability, discuss theapplications with borrowers, and send out adverse action forms fordenials, all in exchange for a fee. The services would be providedfor private loans provided by the university to students and theirparents. Even though loan processing is not expressly approvedunder the incidental power rule, it does satisfy the requirementsof the rule, specifically that the business of FCUs is "to providefinancial services to their members," NCUA said. The university andits students are within the credit union's field of membership, butwhether the students are members is not material because theservice the credit union would perform qualifies as an incidentalpower, the federal regulator said.