209 CMR 50.05 - Application Process to Conduct Certain Activities

(1) General. A credit union that is well or adequately capitalized, and has not been notified that it is in troubled condition, may engage in any activity listed under 209 CMR 50.05(3) by submitting an application to, and receiving approval from the Commissioner before commencing the activity.
(2) Application. The application must include a complete description of the credit union's proposed activity, the credit union's investment in such activity, a description of the business purpose as well as the anticipated financial and business impact, the written policies required by 209 CMR 50.04(2), as well as a representation and undertaking that the activity will be conducted in accordance with Massachusetts and federal law. The application must also provide any other information the Commissioner may require.
(3) Activities Subject to Application and Approval. A credit union may engage in the following activities pursuant to 209 CMR 50.05(1):
(a) Temporary Branch Offices. A credit union may establish and operate a temporary branch office, to be open for less than a year, or on an intermittent basis at a designated site, subject to the investment limitations to purchase, hold and lease real estate suitable for the transaction of business, found at M.G.L. c. 171, § 75.
(b) Shared Branch Offices.
1. Authority. A credit union may establish and operate a branch office on a shared basis with one or more credit unions or federal credit unions subject to the approval of the commissioner under M.G.L. c. 171, § 8.
2. Credit Union Service Organizations. Shared branch offices may be established through a CUSO or by written agreement among two or more credit unions. Such CUSO shall comply with 209 CMR 50.08.
3. Mandatory Safeguards. Any such CUSO or agreement shall establish adequate safeguards relative to credit union liability for employee breaches of member confidentiality; loss against fraud or dishonesty; and any other risks associated with the operation of a shared branch office.
4. Maximum Investment. Shared branch offices shall be subject to the investment limitations to purchase, hold and lease real estate suitable for the transaction of business, found at M.G.L. c. 171, § 75 and 209 CMR 50.06(3)(e) and 50.07(2)(i). In the event of a conflict between the investment limitations of M.G.L. c. 171, § 75 and the maximum investment limitations of 209 CMR 50.08(2)(a)1.a. and b. governing CUSOs, the former provision shall control.
(c) Community Development Investments.
1. Investments in Community Development Credit Unions. A credit union may, individually or with other credit unions or federal credit unions, make deposits in, invest in, or lend to, a state or federally chartered credit union designated as a community development or low-income credit union located in the Commonwealth. A credit union's total deposits, investments and loans to all community development credit unions shall not exceed, in the aggregate, 5% of its total paid in and unimpaired capital and surplus, as of its last calendar year-end financial report.
2. Community Development Loan Pools. A credit union may, with other state or federally-chartered credit unions or banks, invest in, or lend to, a residential mortgage loan pool designed to promote affordable housing for low to moderate income persons residing in the Commonwealth for the purpose of meeting its obligations under the Massachusetts Community Reinvestment Act, M.G.L. c. 167, § 14. Such investments and loans shall not exceed, in the aggregate, 5% of the credit union's total paid in and unimpaired capital and surplus, as of its last calendar year-end financial report. Credit unions shall comply with the member business lending provisions found in NCUA Rules and Regulations Part 723 when lending to mortgage loan pools.
(d) Employee Benefits Funded by Impermissible Investments. A credit union may provide employee benefits, including retirement benefits, to its employees and officers, individually or collectively with other credit unions, that are funded by impermissible investments. The kind and amount of these benefits must be reasonable given the credit union's size, financial condition, and the duties of the employees. A credit union investment to fund an employee benefit plan obligation is not subject to the investment limitations of M.G.L. c. 171 and may purchase an investment that would otherwise be impermissible if the investment is directly related to the credit union's obligation or potential obligation under the employee benefit plan and the credit union holds the investment only for as long as it has an actual or potential obligation under the employee benefit plan. All activities under 209 CMR 50.05(3)(d) shall conform to the procedural and substantive requirements of 12 CFR § 701.19.
(e) Derivatives Authority. A credit union may engage in derivatives activities as authorized pursuant to 12 CFR § 703, Subpart B. The credit union shall meet the eligibility standards pursuant to 12 CFR § 703.108(a), and all activities under 209 CMR 50.05(3)(e) shall conform to the procedural and substantive requirements of 12 CFR § 703, Subpart B and 12 CFR § 741.219(b).
(f) Pilot Investment Program. A credit union that is well capitalized and has not been notified that it is in troubled condition may apply to and receive written approval from the Commissioner to participate in a pilot investment program. The application must address the items outlined in 12 CFR § 703.19(b)(1) through 703.19(b)(9). In approving a credit union's application for participation in a pilot program, the Commissioner may impose such terms and conditions as he or she deems necessary.
(g) Secondary Capital. A credit union designated in writing as "low income" by the Division of Banks and NCUA pursuant to 12 CFR § 741.204(b) may accept secondary capital accounts in accordance with 12 CFR § 701.34(b). Before accepting secondary capital, the low-income credit union must adopt a written Secondary Capital Plan that addresses the criteria stated in 12 CFR 701.34(b)(1) and submit the plan for approval to the Commissioner and NCUA. The credit union shall conform to all other procedural and substantive requirements of 12 CFR § 701.34(b), 701.34(c), and 701.34(d).
(h) Private Label Investments. A credit union may invest in private label mortgage-related securities, as authorized pursuant to 12 CFR § 703.14(a). All activities under 209 CMR 50.05(3)(h) shall conform to the procedural and substantive requirements of 12 CFR § 703, Subpart A, and such investments shall be made in accordance with a detailed written policy approved and reviewed annually by the credit union's directors.
(i) Additional Powers.
1. General. The authorities provided in 209 CMR 50.05(3)(i) are only for those activities listed. A credit union may engage in other activities if they are permitted and determined by the NCUA to be incidental powers pursuant 12 CFR § 721 pursuant to regulations, guidelines or written opinions of the General Counsel of the NCUA only if the Commissioner affirmatively determines by regulation or in writing that the activity is reasonably related to an individual power set out in 209 CMR 50.05(3)(i).
2. Permissible Activities.
a. Certain Correspondent Services.
i. Internal Audits. A credit union may perform internal audits for other credit unions.
ii. Other Services. A credit union may provide the following correspondent services to other credit unions: loan processing, loan servicing, member check cashing services, disbursing share withdrawals and loan proceeds, cashing andselling money orders, and automated teller machine deposit services.
b. Trustee or Custodial Services through Outside Vendors. A credit union may offer trustee or custodial services as defined at 12 CFR § 721.3 either directly or through outside vendors.

Notes

209 CMR 50.05
Amended by Mass Register Issue 1319, eff. 8/12/2016.

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