Thursday, June 7, 2012

NCUA's Charitable Contribution Rule to Be Abolished

The NCUA Board voted to abolish its charitable contribution rule.

The rule limited charitable contributions or donations by a federal credit union (FCU) to nonprofit organizations located or conducting activities in a community in which the FCU has a place of business, or to organizations that are tax exempt under §501(c)(3) of the Internal Revenue Code and that operate primarily to promote and develop credit unions. The rule further required an FCU’s board of directors to approve charitable contributions based on a determination that the contributions are in the FCU’s best interests and are reasonable given the FCU’s size and financial condition. Under the rule, directors could establish a budget for charitable donations and authorize FCU officials to select recipients and disburse funds.

Now, any FCU can make donations without the prior approval of its board of directors and without regulatory restrictions as to recipients. This represents a 180 degree change in position for the Board. NCUA previously commented it was “not convinced that this exemption should apply to all credit unions. The donation of a credit union’s members’ money to an outside party is a highly sensitive issue.”

This decision by the NCUA Board grants credit union management a huge amount of discretion as to recipients and the size of contributions or donations.

However, in some instances, the interests of management with regard to donations will not align with the interests of their owners/members.

While credit union boards should not micro-manage charitable donations, the boards need to adopt policies on charitable contribution including the amount that can be donated and criteria for recipients.

This will ensure that credit union management is accountable to its members rather than seeking to maximize their own satisfaction.


  1. Perhaps the good Doctor does not realize that schools (and universities) are not 501c3 groups nor is the American Red Cross (501c1 - like federal credit unions). Yes, the Board should adopt such a policy. But the federal regulator should not restrict who the organization can contribute to.

  2. WesCorp FCU pre-NCUA conservatorship provided CEO SIRAVO with a $6Million SERP. Several months later the NCUA placed it into conservatorship. Maybe the NCUA should place regulatory restrictions on such criminal payouts. Telesis FCU CEO Grace Mayo received a $2Million payout in 12-2010. The NCUA placed Telesis FCU into conservatorship in 3-2012. It appears the charity at the credit union starts with its CEO. I thought PTL stood for Praise The Lord. At the credit union PTL stands for PASS THE LOOT.

  3. Seems the biggest charity case of late is the damn NCUA. Look at all the assessments they are imposing on credit unions to keep the NCUSIF solvent. The NCUA is getting the maximum amount of charity from the credit unions they regulate. Unfortunate for the credit unions this is one charity case they can't opt out.



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