regulatory and compliance issues and considerations

Reserved for Further Matters
We intend for this to be a work that will address such matters periodically; and thus,
anticipate expansion of this work as noted in connection with our other detailed
Board/Volunteer Training Modules.
A. Introduction:
We field many questions each year involving the scope and duties of Credit Union Board and
Committee Members; and the “benefits” that may be afforded to such persons. The first rule to
remember is that these persons are serving as “NON-COMPENSATED VOLUNTEERS.” Let me
say that again: ““NON-COMPENSATED VOLUNTEERS.” I fully understand that these persons
perform an exceptionally valuable service to Credit Unions and their members. However, all
must remember what a Credit Union is – and the capacity in which volunteers serve. Just as
with my choice to focus my practice on Credit Unions – there is an economic downside to our
choices as Credit Unions cannot afford the rates of other banking organizations. Likewise, if one
wishes to be a “compensated director” then he/she needs to look to the public sector and seek
nomination to a “for profit” board – such as that of a traditional bank.
With Sarbanes-Oxley and the concepts addressed therein (and in NCUA Letter 03-FCU-07, we
need to refocus on training our boards and management as to the nature and scope of the
rules applicable to Volunteers. We need to train then on what a Credit Union can/cannot
do; what their duties and Liabilities are; and re-focus or provide training on laws and
rules that are there to protect persons who act in these roles. In addition, Credit Unions
need to address liability protection and avoidance via such training, proper insurance
and indemnification agreements.
The following are just a few reminders on the basic rules regarding “benefits” or
“compensation” for Board Members/Volunteers.
B. What Insurance Benefits can be Provided to Volunteers?
Section 701.33(2)(ii) answers this question. See below.
Here is a recent question one Credit Union posed per its Board’s request; and the answer we
provided (which addresses this issue):
“Can the Credit Union provide a life insurance benefit to its Board Members; and if this
cannot be done directly, is there some manner in which same can be provided
indirectly?”
Sometimes there are “gray areas in laws / regulations” that may leave room for interpretation.
There are no such gray areas in this situation and my response has been and remains – No –
as to both queries. The basis of this response relies exclusively on the Federal Credit Union Act,
the NCUA’s Rules and Regulations and the Legal Opinions of the NCUA General Counsel’s
Office as follow:
12 USC § 1761 (c) No member of the board or of any other committee shall, as
such, be compensated, except that reasonable health, accident, similar insurance
Copyright©1994-2010 by Credit Union Resources & Educational Services, LLC. All rights reserved.
Revised February 2010
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