40 THE NAFCU JOURNAL NOVEMBER–DECEMBER 2022 Serving as a volunteer official for a federal credit union (FCU) can be a rewarding experience. Not only does a volunteer—particularly one serving on the board—get to help determine the direction of their credit union’s operations, but they also can help members of their community achieve their financial goals. However, by serving as a volunteer, a person will be subjected to a host of restrictions on their activity. Let’s review some of those restrictions: Compensation First and foremost, there is a restriction on an official’s ability to be paid by the FCU. After all, officials are often referred to as “volunteers,” which implies they donate their time and effort free of charge. In particular, section 701.33 of the NCUA regulations addresses this topic. That regulation defines the term “official” to mean “a person who is or was a member of the board of directors, credit committee or supervisory committee, or other volunteer committee established by the board of directors.” The regulation then states that no official of the FCU may receive compensation for acting in their capacity as an official and fulfilling their COMPLIANCE CENTRAL RESTRICTIONS ON CREDIT UNION OFFICIALS By Justin White, NAFCU Regulatory Compliance Counsel duties or responsibilities to the FCU. There is one exception, however—“…one board officer, if any, may be compensated as an officer of the board.” Thus, one member of the board of directors may be paid compensation in his or her capacity as a board officer. Notably, the regulation limits an official’s ability to receive compensation for performing their board or committee responsibilities—that language, however, does not prohibit paying compensation to officials for serving in another capacity. For example, if an employee is elected to the board of directors, the employee can still be paid in his or her capacity as an employee, so long as the employee is not paid in his or her capacity as a board member. Restrictions on Loan Terms NCUA regulations also impose restrictions on loans that are made to FCU officials. First, section 701.21(d)(5) prohibits “preferential treatment” in the rates, terms and conditions of any loan or line of credit made to an “official.” The regulation also prohibits a FCU from providing favorable rates, terms or conditions to any immediate family members of an official or a business partner of an official. Notably, this restriction only applies to officials (plus their family member and business partners)—it does not apply to employees of the FCU who do not meet the definition of “official.” An FCU can offer favorable loan terms or conditions to its frontline employees, such as tellers, branch managers, etc. so long as they do not serve on the board of directors, credit committee or supervisory committee. Secondly, section 701.21(d)(1) of the NCUA regulations places some limits on approving loans for officials. Approval by the board of directors is required whenever an official applies for a loan that, if approved, would result in the “Serving as a volunteer official for a federal credit union (FCU) can be a rewarding experience. However, by serving as a volunteer, a person will be subjected to a host of restrictions on their activity.”
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