NCUA Proposed Rule on Credit Union Service Contracts

Content

ACTION:

Proposed rule.

SUMMARY:

The NCUA Board (Board) is proposing to revise its regulations governing the organization and operation of federal credit unions
(FCUs) by eliminating a provision related to credit union service contracts. The Board intends to reduce administrative costs
and compliance complexity with this revision, enabling FCUs to serve their members more efficiently.

DATES:

Comments must be received by April 27, 2026.

ADDRESSES:

Comments may be submitted in one of the following ways. (Please send comments by one method only):

• Federal eRulemaking Portal: https://www.regulations.gov. The docket number for this proposed rule is NCUA-2026-0434. Follow the “Submit a comment” instructions. If you are reading
this document on federalregister.gov, you may use the green “SUBMIT A PUBLIC COMMENT” button beneath this rulemaking's title to submit a comment to the regulations.gov docket. A plain language summary of the proposed rule is also available on the docket website.

• Mail: Address to Melane Conyers-Ausbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.

• Hand Delivery/Courier: Same as mailing address.

Mailed and hand-delivered comments must be received by the close of the comment period.

Public inspection: Please follow the search instructions on https://www.regulations.gov to view the public comments. Do not include any personally identifiable information (such as name, address, or other contact
information) or confidential business information that you do not want publicly disclosed. All comments are public records;
they are publicly displayed exactly as received and will not be deleted, modified, or redacted. Comments may be submitted
anonymously. If you are unable to access public comments on the internet, you may contact the NCUA for alternative access
by calling (703) 518-6540 or emailing OGCMail@ncua.gov.

FOR FURTHER INFORMATION CONTACT:

Rachel Ackmann, Senior Attorney, Office of General Counsel, at (703) 518-6540 or at 1775 Duke Street, Alexandria, VA 22314.

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Background

The NCUA originally issued rules related to FCUs entering service contracts in the 1970s. (1) In 1982, the rules governing service centers and other FCU contracting activities were combined into one section with the
purpose of enhancing the scope of FCU contractual agreements. (2) Section 701.26 has remained largely unchanged since 1982 with one exception. A 1998 amendment removed a provision that treated
advance payments to a vendor for more than 3 months of service as an investment in a credit union service organization, a
change made to reduce regulatory burden and provide FCUs with greater flexibility in managing vendor contracts. (3) Section 701.26 has not been amended since 1998.

B. Legal Authority

Section 107(1) of the FCU Act gives an FCU the power to enter into contracts. (4) Additionally, the incidental powers provision of the Federal Credit Union Act (FCU Act) expressly grants FCUs the power “to
exercise such incidental powers as shall be necessary or requisite to enable it to carry on effectively the business for which
it is incorporated.” (5) Accordingly, FCUs have broad authority to enter into contractual agreements to perform or engage in activities that are expressly
authorized by the FCU Act or are incidental to the business of credit unions.

Additionally, the FCU Act includes a general grant of regulatory authority and it authorizes the Board to prescribe regulations
for the administration of the FCU Act. (6) Therefore, the Board has authority to regulate FCU contractual agreements.

Part 701 of the NCUA's regulations codifies these FCU Act authorities and governs the organization and structure of FCUs,
including a wide range of operational activities. The part establishes the framework for essential functions such as lending,
governance, member services, and ensuring that FCUs operate in a safe and sound manner.

Section 701.26 addresses authority for an FCU to enter contracts for assets or services that relate to its daily operations.
The regulation covers contracts with third-party vendors and other organizations, including credit unions, that offer services
to credit unions. The regulation also allows one FCU to represent one or more other credit unions or organizations in contractual
arrangements with a third party and authorizes the sharing of fixed assets. (7) Agreements must be in writing and must advise all parties subject to the agreement that the goods and services provided are
subject to examination by the NCUA to the extent permitted by law. Section 701.26 does not give FCUs the authority to provide
services directly to other credit unions but reflects authority to contract for assets or services that may be offered to
credit unions through shared service arrangements. That is, § 701.26 does not address FCUs directly offering services to other
credit unions.

II. Proposed Rule

The Board now proposes to remove § 701.26. The authority for an FCU to enter into contracts for operational services is inherent
in its charter and its general powers under the FCU Act. The regulation's principal requirement—that such agreements be in
writing—is a standard business practice, which exists regardless of whether it is mentioned in the NCUA's regulations. The
Board continues to expect FCUs to adhere to standard business practices and maintain safe and sound practices regarding third-party
contracts, including that all contracts should be written. (8) Thus, the regulation is superfluous, and its removal will streamline the NCUA's regulations.

The Board notes that § 701.26 provides that all subject agreements must advise parties of the NCUA's examination authority.
The Board believes this provision is unnecessary because the NCUA's examination authority is generally limited to the products,
services, and operations of the credit union, not vendors that may supply products and services. The NCUA will examine any
such products and services in relation to the credit union offering them. One exception is related to the NCUA's access to
credit union service organization books and records that is included in part 712, but the Board does not otherwise require
credit union vendors to provide the NCUA access to their books and

  records. [(9)]() Accordingly, the Board does not believe the removal of this requirement would result in a substantive change to current NCUA
  policy.

The Board solicits comments on all aspects of the proposed rule. Additionally, the Board solicits comments on the authority
under § 701.26 for FCUs, in joint operations and other resource sharing situations, to act as a representative of another
credit union or organization. The Board has found that such FCU representation to be authorized under the incidental powers
provision of the FCU Act. The authority, however, is not reflected in part 721. (10) The Board solicits comment on whether it is necessary to amend part 721 to reflect this authority. The Board may amend part
721 in finalizing this proposed rule if it finds an amendment necessary for clarity.

III. Regulatory Procedures

A. Providing Accountability Through Transparency Act of 2023

The Providing Accountability Through Transparency Act of 2023 (5 U.S.C. 553(b)(4)) requires that a notice of proposed rulemaking
include the internet address of a summary of not more than 100 words in length of a proposed rule, in plain language, that
shall be posted on the internet website under section 206(d) of the E-Government Act of 2002 (44 U.S.C. 3501 note) (commonly
known as regulations.gov).

In summary, the Board is proposing a rule to streamline its regulations governing the organization and operation of FCUs by
eliminating a provision related to credit union service contracts. The intended effect is to reduce administrative costs and
compliance complexity, enabling credit unions to serve their members more efficiently.

The proposal and the required summary can be found at https://www.regulations.gov.

B. Executive Orders 12866, 13563, and 14192

Pursuant to Executive Order 12866 (“Regulatory Planning and Review”), as amended by Executive Order 14215, a determination
must be made whether a regulatory action is significant and therefore subject to review by the Office of Management and Budget
(OMB) in accordance with the requirements of the executive order. (11) Executive Order 13563 (“Improving Regulation and Regulatory Review”) supplements and reaffirms the principles, structures,
and definitions governing contemporary regulatory review established in Executive Order 12866. (12) This proposed rule was drafted and reviewed in accordance with Executive Order 12866 and Executive Order 13563. OMB has determined
that this proposed rule is not a “significant regulatory action” as defined in section 3(f)(1) of Executive Order 12866.

Executive Order 14192 (“Unleashing Prosperity Through Deregulation”) requires that any new incremental costs associated with
new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least
10 prior regulations. (13) This proposed rule is expected to be a deregulatory action for purposes of Executive Order 14192.

C. The Regulatory Flexibility Act

The Regulatory Flexibility Act generally requires an agency to conduct a regulatory flexibility analysis of any rule subject
to notice and comment rulemaking requirements, unless the agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities. If the agency makes such a certification, it shall publish the certification
at the time of publication of either the proposed rule or the final rule, along with a statement providing the factual basis
for such certification. For purposes of this analysis, the NCUA considers small credit unions to be those having under $100
million in assets. The Board fully considered the potential economic impacts of the regulatory amendments on small credit
unions. The proposed rule only removes an existing regulatory provision related to FCU contracting. The regulation's requirement—that
such agreements be in writing—is a standard business practice, which exists regardless of whether it is mentioned in the NCUA's
regulations. The Board considers the regulation to be superfluous, and its removal would streamline the NCUA's regulations,
thereby reducing burden.

Accordingly, the NCUA certifies the proposed rule would not impose a significant economic impact on a substantial number of
small credit unions.

D. The Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA) generally provides that an agency may not conduct or sponsor, and not withstanding
any other provision of law, a person is not required to respond to, a collection of information, unless it displays a currently
valid Office of Management and Budget control number. The PRA applies to rulemakings in which an agency creates a new or amends
existing information collection requirements. For purposes of the PRA, an information-collection requirement may take the
form of a reporting, recordkeeping, or a third-party disclosure requirement. The NCUA has determined that the changes in the
proposed rule do not create a new information collection or revise an existing information collection as defined by the PRA.

E. Analysis on Executive Order 13132 on Federalism

Executive Order 13132 encourages certain agencies to consider the impact of their actions on state and local interests. The
NCUA, an agency as defined in 44 U.S.C. 3502(5), complies with the executive order to adhere to fundamental federalism principles.
The proposed changes would only apply to and affect FCUs and would not affect state-chartered credit unions. The proposed
rule would have no effect on states or on the distribution of power and responsibilities among the various levels of government.
Therefore, the Board affirms it will not affect the division of responsibilities between the NCUA and state regulatory authorities
with oversight of federally insured, state-chartered credit unions.

F. Assessment of Federal Regulations and Policies on Families

The NCUA has determined that this proposed rule would not affect family well-being within the meaning of section 654 of the
Treasury and General Government Appropriations Act, 1999. The proposed rule relates to FCUs' contractual requirements, and
any effect on family well-being is expected to be indirect.

List of Subjects in 12 CFR Part 701

Advertising, Aged, Civil rights, Credit, Credit unions, Fair housing, Individuals with disabilities, Insurance, Marital

     status discrimination, Mortgages, Religious discrimination, Reporting and recordkeeping requirements, Sex discrimination,
     Signs and symbols, Surety bonds.

By the National Credit Union Administration Board, this 20th day of February, 2026. Melane Conyers-Ausbrooks, Secretary of the Board. For the reasons set forth in the preamble, the NCUA Board proposes to amend 12 CFR part 701 to read as follows:

PART 701—ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

1. The authority citation for part 701 continues to read as follows:

Authority:

12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1785, 1786, 1787, 1788, 1789. Section
701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601 et seq.; 42 U.S.C. 1981 and 3601-3610. Section 701.35 is also authorized by 42 U.S.C. 4311-4312.

§ 701.26 [Removed and reserved] 2. Remove and reserve § 701.26.

[FR Doc. 2026-03757 Filed 2-24-26; 8:45 am] BILLING CODE 7535-01-P

Footnotes

(1) 39 FR 44422 (Dec. 24, 1974).

(2) 47 FR 30460 (July 14, 1982).

(3) 63 FR 10756 (Mar. 5, 1998).

(4) 12 U.S.C. 1757(1).

(5) 12 U.S.C. 1757(17).

(6) 12 U.S.C. 1766(a).

(7) Examples of where an FCU may represent another credit union or organization include sharing of management services, loan
operations, and negotiations with vendors for shared services or products. 47 FR 30460 (July 14, 1982).

(8) SL No. 07-01 (2007), available at https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/evaluating-third-party-relationships-0.

(9) 12 CFR 712.3(d).

(10) 12 CFR pt. 721. Section 701.26 does not give FCUs the authority to provide services directly to other credit unions. 54 FR
48110 (Nov. 21, 1989). FCUs are authorized to provide their services directly to other credit unions under various express
powers and the incidental powers clause of the FCU Act. For example, correspondent services are services or functions provided
by an FCU to another credit union that the FCU is authorized to perform for its own members or as part of its operation. Correspondent
services are expressly included in part 721. The existing provision related to correspondent services is a separate and distinct
activity from the authority granted in § 701.26. 66 FR 40845 (Aug. 6, 2001).

(11) 58 FR 51735 (Oct. 4, 1993).

(12) 76 FR 3821 (Jan. 21, 2011).

(13) 90 FR 9065 (Feb. 6, 2025).

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