[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]


-----------------------------------------------------------------------

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 712


Credit Union Service Organizations

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

-----------------------------------------------------------------------

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