209 CMR, § 50.08 - Credit Union Service Organizations

(1) Application Process to Conduct Certain Activities Relative to CUSOs.

(a) 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 50.08(2) by submitting an application to, and receiving approval from the Commissioner before commencing the activity.

(b) 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.

(2) Activities Subject to Application and Approval. A credit union may engage in the following activities pursuant to 209 CMR 50.08(1):

(a) Investments in Credit Union Service Organizations. A credit union may, individually or with other credit unions, federal credit unions, or non-credit union parties, invest in one or more CUSOs. Investments in or loans to CUSOs are permissible only if the CUSO primarily services credit unions, its membership, or the membership of credit unions contracting with the CUSO, provided, however, with respect to any approved CUSO service as set out in 209 CMR 50.08(2)(a)2.r., this requirement is met if the CUSO primarily provides such services to persons who are eligible for membership in the credit union or are eligible for membership in credit unions contracting with the CUSO. Such investments in or loans to CUSOs shall otherwise conform to the customer base requirements of 12 CFR § 712.3(b) and shall conduct activities and services related to the routine, daily operations of a credit union. Investments in or loans to federally-chartered CUSOs are permissible only if said federally-chartered CUSO limits itself at all times to those activities that can be conducted by a state-chartered CUSO pursuant to 209 CMR 50.08(1). Investment or lending pursuant to 209 CMR 50.08(1) shall be subject to the following conditions and limitations:

1. Maximum Investment.

a. Equity Investments. A credit union may invest in the shares, stocks or obligations of any other organization, providing services which are associated with the routine operations of credit unions, up to 1% of its total paid in and unimpaired capital and surplus, as of its last calendar year-end financial report, with the approval of the Commissioner.

b. Lending. A credit union's total loans to all CUSOs shall not exceed, in the aggregate, 1% of its total paid in and unimpaired capital and surplus, as of its last calendar year-end financial report. The lending authority under 209 CMR 50.08(2)(a)1.b. is independent from the investment authority authorized under 209 CMR 50.08(2)(a)1.a.

c. Investment Limitations. The investment authorized by 209 CMR 50.08(2)(a)1.a. shall not include the power to acquire control, directly or indirectly, of another financial institution or to invest in shares, stocks or obligations of a trade association, liquidity facility or any similar organization, corporation, or association, except as otherwise expressly authorized by 12 U.S.C. § 1781 et seq. or M.G.L. c. 171.

2. Permissible Activities. A credit union may invest in, or lend to a CUSO that engages in any of the following activities:

a. Checking and Currency Services.

i. Check cashing;

ii. Coin and currency services;

iii. Money order, savings bonds, travelers checks, and purchase and sale of U.S. Mint commemorative coins services; and

iv. Stored Value Products.

b. Clerical, Professional and Management Services.

i. Accounting services;

ii. Courier services;

iii. Credit analysis;

iv. Facsimile transmissions and copying services;

v. Internal audits for credit unions;

vi.Locator services;

vii. Management and personnel training and support;

viii. Marketing services;

ix. Research services; and

x. Excess Capacity. Agreements Relative to Excess Capacity in Personnel.

A CUSO with excess capacity in its personnel may enter into an agreement to permit its employees to work elsewhere subject to the provisions of M.G.L. c. 171, § 19, and applicable state and federal law.

c. Business Loan Origination, including the authority to buy and sell participation interests in such loans.

d. Consumer Mortgage Loan Origination, including the authority to buy and sell participation interest in such loans.

e. Electronic Transaction Services.

i. Automated teller machine (ATM) services;

ii. Credit card and debit card services;

iii. Data processing;

iv. Electronic fund transfer (EFT) services;

v. Electronic income tax filing;

vi. Payment item processing;

vii. Wire transfer services; and

viii. Cyber financial services.

f. Financial Counseling Services.

i. Developing and administering Individual Retirement Accounts (IRA), Keogh, deferred compensation, and other personnel benefit plans;

ii. Estate planning;

iii. Financial planning and counseling;

iv. Income tax preparation;

v. Investment counseling; and

vi. Retirement counseling.

g. Leasing.

i. Personal property; and

ii. Real estate leasing of excess CUSO property.

h. Loan Support Services.

i. Debt collection services;

ii. Loan processing, servicing, and sales; and

iii. Sale of repossessed collateral.

i. Record Retention, Security and Disaster Recovery Services.

i. Alarm-monitoring and other security services;

ii. Disaster recovery services;

iii. Microfilm, microfiche, optical and electronic imaging, CD-ROM data storage and retrieval services;

iv. Provision of forms and supplies; and

v. Record retention and storage.

j. Student Loan Origination, including the authority to buy and sell participation interests in such loans.

k. CUSO Investments in Non-CUSO Service Providers. In connection with providing a permissible service, a CUSO may invest in a non-CUSO service provider. The amount of the CUSO's investment is limited to the amount necessary to participate in the service provider, or a greater amount if necessary to receive a reduced price for goods or services.

l. Activities Related to Routine Daily Operations. A CUSO may engage in other activities if said activities are related to the routine daily operations of credit unions as permitted by the NCUA pursuant to 12 CFR § 712.5 provided, however, that the Commissioner affirmatively deems such activity permissible by regulation or in writing.

m. Trust and Trust-related Services. Trust and trust-related services as set forth at 12 CFR § 712.5(p): Acting as administrator for prepaid legal service plans; acting as trustee, guardian, conservator, estate administrator, or in any other fiduciary capacity; and trust services.

n. Securities Brokerage Services.

o. Insurance Sales. Agency for sale of insurance.

p. Credit Card Loan Origination.

q. Payroll Processing Services. and

r. Check Cashing and Money Transfer Services to Certain Nonmembers Who Are Eligible for Specified Fields of Membership.

i. Selling negotiable checks, travelers checks, money orders and other similar money transfer instruments;

ii. Cashing checks and money orders; and

iii. Receiving international and domestic electronic fund transfers.

3. Prohibited Activities. Notwithstanding 12 CFR § 712.5, a credit union may not invest in or lend to a CUSO that engages in the following activities or services, unless such activity or service is otherwise expressly authorized under M.G.L. c. 171:

a. "Fixed asset services" under 12 CFR § 712.5(g)(1) and (2);

b. "Travel agency services" under 12 CFR § 712.5(o); and

c. "Real estate brokerage" under 12 CFR § 712.5(q).

4. Corporate Requirements.

a. Corporate Structure. A credit union may invest in or lend to a CUSO structured as a business corporation, provided such entity is established and maintained under relevant federal or state law, or limited liability company or limited partnership, provided such entity is established and maintained under relevant state law. A credit union may also invest in a federally-chartered CUSO pursuant to 209 CMR 50.08 if said federally-chartered CUSO limits itself at all times to those activities that can be conducted by a state-chartered CUSO pursuant to 209 CMR 50.08(2).

b. Separate Corporate Identity. A CUSO shall maintain a separate and distinct corporate identity from the investing credit union. A credit union or CUSO that complies with the provisions of 12 CFR § 712.3, 12 CFR § 712.4, and 12 CFR § 712.8 shall be deemed to be in compliance with 209 CMR 50.08(2)(a)4.

5. Officials and Senior Management Employees. Officials, senior management employees and their immediate family members of a credit union that has outstanding loans or investments in a CUSO shall not receive any salary, commission, investment income, or other income or compensation from the CUSO either directly or indirectly, or from any person being serviced through the CUSO as set forth under 12 CFR § 712.8.

(3) Notice Process to Conduct Certain Activities Relative to CUSOs.

(a) General. Once a credit union has applied for and received approval from the Commissioner to engage in any CUSO activity pursuant to 209 CMR 50.08(1), they may subsequently engage in other CUSO activities listed under 209 CMR 50.08(2) by only providing notice to the Commissioner. In order to qualify for the notice authority pursuant to 209 CMR 50.08(3), a credit union must be well or adequately capitalized and has not been notified that it is in troubled condition. The written notice shall be provided 30 days prior to commencing the new activity. At the time the notice is filed or at any time the notice is pending, a credit union may request that the Commissioner waive and the Commissioner may waive the remaining notice period.

(b) Notice. The notice must include a complete description of the activity conducted, the credit union's investment in such activity, and a representation and undertaking that the activity will be conducted in accordance with Massachusetts and federal law. Any credit union filing notice pursuant to 209 CMR 50.08(3) is deemed to have agreed to conduct the activity in a manner consistent with applicable guidelines.

Notes

209 CMR, § 50.08

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