[Federal Register Volume 64, Number 119 (Tuesday, June 22, 1999)]
[Rules and Regulations]
[Pages 33187-33188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15648]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 712


Credit Union Service Organizations

AGENCY: National Credit Union Administration (NCUA).

ACTION: Interim final rule with request for comments.

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SUMMARY: The interim final rule provides a grandfather exemption for 
real estate brokerage services if a credit union service organization 
(CUSO) was providing that service prior to April 1, 1998, and requests 
comment on that exemption and whether real estate brokerage services 
should be reinstated as a permissible CUSO service.

DATES: This rule is effective July 22, 1999. Comments must be received 
on or before August 20, 1999.

ADDRESSES: Comments should be directed to Becky Baker, Secretary of the 
Board. Mail or hand-deliver comments to: National Credit Union 
Administration, 1775 Duke Street, Alexandria, Virginia 22314-3428. Fax 
comments to (703) 518-6319. Please send comments by one method only. 

FOR FURTHER INFORMATION CONTACT: Mary Rupp, Staff Attorney, Office of 
General Counsel, at the above address or telephone (703) 518-6540; or 
Linda Groth, Program Officer, Office of Examination and Insurance, at 
the above address or telephone (703) 518-6360.

SUPPLEMENTARY INFORMATION:

Background

    On November 19, 1998, the NCUA Board requested comment on proposed 
changes to part 712 of its regulations. 63 FR 65714 (November 30, 
1998). Part 712 sets forth the requirements for FCUs investing in or 
lending to CUSOs. The NCUA Board is issuing a separate final rule 
adopting the proposed amendments.
    Although the Board did not request comment on the issue of real 
estate brokerage services, eight commenters objected to the Board's 
removal in March 1998 of real estate brokerage services from the list 
of permissible services. 12 CFR 712.6(b). The March rule allows a CUSO 
currently providing this service to continue until April 1, 2001. 12 
CFR 712.9. In the alternative, the commenters requested that CUSOs 
currently providing real estate brokerage services be permitted to 
continue these services under a grandfather provision.
    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, the Board is willing to provide a grandfather exemption for 
existing real estate brokerage CUSOs. This interim final rule amends 
Sec. 712.6(b) so that CUSOs engaged in real estate brokerage services 
prior to April 1, 1998 may continue to provide that service.
    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.
    The Board believes good cause exists to issue this provision as an 
interim final rule. The rule is relieving a regulatory burden and CUSOs 
engaging in this activity must either know that they are going to be 
allowed to continue or begin the process of closing down the business.

Amendment

    Section 712.6 is revised to allow FCUs to invest in or loan to 
CUSOs engaged in real estate brokerage services provided the CUSO was 
engaging in that activity prior to April 1, 1998.

Request for Comment

    The Board is requesting comment on the change made by this interim 
final rule providing a grandfather exemption for real estate brokerage 
CUSOs in existence prior to April 1, 1998. The Board is also requesting 
comment on whether real estate brokerage services

[[Page 33188]]

should be reinstated as a permissible CUSO activity.

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

12 CFR Part 712

    Administrative practices and procedure, Credit, Credit unions, 
Investments, Reporting and record keeping requirements.

    By the National Credit Union Administration Board on June 14, 
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. 712.6 revise paragraph (b) to read as follows:


Sec. 712.6  What activities and services are prohibited for CUSOs?

* * * * *
    (b) Real estate brokerage CUSO. An FCU may not invest in or loan to 
a CUSO engaged in real estate brokerage services, except those in 
existence prior to April 1, 1998.

[FR Doc. 99-15648 Filed 6-21-99; 8:45 am]
BILLING CODE 7535-01-U