[Federal Register Volume 64, Number 227 (Friday, November 26, 1999)]
[Rules and Regulations]
[Pages 66360-66361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30693]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 712
Credit Union Service Organizations
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: The final rule reinstates real estate brokerage services as a
permissible credit union service organization (CUSO) service. Because
the existing real estate brokerage CUSOs do not appear to present a
safety and soundness risk and the commenters have stated persuasively
that there are sufficient safeguards in place to deal with any
potential conflicts, the Board is reinstating real estate brokerage
services as permissible CUSO service.
DATES: This rule is effective December 27, 1999.
FOR FURTHER INFORMATION CONTACT: Mary Rupp, Staff Attorney, Office of
General Counsel, at the above address or telephone (703) 518-6540.
SUPPLEMENTARY INFORMATION:
Background
In March 1998, the NCUA Board removed real estate brokerage
services from the list of permissible CUSO services. 12 CFR 712.6(b).
On November 19, 1998, the NCUA Board requested
[[Page 66361]]
comment on proposed changes to part 712 of its regulations. 63 FR 65714
(November 30, 1998). Although the Board did not request comment on the
issue of real estate brokerage services, eight commenters objected to
its removal. Based on the comments, the NCUA Board issued an interim
final rule that provided a grandfather exemption for real estate
brokerage services if a CUSO was providing that service prior to April
1, 1998. 64 FR 33187 (June 22, 1999). The interim final rule also
requested comment on that exemption and whether real estate brokerage
services should be reinstated as a permissible activity.
Summary of Comments
The NCUA Board received sixteen comments on the interim final rule:
ten from credit unions; two from credit union trade associations; two
from state leagues; one from a CUSO trade; and one from a bank trade
association. Fifteen of the sixteen commenters were in favor of
reinstating real estate brokerage service as a permissible service.
The only negative commenter was a bank trade group. That commenter
stated that allowing a CUSO into the ``real estate service arena''
results in unfair competition because of credit unions' tax advantages.
Some of the reasons stated throughout the comment letters in
support of reinstating the service were: there is no evidence that the
service presents a safety and soundness risk; if a safety and soundness
concern arises with respect to a particular CUSO, NCUA has within its
supervisory power the authority to require a credit union to divest
itself of the investment; the real estate brokerage services of a CUSO
are monitored by state licensing authorities; the CUSO must comply with
the code of ethics and standards of practice imposed by the National
Association of Realtors; and the service is an important member service
because it provides a convenience and possible savings to the member.
Twelve of the fourteen commenters that commented on the grandfather
provision were in favor of it. The two negative commenters were the
bank trade group discussed above and a credit union trade group. The
credit union trade group wants the grandfather exemption eliminated
because ``real estate brokerage should be reinstated as a permissible
activity for all CUSOs.''
Final Rule
The Board continues to have concerns with conflicts and the
appearance of conflicts between real estate brokerage CUSOs and the
credit unions such CUSOs serve. However, because the existing real
estate brokerage CUSOs do not appear to present a safety and soundness
risk and the commenters have stated persuasively that there are
sufficient safeguards in place to deal with any potential conflicts,
the Board is reinstating real estate brokerage services as a
permissible CUSO service. This final rule eliminates the grandfather
exemption and amends Sec. 712.5 so that CUSOs may again engage in real
estate brokerage services.
Section 712.5 allows the Board to limit or discontinue a CUSO
service if it has supervisory, legal, or safety and soundness concerns.
The Board cautions that, if a conflict between the real estate
brokerage CUSO and the FCU's loan program arises, the Board may order
the FCU to divest its investment in the real estate brokerage CUSO.
Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact any proposed regulation may
have on a substantial number of small entities (primarily those under 1
million in assets). The NCUA Board has determined and certifies that
this rule will not have a significant economic impact on a substantial
number of small credit unions. The reason for this determination is
that the amendment to the rule reduces regulatory burden. Accordingly,
the NCUA Board has determined that a Regulatory Flexibility Analysis is
not required.
Paperwork Reduction Act
This interim rule has no effect on reporting requirements in part
712.
Executive Order 12612
Executive Order 12612 requires NCUA to consider the effect of its
actions on state interests. The CUSO regulation applies only to FCUs.
Thus, the NCUA Board has determined that this interim rule does not
constitute a ``significant regulatory action'' for purposes of the
Executive Order. NCUA will continue to work with the state credit union
supervisors to achieve shared goals concerning CUSOs with both FCU and
state-chartered credit union participation.
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act of 1996
(Pub. L. 104-121) provides generally for congressional review of agency
rules. A reporting requirement is triggered in instances where NCUA
issues a final rule as defined by Section 551 of the Administrative
Procedures Act. 5 U.S.C. 551. The Office of Management and Budget has
reviewed this rule and determined that, for purposes of the Small
Business Regulatory Enforcement Fairness Act of 1996, this is not a
major rule.
List of Subjects in 12 CFR Part 712
Administrative practices and procedure, Credit, Credit unions,
Investments, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board on November
18, 1999.
Becky Baker,
Secretary of the Board.
For the reasons stated in the preamble, the NCUA amends part 712 as
follows:
PART 712--CREDIT UNION SERVICE ORGANIZATIONS
1. The authority citation for part 712 will continue to read as
follows:
Authority: 12 U.S.C. 1756, 1757(5)(D), and (7)(I), 1766, 1782,
1784, 1785 and 1786.
2. In Sec. 712.5, redesignate paragraph (p) as paragraph (q) and
add a new paragraph (p) to read as follows:
Sec. 712.5 What activities and services are preapproved for CUSOs?
* * * * *
(p) Real estate brokerage services.
* * * * *
Sec. 712.6 [Amended]
3. In Sec. 712.6, remove the designation from paragraph (a), and
remove paragraph (b).
[FR Doc. 99-30693 Filed 11-24-99; 8:45 am]
BILLING CODE 7535-01-P
