Credit Union Regulatory Guidance Including: NCUA, CFPB, FDIC, OCC, FFIEC

Samantha: Hello, this is Samantha Shares.

This episode covers N C U A’s
Fair Hiring in Banking final rule.

The following is an audio
version of that regulation.

This podcast is educational
and is not legal advice.

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And now the regulation.

NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701, 741,746, 748, and 752

Fair Hiring in Banking

SUMMARY: The N C U A Board (Board) is
issuing this final rule to incorporate

Interpretive Ruling and Policy Statement
(IRPS) 19-1 and the Fair Hiring in Banking

Act (F H B A) into its regulations.

The Federal Credit Union Act (FCU Act)
generally prohibits, except with the

Board’s prior written consent, any
person who has been convicted of or has

a program entry for certain criminal
offenses involving dishonesty or breach

of trust from participating in the
affairs of an insured credit union.

The final rule will expand career
opportunities for individuals to work

and volunteer at insured credit unions.

The Board also rescinds IRPS 19-1.

DATES: The final rule is effective
[INSERT DATE 30 DAYS AFTER DATE OF

PUBLICATION IN THE FEDERAL REGISTER].

FOR FURTHER INFORMATION CONTACT: Rachel
Ackmann, Senior Staff Attorney, Office

of General Counsel, and Pamela Yu,
Special Counsel to the General Counsel,

Office of General Counsel, at the above
address or by calling (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I.

Background

Section 205(d) of the Federal
Credit Union Act (Section 205(d))

Prior to December 23, 2022, section
205(d)(1) of the Federal Credit Union

Act (FCU Act) provided that, except
with the prior written consent of

the Board (the N C U A refers to

applications for such consent as “consent
applications”), a person who has been

convicted of any criminal offense
involving dishonesty or breach of trust,

or has agreed to enter into a pretrial
diversion or similar program in connection

with the prosecution for such offense
(collectively, covered offenses), may not:

• Become, or continue as, an
institution-affiliated party (IAP) with

respect to any insured credit union; or

• Otherwise participate, directly or
indirectly, in the conduct of the

affairs of any insured credit union.1

Section 205(d)(1)(B) further provides
that an insured credit union may not

allow any person described above to
participate in the conduct of the affairs

of the credit union without Board consent.

Section 205(d)(2) restricts the Board
from approving a consent application

related to a person convicted of certain
crimes enumerated in Title 18 of the

United States Code (U.S.C.) for 10
years, absent a motion by the Board

and approval by the sentencing court.

Finally, section 205(d)(3) states that
“whoever knowingly violates” section

(d)(1)(A) or (d)(1)(B) commits a felony,
punishable by up to 5 years in prison or

a fine of up to $1,000,000 a day, or both.

Section 205(d) prohibitions have existed
in some form since 1970, and since then

federally insured credit unions have been
required to make a diligent inquiry as to

whether prospective employees or IAPs2 are
subject to a section 205(d) prohibition.3

In 2008, the Board adopted IRPS 08-1
to provide direction and guidance to

federally insured credit unions and
those persons who may be affected by

section 205(d).4 The Board specifically
sought comments as to whether the

format of the guidance as an IRPS was

1 12 U.S.C.

1785(d)(1).

2 The N C U A has made its
administrative orders against

IAPs available in a searchable
database on the agency’s website.

See https://N C U
A.gov/news/enforcement-actions/administrative-orders.

3 73 FR 48399, 48401 (Aug.

19, 2008).

4 Id.

appropriate or whether a regulation would
be more suitable.5 The Board received

some comments supporting guidance in the
form of an IRPS and others supporting

a regulation, but ultimately chose to
issue the guidance through an IRPS.6

IRPS 08-1 outlined the actions
prohibited under the FCU Act and the

procedures for applying the Board’s
consent on a case-by-case basis.

Recognizing that certain offenses are
so minor and dated that they would not

presently pose a substantial risk to
the insured credit union, IRPS 08-1

excluded certain de minimis offenses
that met specified requirements

and juvenile offenses from the need
to request consent from the Board.

In effect, the IRPS gave automatic consent
for these offenses without requiring

a consent application or any notice.

In 2019, the Board rescinded IRPS 08-1
and issued IRPS 19-1, a revised and

updated IRPS to reduce regulatory burden
(also known as the Second Chance IRPS).7

IRPS 19-1 amended IRPS 08-1 to expand
the definition of de minimis offenses

to reduce the scope and number of
offenses that would require submission

of a consent application to the Board.

Specifically, the IRPS did not require
a consent application for convictions

involving insufficient funds checks of
moderate aggregate value, small-dollar

simple theft, false identification,
simple drug possession, and isolated

minor offenses committed by covered

5 The Board had not previously adopted
any policies or regulations on section

205(d), as the statute at that time
imposed no guidance or limitations on the

information that the Board may consider,
and the Board received a limited number

of applications under section 205(d).

However, due to an increasing number
of applications requesting the Board’s

consent under section 205(d), the
Board believed it was appropriate

to issue guidance on the topic.

6 Two commenters believed
that a regulation was the more

appropriate format for the guidance.

One of the commenters who favored
a regulation thought a regulation

provided greater protection to
a credit union that might be

challenged by a prospective employee.

Another commenter believed a regulation
was preferable because it would help

reinforce a credit union’s right to appeal
an adverse decision and subject future

changes to public notice and comment.

The Board concluded that the source
of the requirement stems from

federal statute, namely section

205(d).

Therefore, the Board believed that
the need to comply with federal

law, as augmented by guidance in
the form of an IRPS, was sufficient

to protect a credit union.

The Board believed that credit union
officials should be able to adequately

understand and apply the guidance styled
as an IRPS and that the right to request

a hearing contained in the IRPS provided
a credit union a sufficient right to

appeal a denial of consent by the Board.

Additionally, the Board noted
that it would not amend its IRPS

without providing the public notice
and an opportunity to comment.

For all these reasons, the Board
believed it appropriate to issue the

final guidance in the form of an IRPS.

7 84 FR 65907 (Dec.

2, 2019).

persons as young adults.

The Board recognized that many Americans
faced hiring barriers due to a criminal

record, a great number of whom are not
violent or career criminals, but rather

people who made poor choices early in life
who have since paid their debt to society.

The Board found that offering second
chances for career opportunities

to those who are truly penitent was
consistent with our nation’s shared

values of forgiveness and redemption.

On December 23, 2022, Congress passed the
National Defense Authorization Act for

Fiscal Year 2023 (NDAA), which amended
section 205(d).8 The NDAA included

the F H B A — which became immediately
effective on December 23, 2022.

The F H B A amends section 205(d) to
expand employment opportunities for

those with a previous minor or older
criminal offense, among other provisions.

Generally, the amendments codify a number
of elements already contained in the N

C U A’s current policy regarding section
205(d) but also extend greater relief

than what is currently available to
certain individuals with prior convictions

seeking employment with an insured credit
union, particularly individuals with

older convictions, expunged convictions,
or prior convictions for a misdemeanor,

any drug-related possession offense, or
certain designated “lesser offenses.” The

F H B A also clarifies several definitions
and the procedures for processing a

consent application.9 The specific
provisions of the F H B A are discussed

in detail later in this preamble.

Section 19 of the Federal
Deposit Insurance Act

Section 19 of the Federal Deposit
Insurance Act (section 19) contains

a prohibition provision similar to
section 205(d) of the FCU Act.10 Before

2020, the Federal Deposit Insurance

8 Pub.

L 117–263 (Dec.

23, 2022).

9 Under the F H B A, a “consent
application” means “an application filed

with [the] Board by an individual (or
by an insured credit union on behalf

of an individual) seeking the written
consent of the Board under [12 U.S.C.

1785(d)(1)(A).” 12 U.S.C.

1785(d)(6)(A).

10 12 U.S.C.

1829(a).

Corporation (FDIC) provided the public
with guidance relating to section 19 and

the FDIC’s application thereof through
a Statement of Policy similar to the N

C U A’s IRPS 19-1.11 Similar to the N
C U A’s IRPS, the FDIC’s Statement of

Policy, among other things, instituted
a set of criteria to provide for

blanket approval of certain low-risk
crimes and for persons convicted of

such de minimis crimes to forgo filing
a section 19 consent application.

In 2020, the FDIC revised and incorporated
its then existing Statement of Policy into

its regulations to, among other purposes,
provide for greater transparency as to its

section 19 application, provide greater
certainty as to the FDIC’s application

process, and to assist both insured
depository institutions and individuals

who may be affected by section 19 with
understanding its impact and potentially

seek relief from its provisions.12

In December 2022, the F H B
A made amendments to section

19 that are comparable to the
amendments made in section 205(d).

The FDIC proposed to implement
these changes through a

notice-and-comment rulemaking in
November 2023.13 The FDIC finalized

its rulemaking on August 7, 2024.14

Coordination with the FDIC

In the past, the N C U A has drawn
on the FDIC’s guidance related

to section 19 due to the FDIC’s
greater experience processing

section 19 consent applications.

Further, in the Board’s view it is
beneficial to both insured financial

institutions and covered individuals
for the N C U A’s section 205(d)

related requirements to be consistent,
to the extent possible, with the

FDIC’s section 19 requirements.

Consistent guidelines between the two
agencies with respect to these parallel

statutory provisions help streamline the
consent application process, particularly

11 See 84 FR 68353 (Dec.

16, 2019).

12 Id.; 85 FR 51312 (Aug.

20, 2020) (FDIC 2020 final rule).

13 88 FR 77906 (Nov.

14, 2023).

14 89 FR 64353 (Aug.

7, 2024).

for those individuals seeking consent
from both the N C U A and the FDIC

to allow for potential employment at
federally insured financial institutions.

The F H B A formalizes the expectation
that the agencies implement these

comparable statutory provisions
similarly and requires the N C U A

and the FDIC to consult and coordinate
to promote consistent procedures,

where appropriate.15 The Board finds
that adopting similar definitions,

terminology, and procedures in this
final rule will promote consistent

implementation of consent applications
because even those provisions that

fall outside the scope of consent
applications are likely to affect how the

agency administers those applications.

The N C U A and the FDIC have
consulted and coordinated on this

rulemaking as directed by the F H B A.

Additionally, the N C U A has consulted
with the Board of Governors of the

Federal Reserve System and the Office
of the Comptroller of the Currency.

II.

Proposed Rule and Public Comments

At its October 19, 2023, meeting,
the Board issued a proposed rule16

to add new part 752 to Chapter
VII of Title 12 of the U.S.

Code of Federal Regulations (CFR) to
codify IRPS 19-1, along with significant

changes that are consistent with
the F H B A amendments to section

205(d) and the FDIC’s comparable
implementing regulations.17 The

proposed rule addressed, among other
topics, the individuals and types of

offenses covered by section 205(d),
as well as the N C U A’s procedures

for reviewing a consent application.

The proposed rule provided
for a 60- day comment period,

which ended on January 8, 2024.

The Board received 10 public comments
on the proposal from individuals,

a fidelity bond provider, a
faith-based association advocating

15 12 U.S.C.

1785(d)(5)(I), and 12 U.S.C.

1829(f)(9).

16 The proposed rule was published in
the Federal Register on November 7, 2023.

88 FR 76702 (Nov.

7, 2023).

17 The N C U A is issuing a final rule
to codify its policy regarding section

205(d) consent applications due to
the FDIC’s recent codification of its

similar section 19 Statement of Policy.

The N C U A believes codifying
IRPS 19-1 will provide for greater

transparency as to its application,
provide greater certainty as to the N

C U A’s application process, and help
both credit unions and individuals who

may be affected by section 205(d) to
understand its impact and potentially

seek relief from its provisions.

for the rights of the accused
and incarcerated, and national,

state, and regional organizations
representing credit unions.18

The N C U A requested comments on all
aspects of its approach to section 205(d)

and, specifically, the following topics:

• the date on which a criminal offense
“occurred” or was “committed;”

• the date on which “sentencing occurred;”

• whether section 19 encompasses foreign
convictions and pretrial diversions;

• the standard for expungements,
sealings, and dismissals;

• “offenses involving
controlled substances;” and

• de minimis offenses.

Most commenters opted to provide
general comments rather than address the

specific questions posed in the preamble.

Only one commenter specifically addressed
each of the eight questions presented.

Four commenters expressed broad support
for providing second chances and

expanding employment opportunities to
those with criminal offense backgrounds

but did not provide substantive
comments on the proposed rule.

Of those commenters that provided
substantive comments, all were generally

supportive of the proposed rule.

One commenter noted that the proposed
rule enhances the ability of credit unions

to make their own hiring decisions and
decreases the instances where a consent

application would need to be submitted.

Two commenters wrote that by modifying
and expanding the current de minimis

offenses deemed automatically approved
by the Board, the proposal expands

opportunities for individuals seeking

18 One comment was indecipherable
and included an attachment with

no relevance to the proposed rule.

This submission was counted in the
total number of comments received.

employment in the
financial services sector.

Further, they noted that by expanding the
category of de minimis offenses, the N C

U A better aligns itself with the FDIC.

Several of the commenters indicated
their support for the proposed rule

but suggested changes to particular
provisions or asked for clarification

on certain aspects of the proposal.

The comments and the Board’s
responses are addressed in the

section-by-section discussion below.

III.

Final Rule

The Board is now rescinding IRPS 19-1 and
issuing a final rule to incorporate IRPS

19-1 and the F H B A into its regulations.

The final rule addresses, among other
topics, the types of offenses covered

by section 205(d), the effect of the
completion of sentencing or pretrial-

diversion program requirements in the
context of section 205(d), and the

N C U A’s procedures for reviewing
applications filed under section 205(d).

The final rule also makes conforming
changes and adopts amendments to § 701.14

on changes in official or senior executive
officer in credit unions that are newly

chartered or are in troubled condition.

Substantive comments on specific
aspects of the proposed rule

are discussed in detail in the
following sections of the preamble.

For the reasons described, the
Board is adopting the proposal

with some modifications.

Section-by-Section Discussion

1.

Section 752.1 – What is
section 205(d) of the FCU Act?

This section sets out the
scope of new part 752.

Paragraph (a) generally describes
the requirements of section 205(d).

Paragraph (b) of this section clarifies
that insured credit unions must make a

reasonable, documented inquiry regarding
an applicant’s history to ensure that a

person who is subject to the prohibition
provision of section 205(d) is not

hired or permitted to participate in the
conduct of credit unions’ affairs without

the written consent of the N C U A.

The Board reiterates that, consistent
with the N C U A’s current policy,

a federally insured credit union’s
reasonable, documented inquiry should, at

a minimum, establish a screening process
to obtain information about convictions

and program entries from job applicants.

If a federally insured credit union
learns a prospective employee has a

prior conviction or program entry for
a de minimis offense, the credit union

should document in its files that an
application is not required because the

covered offense is considered de minimis
and meets the criteria for the exception.

Paragraph (b) provides that insured
credit unions are permitted to make

conditional offers of employment
to prospective applicants.

As per the N C U A’s existing policy,
an insured credit union choosing to

adopt a policy to extend conditional
offers of employment may establish

its own procedures to make criminal
record inquiries at any stage of its

choosing in its hiring process, so
long as applicants do not commence work

for or be employed by the credit union
until the applicant is determined to

not be prohibited under section 205(d)
or receives consent from the Board.

Paragraph (c) addresses the need for a
consent application and establishes the

standard for an application’s approval.

The N C U A will evaluate a consent
application to determine if a person

is fit to participate in the conduct
of the affairs of an insured credit

union without posing a risk to its
safety and soundness or impairing

public confidence in that credit union.

The burden is upon the
applicant to establish that the

application warrants approval.

The Board noted in the proposal that the F
H B A uses the terms “national office” and

“regional office,” which are inconsistent
with the N C U A’s organization.19 To

address those technical inconsistencies
in the final rule, the Board has replaced

references to the N C U A’s regional
offices and the Office of National

Examinations and Supervision (ONES)
with the term “field office” throughout.

The Board has also added paragraph
(d) to define the term “field office”

as a Regional Office or the Office of
National Examinations and Supervision,

as described in 12 CFR 790.2.

Section 752.1 is otherwise
adopted generally as proposed.

2.

Section 752.2 – Who is
covered by section 205(d)?

This section identifies who
is covered by section 205(d).

Paragraph (a) states that
IAPs, as defined by 12 U.S.C.

1786(r), are covered.

Similar to IRPS 19-1, volunteer
and de facto employees are deemed

covered under section 205(d) as well.

Whether other persons who are not IAPs,
such as certain independent contractors,

are covered depends upon their degree of
influence or control over the management

or affairs of an insured credit union.

For example, directors and officers
of affiliates, or joint ventures of an

insured credit union, are covered if they
participate in the conduct of affairs

of the insured credit union or are able
to influence or control the management

or affairs of the insured credit union.

Generally, those who exercise
major policymaking functions

of an insured credit union
are covered by section 205(d).

Paragraph (b) defines the term “person”
for the purposes of section 205(d) as an

individual only and not a legal entity.

19 See 12 CFR 790.2.

The N C U A is currently composed of
the Board with a Central Office; Field

Offices, consisting of three Regional
Offices and ONES; the Asset Management

and Assistance Center; the Community
Development Revolving Loan Program; and

the N C U A Central Liquidity Facility.

One commenter indicated that
the principles-based definition

for covered persons in

§

752.2 was sufficiently clear as proposed,
particularly when read in conjunction

with the statutory definition of
“institution-affiliated party.” The

commenter noted that any potential gray
areas that arise can be resolved through

legal opinions on a case-by-case basis.

The Board is adopting this
section largely as proposed.

As noted in the proposal, § 752.2 includes
less detail than IRPS 19-1 regarding

how the N C U A will determine whether
a person participates in the conduct of

the affairs of an insured credit union.

The N C U A intends to publish guidance
that further clarifies its intent

about other persons who are not IAPs.

The guidance will include
language similar to IRPS 19-1.

3.

Section 752.3 – Which offenses qualify as
“Covered Offenses” under section 205(d)?

This section addresses what constitutes
a covered offense under section

205(d).20 Paragraph (a) states that
a conviction or program entry must

have been for a criminal offense
involving dishonesty or breach of trust.

The paragraph defines criminal offenses
involving dishonesty and breach of trust.

The F H B A defines “criminal offense
involving dishonesty” as “an offense

under which an individual, directly
or indirectly, cheats or defrauds or

wrongfully takes property belonging
to another in violation of a criminal

statute.” The F H B A further provides
that the term includes an offense

that federal, state, or local law
defines as dishonest or for which

dishonesty is an element of the offense.

However, the term does not
include a misdemeanor criminal

offense committed more than 1
year before the date on which an

20 The Board notes that the approach
to criminal offenses mandated by

the statute and rulemaking would not
have an impact on other processes

related to criminal convictions.

For example, the N C U A may consider
a more expansive scope of convictions

related to controlled substances under
section 212 of the Federal Credit

Union Act in disapproving directors,
committee members, and senior

executive officers of troubled or
newly chartered insured credit unions.

See 12 CFR 701.14 for the N C U A’s
implementation of this provision, also

addressed elsewhere in this final rule.

individual files a consent application,
excluding any period of incarceration,

or an offense involving the
possession of controlled substances.

The F H B A does not
define breach of trust.

Under this section, breach of trust means
a wrongful act, use, misappropriation, or

omission with respect to any property or
fund that has been committed to a person

in a fiduciary or official capacity, or
the misuse of one’s official or fiduciary

position to engage in a wrongful act,
use, misappropriation, or omission.

This definition is identical
to the definition in IRPS 19-1.

As discussed previously, the F H B A
excludes from the scope of such offenses

“an offense involving the possession
of controlled substances.” The Board

interprets this phrase concerning
controlled substances to exclude from

the scope of the prohibition, at a
minimum, criminal offenses involving

the simple possession of controlled
substances and possession with intent

to distribute a controlled substance.

This exclusion may also apply to other
drug-related offenses depending on

the statutory elements of the offenses
or from court determinations that the

statutory provisions of the offenses do
not involve dishonesty or breach of trust,

as noted in paragraph (b) of § 752.3.

The Board notes that in processing other
applications, such as change in official

or senior executive officer in credit
unions that are newly chartered or are in

troubled condition, the N C U A may still
consider excluded offenses as appropriate.

For example, an offense that is not
covered under section 205(d) may bear on

an individual’s competence, experience,
character, or integrity under 12 U.S.C.

1790a and 12 CFR 701.14.

Potential applicants may contact their
appropriate N C U A field office if

they have questions about whether their
offenses are covered under section 205(d).

This new regulatory language marks a
shift from IRPS 19-1, which requires

consent applications for certain simple
misdemeanor drug possession offenses.

Under IRPS 19-1, a consent application
for a simple misdemeanor drug possession

offense is required except if the

conviction or program entry
was classified as a misdemeanor

at the time of conviction or

program entry, the person had no other
conviction or program entry described

in section 205(d), and it had been 5
years since the conviction or program

entry (or 30 months in the case of a
person 21 years or younger at the time

of the conviction or program entry),
and the conviction did not involve

the illegal distribution (including an
intent to distribute), sale, trafficking,

or manufacture of a controlled
substance or other related offense.

Commenters were generally
supportive of the Board’s proposal

concerning controlled substances.

One commenter wrote that credit unions
in rural areas with high addiction rates

have indicated that the classification
of possession of an illegal substance as

a de minimis offense would increase the
pool of potential employment candidates.

The same commenter noted studies have
shown employment has therapeutic effects

in drug addiction treatment and, in
the spirit of assisting communities

in reaching their fullest potential,
credit unions should have the ability

to offer employment opportunities
to more eligible candidates,

including those battling addiction.

Another commenter supported the N C
U A’s review of its interpretation

of crimes involving possession.

The Board believes that the final
rule is consistent with the text

and purposes of the F H B A and will
align the Board’s interpretation of

section 205(d) as to offenses involving
controlled substances more closely

with other federal banking regulators.

The F H B A explicitly excludes from
the category of “criminal offense

involving dishonesty” “an offense
involving the possession of controlled

substances,” not just the offense of
“possession of controlled substances.”21

The modifier “involving,” in the
Board’s view, expands that exclusion

beyond simple-possession offenses.

The regulatory language, however,
will continue to recognize that

a drug-related offense could
potentially involve dishonesty, breach

of trust, or money laundering.22

21 See 12 U.S.C.

1785(d)(6)(B)(iii) (emphasis added).

22 See House Rpt.

No.

117–314 (May 10, 2022), available at
https://www.congress.gov/congressional-report/117th-

congress/house-report/314/1.

Moreover, while section 205(d) provides
statutory barriers to the employment of

certain individuals due to their criminal
history, insured credit unions otherwise

retain the discretion, under that statute,
as to which applicants they want to hire.

The Board also notes that this provision
does not affect its ability to consider

drug-related offenses as they pertain
to the suitability of an individual

under other statutory provisions,
including section 212 of the FCU Act.23

Paragraph (b) requires that, to determine
if the criminal offense is one of

dishonesty or breach of trust, the N C U
A will look to the statutory elements of

the criminal offense or to court decisions
in the relevant jurisdiction that have

interpreted these statutory elements.

This provision is similar to the
policy under IRPS 19-1 and is

unchanged from the proposed rule.

The F H B A also states that the term
“criminal offense involving dishonesty”

does not include “a misdemeanor criminal
offense committed more than one year

before the date on which an individual
files a consent application, excluding

any period of incarceration.”24 The
Board interprets the term “offense

committed” to mean the “last date
of the underlying misconduct,” based

on the plain text of the statute.

In instances with multiple offenses,
“offense committed” means the last

date of any of the underlying offenses.

Paragraph (c) includes language
reflecting the F H B A’s exclusion of

certain older offenses from the scope of
section 205(d).25 The F H B A provides

that individuals are not subject to
a prohibition under section 205(d) if

they committed a covered offense and
it has been 7 years or more since the

offense occurred; or if the individual
was incarcerated with respect to the

offense, it has been 5 years or more
since the individual was released

from incarceration; or the individual
committed the offense when they were 21

years of age or younger, and it has been

23 12 U.S.C.

1790a.

24 12 U.S.C.

1785(d)(6)(B)(iii)(I).

25 See 12 U.S.C.

1785(d)(4)(A).

more than 30 months since
the sentencing occurred.26

The Board considers the phrases “offense
committed”—noted previously—and “offense

occurred” to be substantially similar.

Accordingly, the Board interprets the
term “offense occurred” to mean the

“last date of the underlying misconduct.”
In instances with multiple offenses,

“offense occurred” means the last date
of any of the underlying offenses.

One commenter supported the Board’s
proposal, noting its interpretation

of the term “offense occurred”
is reasonable and logical.

Paragraph (c) contains another F H B A
exception: section 205(d)’s restrictions

do not apply to an offense if “the
individual was incarcerated with

respect to the offense and it has been
5 years or more since the individual was

released from incarceration.”27 While
the language of the statute is clear,

the Board notes that there could be
situations in which an individual who was

incarcerated with respect to an offense
would be permitted to work at an insured

credit union before a similarly situated
individual who was not incarcerated

in connection with an offense.

This difference is due to the F H B
A’s use of a shorter time period for

individuals who were incarcerated
for an offense than for individuals

who did not serve jail time.

Paragraph (c) also tracks the F H B A’s
language concerning offenses committed by

individuals 21 years of age or younger.

The F H B A states that, for individuals
who committed an offense when the

individual was 21 years of age or younger,
section 205(d) shall not apply to the

offense if it has been more than 30
months since the sentencing occurred.28

The Board interprets “sentencing
occurred” to mean the date on which a

court imposed the sentence (as indicated
by the date on the court’s sentencing

order), not the date on which all
conditions of sentencing were completed.

Moreover, paragraph (c) notes that its
exclusions—which are derived from the

26 Note that these exceptions do not apply
to the offenses described under 12 U.S.C.

1785(d)(2).

27 See 12 U.S.C.

1785(d)(4)(A)(i)(II).

28 12 U.S.C.

1785(d)(4)(A)(ii).

F H B A—do not apply to the enumerated
offenses described under 12 U.S.C.

1785(d)(2).

One commenter suggested that the term
“sentencing occurred” should mean the

date that appears on the applicable
sentencing order, instead of the date

the court’s clerk entered the order
on the docket, which often occurs days

after the order is signed by the judge.

The commenter pointed out that
the date on the sentencing order

can be easily and definitively
ascertained from the court records.

The Board agrees with this commenter
and has modified this paragraph

to add a clarifying parenthetical,
as indicated previously.

Proposed paragraph (d) added parallel
language reflecting the FDIC’s long-held

position that individuals who are
convicted of, or enter into a pretrial

diversion program for, a criminal
offense involving dishonesty or breach

of trust in foreign jurisdictions are
subject to section 19, unless the offense

is otherwise excluded by 12 CFR 303,
subpart L, as stated in the FDIC’s rule.

One commenter agreed that section
205(d) should include foreign criminal

convictions and pretrial diversions
for offenses in foreign jurisdictions

involving dishonesty, like fraud and
embezzlement, unless the conviction has

been expunged, dismissed, or pardoned.

Another commenter noted that, as
a fidelity bond carrier, it will

continue to require full disclosure
of all pertinent, known facts in the

bond application and renewal process,
and all facts related to current or

prospective employees will remain
relevant to its underwriting decisions.

The Board has not previously had
a position on foreign offenses;

however, given the congressional
mandate to consult and coordinate to

promote consistent implementation on
consent application procedures where

appropriate, the Board is adopting the
FDIC’s interpretation, as proposed.

Employers may be unaware of an applicant’s
foreign offenses without conducting

their own inquiry, and many countries
have their own application processes

to conduct criminal background checks.

The Board notes several non-exhaustive
ways in which insured credit unions could

comply with this requirement.

For credit union operations outside
the United States, the insured

credit union could conduct a reasonable,
documented inquiry to verify an

applicant’s history by inquiring
about potential covered offenses that

may have occurred in that foreign
country (or countries) in which the

credit union conducts operations,
as well as the United States.

As another example of such an inquiry,
if an insured credit union plans to

hire someone in the United States who is
from a foreign country, the credit union

could inquire about potential covered
offenses that may have occurred in the

United States and in that foreign country.

And if a foreign jurisdiction forbade
background investigations by an insured

credit union, the credit union could
note this restriction as part of

its reasonable, documented inquiry.

4.

Section 752.4 What constitutes a
conviction under section 205(d)?

Paragraph (a) states that there must
have been a conviction of record for

section 205(d) to apply, and that section
205(d) does not apply to arrests, pending

cases not brought to trial (unless
the person has a program entry as set

out in § 752.5), or any conviction
reversed on appeal unless the reversal

was for the purpose of re-sentencing.

The Board is generally adopting paragraph
(a) as proposed, with non-substantive

modifications to § 752.4(a) to change
the tense of the final sentence for

consistency with the preceding sentence.

Paragraph (b) clarifies that, absent
a program entry, when an individual is

charged with a covered offense but is
subsequently convicted of an offense that

is not a covered offense, that conviction
is not subject to section 205(d).

IRPS 19-1 does not have this
clarification; however, it is included

in the FDIC’s current part 303.

The final rule clarifies that the
conviction, not the originally charged

offense, is relevant under section 205(d).

Paragraph (c) of this section reflects
statutory language related to the

treatment of orders of expungement,
sealing, or dismissal of criminal records.

Under IRPS 19-1, a conviction
that has been completely expunged

is not considered a conviction
of record and does not require a

consent application.

However, IRPS 19-1 further noted that
where an order of expungement has

been issued and is intended to be a
complete expungement, the jurisdiction

cannot allow the conviction or
program entry to be used for any

subsequent purpose including, but
not limited to, an evaluation of

a person’s fitness or character.

Also, the failure to destroy or seal
the records will not prevent the

expungement from being considered complete
for the purposes of section 205(d).

The F H B A provides a two-pronged
test to determine whether a covered

offense should be considered expunged,
dismissed, or sealed and therefore

excluded from the scope of section

205(d).

First, there must be an “order of
expungement, sealing, or dismissal

that has been issued in regard to the
conviction in connection with such

offense”; second, it must be “intended
by the language in the order itself,

or in the legislative provisions
under which the order was issued, that

the conviction shall be destroyed or
sealed from the individual’s state,

tribal, or federal record, even if
exceptions allow the conviction to

be considered for certain character
and fitness evaluation purposes.”29

The F H B A does not address
expungements, sealings, or dismissals

by operation of law, and the Board has
sought to provide a more comprehensive

framework as to such records.

The Board proposed to add language to the
second (intent) prong of the expungement

framework to encompass the language in the
expungement order itself, the legislative

provisions under which the order was
issued, and other legislative provisions.

The Board believes that the additional
language is consistent with the purposes

of the statute and congressional
intent to provide relief to individuals

with older or minor offenses.

One commenter agreed that the proposed
interpretation of expungement to

include those by application of
law is reasonable and supported

finalizing that provision as proposed.

29 12 U.S.C.

1785(d)(4)(B)(ii).

The proposal noted that, similar
to IRPS 19-1, covered offenses that

have been pardoned—and which are not
otherwise excluded by § 752.8—would

still require a consent application.

One commenter suggested that
pardons should also qualify as an

expungement by operation of law.

The commenter observed that requiring
a consent application for a conviction

that has been pardoned seems
inconsistent with congressional intent

and the presidential pardon power.

The commenter suggested that if a
conviction has been officially nullified

due to a pardon by the President or a
state governor, that conviction should

be nullified in all respects, including
pursuant to the N C U A’s regulations.

The commenter asked that the Board
exclude pardons from the scope of

section 205(d) and suggested that
pardoned offenses should be treated

similarly to expungements, dismissals,
or the sealing of a conviction.

The Board declines to adopt this
recommendation and notes its longstanding

position that covered offenses that have
been pardoned, and which are not otherwise

excluded from the scope of section
205(d), will still require an application.

A pardon typically cancels the
punishment for a criminal offense,

not the underlying finding of guilt.

In contrast, an expungement or
sealing is significantly more likely

to result, by applicable statute or
court order, in the removal of the

finding of guilt or otherwise result
in a legal determination that the

offense should not be used against an
individual for employment purposes.

Accordingly, in the Board’s view, a
person with such an expunged or sealed

offense tends to present less of a risk
to the credit union system than a person

whose same offense has been pardoned.

The Board notes, however, that
while a covered offense that has

been pardoned but not expunged
will still require an application,

in most cases the pardon would
generally weigh in favor of approval.

Paragraph (d) excludes “youthful
offender” judgments for minors

from the scope of section 205(d).

Paragraph (d) clarifies
that it encompasses the

term “youthful offender” and

“juvenile delinquent” and similar
terms, since a court does not have

to specifically use these terms
in an adjudication in order for

paragraph (d)’s provisions to apply.

5.

Section 752.5 – What constitutes
a pretrial diversion or similar

program under section 205(d)?

Paragraph (a) defines what
constitutes a pretrial diversion or

similar program (a program entry).

A pretrial diversion or similar
program means a program characterized

by a suspension or eventual dismissal
or reversal of charges or criminal

prosecution upon agreement by
the accused to restitution, drug

or alcohol rehabilitation, anger
management, or community service.

The F H B A establishes this definition.

Paragraph (b) clarifies that when a
covered offense either is reduced by

a program entry to an offense that
would otherwise not be covered by

section 205(d) or is dismissed upon
successful completion of a program

entry, the offense remains a covered
offense for purposes of section 205(d).

The covered offense will require
a consent application unless it is

de minimis as provided by § 752.8.

This language is new as compared to IRPS
19-1 and comes from the FDIC’s part 303.

Paragraph (c) states that expungements
or sealings of program entry

records will be treated the same as
expungements or sealings of convictions.

This language is new as compared to IRPS
19-1 and comes from the FDIC’s part 303.

No commenters objected to these
provisions, which the Board

generally adopts as proposed.

6.

Section 752.6 – What are the types of
consent applications that can be filed?

The F H B A codifies procedures
for consent applications

filed with the N C U A.

The statute

removes the N C U A’s existing
policy that an insured credit

union sponsor a consent application

or that an individual seek a waiver of
the credit union filing requirement.

Specifically, the proposed rule provides
that the N C U A will accept applications

from an individual or an insured credit
union applying on behalf of an individual.

Paragraph (b) provides that an individual
consent application or a credit

union-sponsored consent application may
be filed separately or contemporaneously

with the appropriate N C U A field office.

7.

Section 752.7 – When may
an application be filed?

This section notes that before a consent
application may be filed, “all of the

sentencing requirements associated with a
conviction, or conditions imposed by the

program entry, including but not limited
to, imprisonment, fines, conditions of

rehabilitation, and probation requirements
must be completed, and the case must be

considered final by the procedures of
the applicable jurisdiction.” The Board

includes this language to accord with
several of the F H B A’s exclusions from

section 205(d) that are not tied to the
completion of sentencing requirements.

Furthermore, the F H B A requires the N
C U A to “make all forms and instructions

related to consent applications
available to the public, including

on [its] website.”30 These forms and
instructions “shall provide a sample

cover letter and a comprehensive list
of items that may accompany the consent

application, including clear guidance on
evidence that may support a finding of

rehabilitation.”31 While the final rule
does not codify these requirements, the

agency will comply with the statutory
mandate to make appropriate forms and

instructions available to the public.

The final rule provides generally
that the N C U A’s consent application

forms as well as additional information
concerning section 205(d) can be

accessed on the N C U A’s website.

One commenter noted that the
availability of forms on the

agency’s public website will be

30 12 U.S.C.

1785(d)(5)(E)(i).

31 12 U.S.C.

1785(d)(5)(E)(ii).

helpful.

No commenters objected to these
provisions, which the Board

generally adopts as proposed.

8.

Section 752.8 – What is
the De minimis exemption?

The Board has made a number of changes
to this section based on the statutory

revisions and helpful comments received.

One commenter—to the FDIC’s parallel
notice of proposed rulemaking under

the F H B A32— requested that this
section be revised to exempt de minimis

offenses from the scope of the statutory
prohibition, to align with the F H B A.

The Board agrees, and this section has
been revised in the final rule to treat

de minimis offenses, a category that
includes the sub-category “designated

lesser offenses,” as offenses that
are excluded from the prohibitions

of section 205(d) (assuming certain
conditions are met) and for which

offenses no application is required.

This is a substantive departure from
the Board’s longstanding treatment

of de minimis offenses, in which
potential applicants with such offenses

on their records did not need to file
an application with the Board because

the N C U A deemed their (potential)
application automatically approved.

In other words, the N C U A considered
such offenses covered under section

205(d), while the F H B A exempts those
offenses entirely from section 205(d).

Accordingly, this section of the final
rule includes additional language to

clarify that the prohibitions of section
205(d) will not apply, and an application

will therefore not be required, as
to offenses meeting the conditions to

qualify for the de minimis exemption.

The F H B A removed the use of fake
identification from the scope of

section 205(d), and paragraphs (a)(1)
and (b)(4) reflect this exclusion.33

32 See 88 FR 77906 (Nov.

14, 2023).

33 See 12 U.S.C.

1785(d)(4)(C)(iv).

Paragraph (a)(1) states an individual
who has been convicted of two or fewer

covered offenses need not file if the
individual could have been sentenced to

a term of confinement in a correctional
facility of 3 years or less and/or

a fine of $2,500 or less, and the
individual actually served 3 days or

less of jail time for each, provided
that all of the sentencing requirements

associated with the conviction have been
completed, each conviction or program

entry was entered at least 3 years prior
to the date of a consent application

(assuming there are two convictions or
program entries for a covered offense),

and each covered offense was not
committed against an insured depository

institution or insured credit union.

One commenter suggested that the
maximum potential fine amount for

the de minimis criterion in paragraph
(a)(1) should be increased from

$2,500 to $5,000, in keeping with a
certain federal criminal statute that

provides for fines up to $5,000 for
certain misdemeanors or infractions.

The commenter noted that under the
statutory provision there are very

few violations of federal criminal
laws for which the potential fine

for a violation would be less than
$5,000, making many federal offenses

ineligible for de minimis treatment.

The Board declines to expand
the de minimis framework as

suggested because it considers
the current threshold appropriate.

The $2,500 amount is comparable
to the $2,000 de minimis

threshold for insufficient-fund
offenses under the F H B A.

While the Board acknowledges that offenses
falling under the statute the commenter

cited may require an application,
two factors mitigate this concern.

First, some of the offenses or
infractions may not involve dishonesty

or a breach of trust, which would make
them irrelevant under section 205(d).

Second, many of those offenses are
likely to be misdemeanors, which receive

significant relief under § 752.3.

Thus, the Board finds the rule
gives appropriate relief for minor

offenses with the $2,500 threshold.

Paragraph (a)(2) reflects the F H B A’s
confinement criteria as to the Board’s

determination of de minimis offenses.34

To improve the clarity of this section,
the final rule adds a sentence explaining

that designated lesser offenses
need not meet the other criteria

that apply to de minimis offenses.

For greater ease of reference, proposed
paragraphs (a)(2)(i) – (iii) have

been reorganized in the final rule.

Under redesignated paragraph (a)(3),
jail time is calculated based on the time

an individual spent incarcerated as a
punishment or a sanction—not as pretrial

detention—and does not include probation
or parole where an individual was

restricted to a particular jurisdiction
or was required to report occasionally

to an individual or a specific location.

Jail time includes confinement to
a psychiatric treatment center in

lieu of a jail, prison, or house of
correction on mental competency grounds.

The definition is not intended to include
any of the following: persons who are

restricted to a substance-abuse treatment
program facility for part or all of

the day; and persons who are ordered to
attend outpatient psychiatric treatment.

Paragraph (a)(4), redesignated from
proposed paragraph (a)(3), requires

that if there are two convictions
or program entries for a covered

offense, each conviction or program
entry must have been entered at least

3 years prior to the date a consent
application would otherwise be required.

Paragraph (a)(5) (redesignated from
proposed paragraph (a)(4)) requires

that, in order for an offense or
offenses to qualify under the general

de minimis framework, each offense
“must not have been” committed

against an insured depository
institution or insured credit union.

This language aligns with
the current FDIC regulations.

Under the proposed rule,
several de minimis criteria had

qualifiers for offenses committed

34 See 12 U.S.C.

1785(d)(4)(C)(ii).

against “insured” credit unions.35 Two
commenters noted that the proposal’s

references to covered offenses committed
against “insured credit unions” or

“insured depository institutions” for
determining whether a given offense

is de minimis was too narrowly focused
on whether an institution is insured.

One commenter suggested that if an
offense is committed against any

credit union or financial institution,
it should not be considered a de

minimis offense irrespective of
the institution’s insurance status.

Another commenter noted that any
prior offense by a covered individual

committed against a financial
institution, insured or not, increases

risks to insured credit unions.

Both commenters suggested eliminating
the “insured” qualifier so that the

de minimis exemption would not be
available for offenses committed against

any depository institution or credit
union—not just insured depository

institutions and insured credit unions.

After careful consideration, the Board
declines to adopt this recommendation.

The F H B A and its legislative history
indicate lawmakers’ preference for broad

relief and granting second chances.

Adopting the commenters’ recommendation
would provide less relief for

individuals with minor offenses committed
against non-federally insured credit

unions or depository institutions.

While this approach to the de minimis
framework marks a departure from

IRPS 19- 1, in the Board’s view,
providing greater relief for de minimis

offenses—not less—is consistent with
the F H B A and congressional intent.

Paragraph (b)(1) (age of person at time
of covered offense) provides that a

consent application is not required if
there are two convictions or program

entries for a covered offense, and the
actions that resulted in both convictions

or program entries all occurred when the
individual was 21 years of age or younger

and the convictions or program entries
were entered at least 18 months prior

to the date of a consent application.

For a reduced waiting period to
apply before an individual may

qualify for the de minimis exemption,
the underlying convictions or

35 See proposed §§ 752.8(a)(4),
(b)(2), (b)(3).

program entries must meet
the other de minimis criteria

in paragraph (a) of § 752.8.

The Board has revised the de minimis
requirement related to the aggregate total

face value of all “bad” or insufficient
funds checks from $1,000 to $2,000,

to conform with the statute.36 Under
paragraph (b)(2), a consent application

is not required if an individual has
convictions or program entries of

record based on the writing of “bad”
or insufficient funds checks and the

following conditions apply: (i) the
aggregate total face value of all “bad”

or insufficient funds checks cited across
all the convictions or program entries

for “bad” or insufficient funds checks
is $2,000 or less; (ii) no depository

institution or credit union was a payee
on any of the “bad” or insufficient

funds checks that were the basis of
the convictions or program entries;

and (iii) the individual has no more
than one other de minimis offense.

The F H B A and the final rule do
not require a consent application

for convictions or program entries
for small-dollar, simple theft.

Under paragraph (b)(3), convictions
or program entries based on the simple

theft of goods, services, or currency
(or other monetary instrument) are

considered de minimis offenses if
the following conditions apply: (i)

the value of the currency, goods, or
services taken is $1,000 or less; (ii)

the theft was not committed against an
depository institution or credit union;

(iii) the individual has no more than
one other de minimis offense under this

section; and (iv) if there are two de
minimis offenses under this section, each

conviction or program entry was entered
at least 3 years prior to the date a

consent application would otherwise be
required, or at least 18 months prior

to the date a consent application would
otherwise be required if the actions

that resulted in the conviction or
program entry all occurred when the

individual was 21 years of age or younger.

This exception excludes burglary, forgery,
robbery, identity theft, and fraud.

Finally, the Board notes that
the F H B A includes “designated

lesser offenses” in addition

36 See 12 U.S.C.

1785(d)(4)(C)(iii).

to de minimis offenses.

Designated lesser offenses, including
use of fake identification, shoplifting,

trespass, fare evasion, or driving
with an expired license or tag, are

described in the F H B A as low-risk
offenses statutorily excluded

from the scope of section 205(d).

Redesignated paragraph (b)(4), which
appeared as §752.3(d) in the proposed

rule, excludes from the scope of
covered offenses “designated lesser

offenses,” (for example, using fake
identification), as specified in 12 U.S.C.

1785(d)(4)(C)(iv), if 1 year or
more has passed since the applicable

conviction or program entry.

As explained in paragraph (a) in
the final rule, these offenses do

not need to meet the other criteria
specified for de minimis offenses.

The Board has deleted proposed
§ 752.8(c) concerning fidelity bond

coverage and disclosure of de minimis
offenses to insured credit unions.

This now-deleted paragraph had required
that, “Any person who meets the criteria

under this section shall be covered by
a fidelity bond to the same extent as

others in similar positions and shall
disclose the presence of the conviction(s)

or program entry(ies) to all insured
credit unions in the affairs of which

he or she intends to participate.”

One commenter expressed concern
that § 752.8(c), as proposed, could

be misinterpreted as imposing a
mandate on fidelity bond carriers

to provide coverage to individuals
meeting the de minimis criteria.

Specifically, the use of the phrase
“shall be covered by a fidelity bond”

could be read to imply that the burden
for fidelity coverage is on bond

providers to provide the required
coverage, rather than on the credit

union to obtain the required coverage.

This commenter’s concern was seemingly
borne out in another comment that

recommended that the same “mandate” for
fidelity bond coverage for individuals

meeting the de minimis criteria should
also be extended to individuals whose

consent applications have been approved.

This commenter’s recommendation
illustrated that a misunderstanding

of the phrase “shall be covered by a
fidelity bond” could occur as suggested.

Additionally, one commenter responding
to the FDIC’s parallel notice asked for

clarification concerning de minimis
offenses and another commenter

suggested that de minimis offenses
should be treated the same way as

“designated lesser offenses” by
excluding both types of offenses from

the scope of the statutory prohibition.

Since the F H B A has excluded de
minimis offenses from the scope of

section 205(d), the Board believes
that these requirements should no

longer attach to individuals who have
committed such offenses and has removed

this provision from the final rule.

Deleting proposed § 752.8(c) also removes
the ambiguity of the phrase “shall be

covered by a fidelity bond.” The Board
emphasizes, however, that all federally

insured credit union employees and
officials continue to be subject to the

fidelity bond and insurance coverage rules
under 12 CFR 713 and must be bondable to

work for or participate in the conduct
of the affairs of the credit union.37

Paragraph (c), redesignated from
proposed paragraph (d), states that

any conviction or program entry
for specific criminal offenses

under Title 18 set out in 12 U.S.C.

1785(d)(2) cannot qualify
for a de minimis exemption.

9.

Section 752.9 – How does an individual
or a credit union file an application?

This section, adopted as proposed,
eliminates the credit union filing

requirement and waiver process and
indicates that an insured credit

union may file an application
on behalf of an individual.

The individual may also
file an application.

This section also provides that
applications filed by a credit union

should be filed with the N C U A field
office where the credit union’s home

office is located (or with ONES for
credit unions that office supervises),

and applications filed by an individual
should be filed with the N C U A

field office where the person lives.

States covered by each N C U A field
office are listed in 12 CFR 790.2.

37 Federally insured, state-chartered
credit unions are required by 12 CFR

741.201 to comply with the fidelity
bond coverage requirements of part 713.

Corporate credit unions must comply
with 12 CFR 704.18 in lieu of part 713.

Along with this final rule, the Board
is revising its delegations of authority

related to consent applications.

Formerly, the Regional Directors and
the ONES Director only had delegated

authority to act on credit union-sponsored
applications, and the Board had

retained the authority to approve or
disapprove individual applications.

Under the revised delegations, the
Regional Directors and the ONES

Director will have authority to
act on both individual and credit

union-sponsored applications.

Any disapproval of an individual or credit
union-sponsored application for consent,

including a disapproval of a request
for reconsideration, will require the

prior concurrence of the General Counsel.

Consistent with the F H B A, the
General Counsel’s concurrence

must certify that the denial is
consistent with section 205(d).

Under the revised delegation, the Board
will retain authority to approve or

disapprove individual applications for
consent involving an offense described

under section 205(d)(2)(A) and such other
high-level security cases it designates.

10.

Section 752.10 – How will the N
C U A evaluate an application?

Paragraph (a) sets out the factors the
N C U A will assess to determine the

level of risk the applicant poses to
an insured credit union and whether the

N C U A will consent to the person’s
participation in a credit union’s affairs.

The paragraph reflects new statutory
requirements related to the N C U A’s

review process, including the requirement
that the N C U A primarily rely on the

criminal history record of the Federal
Bureau of Investigation (FBI) in its

review and provide such record to the
applicant to review for accuracy.38

The Board interprets the term “criminal
history record” to mean “identity history

summary checks,” which are commonly known
as “rap sheets.” Under paragraph (a)—and

in accordance with the F H B A—the N C
U A, in reviewing an application, will

provide “such record” (a copy of the rap
sheet) to the individual to review for

38 See 12 U.S.C.

1785(d)(5)(F).

accuracy.39 The N C U A will not
provide it to the credit union,

but only to the individual who is
the subject of the application.

One commenter stated that the
requirement to rely primarily on

FBI rap sheets will help improve
the consent application process.

One commenter, to the FDIC’s parallel
F H B A notice of proposed rulemaking,

requested that the FDIC establish a
deadline to evaluate the application

once received and a deadline of 5 days to
return the copy of the criminal history

record once received from the FBI.

The FDIC has adopted this recommendation
in part;40 however, the Board

declines to adopt the suggested
deadlines in this final rule.

While the Board remains mindful that the
consent application process may impose

inconveniences and uncertainties to
covered individuals and credit unions as

they await the agency’s determination,
the Board maintains it is impracticable

to establish a timetable for action on
applications because each application is

fact specific and varies in complexity.

Past applications submitted to the N C U
A have generally been adjudicated within

60 days from receipt, and often the
processing time was significantly less.

The Board remains committed to
processing consent applications

as promptly as practicable.

In addition, the N C U A will make
reasonable efforts to communicate

with the subject of the application
within 15 calendar days of receipt of

the criminal history record from the
FBI to inform the individual that the

N C U A will be providing them with
a copy of the report and to verify

the individual’s contact information.

The N C U A will also make reasonable
efforts to send the report to the

individual within 5 business days
of successful verification of the

individual’s contact information.

If the individual believes that there
are any inaccuracies in the report, the

N C U A will direct the individual to the

39 Id.

40 Under revised 12 CFR 303.229(a)(2),
the FDIC will make reasonable efforts

to communicate with the subject of
the application within 15 calendar

days of receipt of this record from
the FBI to inform the individual that

the FDIC will be providing them with
a copy of the report and to verify

the individual’s contact information.

The FDIC will also make reasonable
efforts to send the report to the

individual within 5 business days
of successful verification of the

individual’s contact information.

If the individual believes that there
are any inaccuracies in the report, the

FDIC will direct the individual to an
appropriate contact at the FBI, where

the individual can seek corrections.

FBI, where the individual
can seek corrections.

Paragraph (b) states that the N C U A
will not require an applicant to provide

certified copies of criminal history
records unless the N C U A determines

that there is a clear and compelling
justification to require additional

information to verify the accuracy of
the criminal history record of the FBI.

Paragraph (c) states that the determining
factors in assessing an application

are whether the person has demonstrated
their fitness to participate in

the conduct of the affairs of an
insured credit union, and whether the

affiliation, or participation by the
person in the conduct of the affairs

of the credit union, may constitute
a threat to the safety and soundness

of the credit union or the interests
of its members or threaten to impair

public confidence in the credit union.

Paragraph (d) sets forth the
considerations the N C U A

will evaluate in conducting
an individualized assessment.

These considerations are substantively
similar to factors under IRPS 19-1.

The final rule also clarifies how
the N C U A will evaluate evidence

of rehabilitation and other evidence,
as required by the F H B A.41

Paragraph (e) provides that the question
of whether a person, who was convicted of

a crime or who agreed to a program entry,
was guilty of that crime shall not be at

issue in a proceeding under this subpart
or under 12 CFR part 746, subpart B.

Paragraph (f) provides that the N C U
A will also apply the considerations

in paragraph (d) to determine whether
the interests of justice are served in

seeking an exception in the appropriate
court when a consent application is

made prior to 10 years after the final
conviction or agreement to program

entry for certain federal offenses.42

41 While the statute uses the terms
“rehabilitation” and “mitigating” as

separate categories of evidence, the
terms appear to be substantially similar

in the context of section 205(d) consent
applications, and the use of both terms

in these regulations may create confusion.

Therefore, the final rule uses the
term rehabilitation, not mitigating.

42 See 12 U.S.C.

1785(d)(2)(A).

Paragraph (g) provides that all
approvals or orders will be subject

to the condition that the person be
covered by a fidelity bond to the same

extent as others in similar positions.

The final rule clarifies that
paragraph (g) applies whether the

approval is conferred by order
or less formal means, such as an

approval letter from a field office.

Paragraph (h) includes statutory
language explaining when a new credit

union-sponsored application would
be necessary due to changes in the

scope of an applicant’s employment.

It provides that when deemed appropriate
by the N C U A, credit union-sponsored

applications are intended to allow
the individual to work for the

same employer and across positions.

N C U A consent will be required for
any proposed significant changes in the

individual’s security-related duties
or responsibilities, such as promotion

to an officer or other positions that
the employer determines will require

higher security-screening credentials
(that is, any position with higher

level access or responsibility,
not only security personnel or

individuals in the security field).

Paragraph (i) provides that when a
person who has received approval under

section 205(d) subsequently seeks
to participate in the conduct of the

affairs of another insured credit union,
another application must be submitted.

11.

Section 752.11 – What will the N C
U A do if the application is denied?

Paragraph (a) provides that the
N C U A will provide a written

denial that will summarize or cite
the relevant factors from §752.10.

Paragraph (b) provides that the applicant
(either the insured credit union or

the subject individual, or both, as a
consolidated request) may file a written

request for reconsideration or appeal
under the administrative review process

contained in 12 CFR part 746, subpart B.

That subpart includes uniform procedures
by which petitioners may appeal initial

agency determinations to the Board.

Under part 746, subpart B,
prior to submitting an appeal

to the Board, the petitioner may

make a written request to the
appropriate field office to

reconsider an initial agency

determination within 30 calendar days
of the date of that determination.

Within 60 calendar days of the date of
an initial agency determination or, as

applicable, a determination by the field
office on any request for reconsideration,

a petitioner may file an appeal seeking
review of the determination by the Board.

Under part 746, subpart B, a
petitioner may also request an

oral hearing before the Board.

These procedures meet the statutory
requirement for “national office review”

of any consent application that is denied
by a “regional office,” if the individual

requests a review by the Board.43 This
option is also substantially similar to

the FDIC’s current parts 303 and 308,
except that under those regulations,

an oral hearing is conducted unless
the applicant or the insured depository

institution waives it in writing and
instead makes a written submission.44

Technical or Non-Substantive
Modifications.

In addition to the modifications to
the proposal described above, the

final rule includes a few minor,
technical, or non-substantive revisions.

For example, the Board has updated
subject headings for clarity and for

consistency with the FDIC’s final rule.

Several paragraphs have also been
combined and redesignated for efficiency.

Additionally, some adjustments to
terminology and for plain language have

been adopted in the final rule, such
as using “will” instead of “shall” when

explaining actions the N C U A will take.

N C U A Practice on Section 205(d)

In general, the final rule mirrors the
FDIC’s part 303, and the FDIC’s separate

rulemaking to implement the F H B A,
with minimal, non-substantive changes.

Additionally, while there were a few
differences between the FDIC’s part 303

and IRPS 19-1 before the F H B A, such

43 12 U.S.C.

1785(d)(5)(D).

44 12 CFR 308.158(d).

as some details on de minimis offenses,
expungements, and treatment of

drug-related offenses, the enactment
of the FBHA resolved most differences

between the two agencies’ rules and
created a more uniform standard.

However, there are a few areas in
which IRPS 19-1 provided additional

context and discussion on policy
and procedures related to section

205(d) compared to part 303.

In general, the additional
information does not provide

any substantive difference from
part 303 and instead provides

additional clarifying information.

The Board has chosen to omit much of
the clarifying information in the final

rule to ensure its consistency with part
303; however, the Board also believes

credit unions may generally have less
experience with section 205(d) than

insured depository institutions and are
typically smaller in size with fewer

resources, so additional guidance may help
insured credit unions to discharge their

responsibilities under section 205(d).

One commenter was supportive of the
N C U A issuing guidance to go along

with the final rule and suggested that
examples be given in the guidance.

Accordingly, after finalizing and
implementing this rule, the N C U A

intends to issue guidance that provides
insured credit unions with additional

information about section 205(d).

The guidance will include portions
of IRPS 19-1 that were not

incorporated into the final rule.

For example, IRPS 19-1 provided that
when the credit union learns that

a prospective employee has a prior
conviction or entered into a pretrial

diversion program for a covered offense,
the credit union should document in its

files that a consent application is not
required because the covered offense is

considered de minimis and meets all of
the criteria for the exception, or—if

the credit union is willing to sponsor
the prospective employee’s consent

application—submit an application
requesting the Board’s consent.

The credit union could also extend
a conditional offer of employment

and notify the prospective employee
that it is contingent upon a

satisfactory background check to
determine whether the individual is

prohibited under section 205(d).

The Board intends no change of position
regarding these policies even though

they are not included in the final rule.

IRPS 19-1 also stated that persons
who will occupy clerical, maintenance,

service, or purely administrative
positions generally can be approved

without an extensive review.

A more detailed analysis, however,
would be performed in the case of

persons who will be able to influence
or control the management or

affairs of the insured credit union.

The final rule does not include a similar
delineation between how the N C U A

intends to approve consent applications
for different types of positions.

However, the Board continues to
believe that applications for

clerical, maintenance, service,
or purely administrative positions

do not require the same review as
applications for other positions that

have access to more of the day-to-day
financial operations of a credit union.

The N C U A plans to address
this issue in the guidance.

Other Conforming Amendments.

Both the standard FCU Bylaws in
appendix A of part 701 and the

criteria for determining the
insurability of a credit union in 12

CFR 741.3(c) reference section 205(d).

In general, both sections prohibit a
person who has been convicted of any

criminal offense involving dishonesty
or breach of trust from serving at

an insured credit union, except with
the written consent of the Board.

The Board believes these references are
incomplete because not all convictions

of criminal offenses involving dishonesty
or breach of trust now serve as the valid

basis for a section 205(d) prohibition.

Therefore, the final rule replaces
the current reference to “any crime

involving dishonesty or a breach
of trust” to refer to the specific

crimes covered under section

205(d).

Referring directly to the FCU Act
also automatically incorporates future

statutory changes to section 205(d).

Additionally, as required
by the Gramm-Leach-Bliley

Act, appendix B to part 748

(Appendix B) contains guidance
on creating an effective incident

response plan in the event of

unauthorized access to member information
and the requirements of the notices

distributed to the affected members.45
Appendix B states that credit unions

should also conduct background checks
of employees to ensure that the credit

union does not violate 12 U.S.C.

1785(d).

The final rule requires a background
check in § 752.1(b), which is consistent

with current expectations.46 Therefore,
the final rule amends this footnote to

state that insured credit unions must also
conduct background checks of employees.

Amendments to § 701.14 on Change in
Official or Senior Executive Officer

in Credit Unions that are Newly
Chartered or are in Troubled Condition.

In addition to the prohibition on certain
individuals participating in the conduct

of the affairs of a credit union included
in section 205(d), the FCU Act also sets

forth conditions under which certain
insured credit unions must notify the N C

U A in writing of any proposed changes in
its board of directors, committee members,

or senior executive staff (section
212).47 The Board implements section 212

through § 701.14 of its rules.48 Section
701.14 requires generally that insured

credit unions that are newly chartered
or troubled file notice with the N C U

A before adding, replacing, or changing
the duties of a board or committee

member or a senior executive officer.

The Board has not substantively
amended §701.14 since 2012 when

the Board revised the definition
of troubled condition.49 The Board

proposed to make minor amendments to

§701.14 to clarify when a notice
is required, how the N C U A

would process the notice, and what

45 12 CFR 748, App.

B.

46 The Board notes that insured credit
unions may extend a conditional offer of

employment contingent on the completion
of a background check satisfactory to

the credit union to determine if the
applicant is barred under section 205(d).

47 12 U.S.C.

1790a.

48 12 CFR 701.14.

49 77 FR 45285 (July 31, 2012).

information must be included
in the N C U A’s notice of

disapproval to the applicant.

Specifically, the Board proposed to:

• Clarify when notice is required by
specifying that a credit union must

provide notice when adding or replacing
any member of its board of directors or

committees, employing any person as a
senior executive officer of the credit

union, or changing the responsibilities
of a board member, committee member, or

a senior executive officer so that the
person would assume a different position;

• Increase the amount of time for
N C U A to initially review a

notice after its receipt from 10
calendar to 15 calendar days;50

• Specify that Regional Director and
ONES Director communications under

§ 701.14 may be done through email; and

• Explicitly state that the notice
of disapproval will identify

the reason(s) for the denial.

One commenter supported the proposed
amendment to clarify that a notice

is required when a newly chartered
or troubled credit union is adding

or replacing any member of its board
of directors or committees, employing

any person as a senior executive
officer of the credit union, or

changing the responsibilities of a
board member, committee member, or

senior executive officer if the person
is assuming a different position.

The commenter stated that the amendment
would provide a necessary clarification

but encouraged the N C U A to ensure
federally insured state-chartered credit

unions remain aware of the notification
requirement to their respective state

supervisory authority, as currently
required under § 701.14(c)(3).

The same commenter, however, was
opposed to increasing the amount of

time for the agency to initially review
a notice for a change in official

or senior executive officer from the
current 10 calendar day limit to 15

calendar days under § 701.14(c)(3)(iii).

While the commenter agreed it

50 See 12 CFR 701.14(c)(3)(iii).

is important to conduct a thorough review
of each request, the commenter felt that

the current timeframe is sufficient and
did not support extending the time for

N C U A’s initial review because of the
time sensitivity in these situations,

particularly for a troubled credit union.

After careful consideration, the
Board is adopting the amendment to the

notification requirement as proposed.

As discussed in the notice of proposed
rulemaking, the 10-day notification

requirement is not specified in the
statute, and the N C U A has found

the 10-day timeframe difficult to
meet, as additional information to

analyze the request may be required.

The Board continues to believe that
the additional 5 calendar days will

not unduly delay the start or change
in position of board members, committee

members, or senior executive officers.

In making this change, the Board
emphasizes that the increase from 10

to 15 days applies only to the amount
of time the N C U A has to either

determine an application is complete
or request additional information.

The current 30-day approval
timeline remains the same,

unless the agency is waiting on
additional requested information.

An applicant can mitigate any
delay by producing requested

information expeditiously.

The N C U A endeavors to process
all applications as quickly as

possible, irrespective of whether
additional information is requested.

The agency did not receive any
comments on the other amendments

to § 701.14 and the Board is
finalizing those changes as proposed.

The Board notes that other authorities
bear on an individual’s ability

to work for or participate in
the conduct of the affairs of a

federally insured credit union.51

IV.

Other Alternatives Considered

Comments Received by the FDIC

On November 14, 2023, the FDIC published
a notice of proposed rulemaking to

51 See 12 U.S.C.

1786(i)(1)(A); 12 U.S.C.

5101 et seq.; 12 U.S.C.

5104; Pub.

L.

116–283, codified at 31 U.S.C.

5321(g).

conform the FDIC’s section 19
regulations with the F H B A52 and

the FDIC received several comments
and recommendations on its proposal.

The N C U A considered these other
comments as part of its statutory

obligation to consult and coordinate
with the FDIC to promote consistent

implementation of the F H B A.

Aside from the modifications described
earlier in this preamble, the Board

has decided not to incorporate those
recommendations into the final rule.

As discussed previously, almost all of
the substantive requirements incorporated

into the agency’s regulations stem from
the F H B A’s revisions to section 205(d).

The Board had limited discretion
in adopting alternatives to

those statutory revisions.

The Board considered other recommendations
that were submitted by the commenters

but believes that the final rule
represents the most appropriate option

for covered entities and individuals.

V.

Regulatory Procedures

Paperwork Reduction Act

The Paperwork Reduction Act of 1995
(PRA) applies to rulemakings in which an

agency creates a new or amends existing
information collection requirements.53

For purposes of the PRA, an information
collection requirement may take the

form of a reporting, recordkeeping, or
a third-party disclosure requirement.

The N C U A may not conduct or
sponsor, and the respondent is

not required to respond to, an
information collection, unless it

displays a valid Office of Management
and Budget (OMB) control number.

The N C U A will revise its
section 205(d) application form

to conform with the changes to
section 205(d) under the F H B A.

These changes amend the N C U A’s
existing information collection associated

with this rule, entitled “Application
Pursuant to Section 205(d) of the

52 See 88 FR 77906.

53 44 U.S.C.

3507(d); 5 CFR part 1320.

Federal Credit Union Act” (3133-0203).

For this reason, the
information-collection requirements

contained in this final rule will
be submitted by the N C U A to

OMB for review and approval under
section 3507(d) of the PRA (44 U.S.C.

3507(d)) and § 1320.11
of the OMB’s implementing

regulations (5 CFR part 1320).

The final rule extends greater relief
than what was formerly available to

certain individuals with prior convictions
seeking employment with an insured

credit union, thereby eliminating the
need to submit consent applications

for certain offenses, particularly
older or expunged convictions,

prior misdemeanors, drug possession
offenses, and other lesser offenses.

The final rule should reduce the number
of respondents applying for consent,

but it may also increase the number
of applications because of a renewed

awareness of the statutory prohibition.

Thus, the estimated number of respondents
applying for consent remains at one.

The final rule requires credit unions to
make a reasonable, documented, inquiry to

verify an applicant’s history to ensure
that a person who has a conviction or

program entry covered by the provisions of
section 205(d) is not hired or permitted

to participate in its affairs without
the written consent of the N C U A.

This recordkeeping requirement is minimal.

These program changes would revise
the information collection requirement

currently approved OMB control
number 3133-0203, as follows:

Title of Information Collection: Part
752, Application Pursuant to Section

205(d) of the Federal Credit Union Act.

Estimated Number of Respondents: 4.

Estimated Number of
Responses per Respondent: 1.

Estimated Annual Frequency of Response: 1.

Estimated Hours per Response: 0.75.

Estimated Total Annual Burden Hours: 3.

Affected Public: Private Sector:
Not-for-profit institutions;

Individual or Household.

Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA)
generally requires that when an agency

issues a proposed rule or a final
rule pursuant to the Administrative

Procedure Act or another law, the
agency must prepare a regulatory

flexibility analysis that meets the
requirements of the RFA and publish

such analysis in the Federal Register.

Specifically, the RFA normally requires
agencies to describe the effect of

a rulemaking on small entities by
providing a regulatory impact analysis.

For purposes of the RFA, the Board
considers credit unions with assets

less than $100 million to be small
entities.54 A regulatory flexibility

analysis is not required, however, if
the agency certifies that the rule will

not have a significant economic impact
on a substantial number of small entities

and publishes its certification and
a short, explanatory statement in the

Federal Register together with the rule.

The Board does not believe the final rule
will have a significant economic impact

on a substantial number of small entities.

In the period from 2019 through
2023, the N C U A received

four consent applications.

This averages out to
one application a year.

Therefore, on average, only about
one small entity—at most—will be

affected by the proposed rule annually.

As discussed in the SUPPLEMENTARY
INFORMATION section, the final rule

will align the N C U A’s regulations
with the F H B A’s provisions and more

closely align the N C U A’s section
205(d) regulations with those of

other federal financial regulators.

Most of the changes were precipitated
by the F H B A—which was effective

immediately upon passage—and the final
rule aligns the N C U A’s regulations

with these elements of the F H B A;
therefore, most of the associated changes

in the final rule will have no direct
effect on individuals or credit unions.

Further, since the N C U A estimates
that on average approximately

one N C U A-insured institution

54 N C U A IRPS 15-1, 80 FR 57512 (Sept.

24, 2015).

could be affected by the final
rule annually, any direct effects

realized because of the final rule
are likely to be small and affect a

relatively small number of entities.

In light of the foregoing, the N C U A
certifies that the final rule will not

have a significant economic impact on
a substantial number of small entities.

Executive Order 13132

Executive Order 13132 encourages
independent regulatory agencies

to consider the impact of their
actions on state and local interests.

The N C U A, an independent regulatory
agency as defined in 44 U.S.C.

3502(5), voluntarily complies with
the executive order to adhere to

fundamental federalism principles.

This final rule will apply to all insured
credit unions, including federally

insured, state- chartered credit unions.

The Board has determined that the final
amendments will not have a substantial

direct effect on the states, on the
connection between the national government

and the states, or on the distribution
of power and responsibilities among

the various levels of government.

Further, the final rule implements a
statutory amendment, and the N C U A

does not have discretion in implementing
the statutory changes to section 205(d).

In particular, the Board does not
believe that these changes will affect

its existing agreements and division
of supervisory responsibilities

with state regulatory agencies.

The Board expects to continue to
coordinate with these agencies as

appropriate in carrying out its
responsibilities under section

205(d) and related provisions.

Therefore, the Board has determined
that this rule does not constitute a

policy that has federalism implications
for purposes of the executive order.

Assessment of Federal Regulations
and Policies on Families

The N C U A has determined that this
final rule may affect family well-being

positively within the meaning of
section 654 of the Treasury and

General Government Appropriations Act,

1999, Public Law 105-277, 112 Stat.

2681 (1998).

In particular, the N C U A has reviewed
the criteria specified in section

654(c)(1) of that act, by evaluating
whether this final regulatory action (1)

affects the stability or safety of the
family, particularly in terms of marital

commitment; (2) affects the authority
of parents in the education, nurture,

and supervision of their children; (3)
helps the family perform its functions;

(4) affects disposable income or
poverty of families and children; (5)

only financially impacts families, if
at all, to the extent such impacts are

justified; (6) may be carried out by
State or local government or by the

family; or (7) establishes a policy
concerning the relationship between the

behavior and personal responsibility
of youth and the norms of society.

Under this statute, if the agency
determines the regulation may negatively

affect family well-being, then the
agency must provide an adequate

rationale for its implementation.

The final rule implements legislative
amendments that increase employment

opportunities for individuals with
certain older or minor criminal offenses

involving dishonesty or breach of trust.

These increased employment opportunities
may strengthen the stability of families,

help families perform their functions,
and increase disposable income.

These changes are not likely to
affect the rights of parents in the

education or nurture of their children.

The changes call for federal rather
than state or local government action

because the legislation affects
the federal statute governing all

federally insured credit unions.

The Board also notes that it has limited
discretion in whether and how to implement

the legislative amendments and thus cannot
substantially vary from the legislation.

The Board has determined that
this final rule may affect family

well-being positively within
the meaning of this statute.55

Small Business Regulatory Enforcement
Fairness Act—Congressional Review Act

55 Pub.

L.

105–277, 112 Stat.

2681 (1998).

The Congressional Review chapter of the
Small Business Regulatory Enforcement

Fairness Act of 1996 generally provides
for congressional review of agency

rules.56 A reporting requirement is
triggered in instances where the N C U

A issues a final rule as defined in the
Administrative Procedure Act.57 Besides

being subject to congressional oversight,
an agency rule may also be subject to a

delayed effective date if it is a “major
rule.” The N C U A does not believe this

rule is a “major rule” within the meaning
of the relevant sections of the statute.

As required by the statute, the N C U
A will submit this final rule OMB for

it to determine if this final rule is a
“major rule” for purposes of the statute.

The N C U A also will file appropriate
reports with Congress and the U.S.

Government Accountability Office
so this rule may be reviewed.

List of Subjects in 12 CFR Part 701

Administrative practice and
procedure, Credit, Credit unions.

12 CFR Part 741

Bank deposit insurance, Credit unions,
Reporting and recordkeeping requirements.

12 CFR Part 746

Administrative practice and procedure,
Claims, Credit unions, Investigations.

12 CFR Part 748

Computer technology, Confidential business
information, Credit unions, Internet,

Personally identifiable information,
Privacy, Reporting and recordkeeping

requirements, Security measures.

12 CFR Part 752

Administrative practice and procedure.

56 5 U.S.C.

551.

57 Id.

By the N C U A Board
on [INSERT DATE], 2024.

Melane Conyers-Ausbrooks,

Secretary of the Board.

For the reasons discussed in
the preamble, the Board amends

12 CFR chapter VII 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.

2.

In 701.14, revise paragraphs (c)(1),
(c)(3)(iii), and the second sentence

in paragraph (e) as follows:

§ 701.14 Change in official or
senior executive officer in credit

unions that are newly chartered
or are in troubled condition.

(c)

* * *
(1) Prior Notice Requirement.

An insured credit union must give
the N C U A written notice at least

30 days before the effective date
of adding or replacing any member of

its board of directors or committee
member, employing any person as a senior

executive officer of the credit union, or
changing the responsibilities of a board

member, committee member, or a senior
executive officer so that the person

would assume a different position if:

(i) The credit union has been
chartered for less than 2 years; or

(ii) The credit union meets the
definition of troubled condition in

paragraph (b)(3) or (4) of this section.

* * * * *

(3)

* * *

(iii) Processing.

Within 15 calendar days after receiving
the notice, the Regional Director will

inform the credit union either that the
notice is complete or that additional,

specified information is needed and must
be submitted within 30 calendar days.

If the initial notice is complete, the
Regional Director will issue a written

decision of approval or disapproval to the
individual and the credit union within 30

calendar days of receipt of the notice.

If the initial notice is not complete,
the Regional Director will issue a

written decision within 30 calendar
days of receipt of the original

notice plus the amount of time the
credit union takes to provide the

requested additional information.

If the additional information is not
submitted within 30 calendar days of

the Regional Director’s request, the
Regional Director may either disapprove

the proposed individual or review the
notice based on the information provided.

If the credit union and the individual
have submitted all requested information

and the Regional Director has not issued
a written decision within the applicable

time period, the individual is approved.

Regional Director communications
may be done through electronic mail.

* * * * *

(e) * * * The Notice of Disapproval
will identify the reason(s) for the

denial and advise the parties of their
rights to request reconsideration

from the Regional Director and/or file
an appeal with the N C U A Board in

accordance with the procedures set
forth in 12 CFR part 746, subpart B.

3.

In the Official Commentary to Appendix
A to part 701, under “Article V.

Elections,” revise paragraph
i.(b) to read as follows:

Appendix A to Part 701—Federal
Credit Union Bylaws Official N C U A

Commentary—Federal Credit Union Bylaws

Article V.

Elections

* * * * *

i.

Eligibility Requirements:

* * *

(b) The individual cannot have
been convicted of a crime covered

under section 205(d) of the
Federal Credit Union Act (12 U.S.C.

1785(d)) unless the N C U A
Board has waived the prohibition

for the conviction; and

* * * * *

PART 741 – REQUIREMENTS OF INSURANCE

4.

The authority citation for part
741 continues to read as follows:

Authority: 12 U.S.C.

1757, 1766(a), 1781–1790,
and 1790d; 31 U.S.C.

3717.

5.

In § 741.3, revise the second
sentence of paragraph (c) as follows:

§ 741.3 Criteria.

(c) Fitness of management.

* * * No person shall serve as a director,
officer, committee member, or

employee of an insured credit union
who has been convicted of a crime

covered under section 205(d) of the
Federal Credit Union Act (12 U.S.C.

1785(d)), except with the
written consent of the Board.

* * * * *
PART 746—APPEALS PROCEDURES

6.

The authority citation for part
746 continues to read as follows:

Authority: 12 U.S.C.

1766, 1787, and 1789.

§ 746.201 [Amended]

7.

In § 746.201, in paragraph (c), add
“752.11(b),” between “745.201(c),” and

“subpart J to part 747 of this chapter,”.

PART 748—SECURITY PROGRAM, SUSPICIOUS
TRANSACTIONS, CATASTROPHIC ACTS,

CYBER INCIDENTS, AND BANK SECRECY ACT

COMPLIANCE

8.

The authority citation for part
748 continues to read as follows:

Authority: 12 U.S.C.

1766(a), 1786(b)(1), 1786(q),
1789(a)(11); 15 U.S.C.

6801-6809; 31 U.S.C.

5311 and 5318.

9.

Revise footnote 7 in appendix B
to part 748 to read as follows.

Appendix B to Part 748—Guidance on
Response Programs for Unauthorized Access

to Member Information and Member Notice

7 Credit unions must also conduct
background checks of employees

to ensure that the credit union
does not violate 12 U.S.C.

1785(d), which prohibits a credit
union from hiring an individual

convicted of certain criminal
offenses or who is subject to a

prohibition order under 12 U.S.C.

1786(g).

* * * * *
10.

Add part 752 to read as follows:

PART 752—CONSENT TO SERVICE OF PERSONS
CONVICTED OF, OR WHO HAVE PROGRAM

ENTRIES FOR, CERTAIN CRIMINAL OFFENSES

Sec.

752.1 What is section
205(d) of the FCU Act?

752.2 Who is covered by section 205(d)?

752.3 Which offenses qualify as
“Covered Offenses” under section 205(d)?

752.4 What constitutes a
conviction under section 205(d)?

752.5 What constitutes a
pretrial diversion or similar

program under section 205(d)?

752.6 What are the types of
applications that can be filed?

752.7 When may an application be filed?

752.8 What is the De minimis exemption?

752.9 How does an individual or a
credit union file an application?

752.10 How will the N C U
A evaluate an application?

752.11 What will the N C U A do
if the application is denied?

Authority: 12 U.S.C.

1785(d).

§ 752.1.

What is section 205(d) of
the Federal Credit Union Act?

(a) This subpart covers applications
under section 205(d) of the Federal

Credit Union Act (FCU Act), 12 U.S.C.

1785(d).

The N C U A refers to such applications
as “consent applications.” Under

section 205(d), any person who has
been convicted of any criminal offense

involving dishonesty or breach of trust,
or has agreed to enter into a pretrial

diversion or similar program (program
entry) in connection with a prosecution

for such offense (collectively, Covered
Offenses), may not become, or continue

as, an institution-affiliated party
(IAP) of an insured credit union; or

otherwise participate, directly or
indirectly, in the conduct of the affairs

of any insured credit union without the
prior written consent of the N C U A.

Section 205(d) imposes a ten-year ban
against the Board granting consent

for a person convicted of certain
crimes enumerated in Title 18 of

the United States Code (U.S.C.).

In order for the Board to grant consent
during the 10-year period, the Board

must file a motion with, and obtain
the approval of, the sentencing court.

(b) In addition, the law prohibits an
insured credit union from permitting

such a person to engage in any conduct
or to continue any relationship

prohibited by section 205(d).

Insured credit unions must therefore
make a reasonable, documented, inquiry

to verify an applicant’s history to
ensure that a person who has a Covered

Offense under section 205(d) is not
hired or permitted to participate in its

affairs without the written consent of
the N C U A issued under this subpart.

Insured credit unions may extend a
conditional offer of employment contingent

on the completion of a background
check satisfactory to the credit

union to determine if the applicant is

prohibited under section 205(d),
but the applicant may not

work for, be employed by, or

otherwise participate in the affairs
of the insured credit union until the

credit union has determined that the
applicant is not prohibited under section

205(d) (including persons who have
had a consent application approved).

(c) If there is a conviction or program
entry covered by the prohibitions of

section 205(d), an application under
this subpart must be filed seeking

the N C U A’s consent to become, or to
continue as, an IAP; or to otherwise

participate, directly or indirectly, in
the affairs of the insured credit union.

The application must be filed, and
consented to, prior to serving in any

of the foregoing capacities unless such
application is not required under the

subsequent provisions of this subpart.

The purpose of an application is to
provide the applicant an opportunity

to demonstrate that, notwithstanding
the prohibition, a person is fit to

participate in the conduct of the
affairs of an insured credit union

without posing a risk to its safety
and soundness or impairing public

confidence in that credit union.

The burden is upon the
applicant to establish that the

application warrants approval.

(d) The term field office, for purposes
of this subpart, means a Regional Office

or the Office of National Examinations and
Supervision, as described in 12 CFR 790.2.

§ 752.2 Who is covered by section 205(d)?

(a) Persons covered by section 205(d)
include IAPs, as defined by 12 U.S.C.

1786(r), and others who are
participants in the conduct of the

affairs of an insured credit union.

Therefore, all directors, officers,
and employees of an insured credit

union who fall within the scope of
section 205(d), including de facto

employees, as determined by the N C
U A based upon generally applicable

standards of employment law, will
also be subject to section 205(d).

Whether other persons are covered
by section 205(d) depends upon

their degree of influence or
control over the management or

affairs of an insured credit union.

For example, section 205(d) would apply to

directors and officers of affiliates,
subsidiaries, or joint ventures of

an insured credit union if they 50

participate in the affairs of the
insured credit union or are able to

influence or control the management or
affairs of the insured credit union.

Typically, an independent contractor does
not have a relationship with the insured

credit union other than the activity for
which the credit union has contracted.

However, an independent contractor who
also influences or controls the management

or affairs of the insured credit union
would be covered by section 205(d).

(b) The term person, for purposes of
section 205(d), means an individual

and does not include a corporation,
firm, or other business entity.

§ 752.3 Which offenses qualify as
“Covered Offenses” under section 205(d)?

(a) Categories of Covered Offenses.

The conviction or program entry must
be for a criminal offense involving

dishonesty or breach of trust.

(1) The term criminal
offense involving dishonesty—

(i) Means an offense under which an
individual, directly or indirectly—

(A) Cheats or defrauds; or

(B) Wrongfully takes property
belonging to another in

violation of a criminal statute;

(ii) Includes an offense that federal,
state, or local law defines as

dishonest, or for which dishonesty
is an element of the offense; and

(iii) Does not include—

(A) A misdemeanor criminal offense
committed more than 1 year before

the date on which an individual files
a consent application, excluding

any period of incarceration; or

(B) An offense involving the
possession of controlled substances.

At a minimum, this exclusion applies
to criminal offenses involving the

simple possession of a controlled
substance and possession with intent

to distribute a controlled substance.

This exclusion may also apply
to other drug-related offenses

depending on the statutory elements
of the offenses or from court

determinations that the statutory
provisions of the offenses do

not involve dishonesty or breach

of trust as noted in
paragraph (b) of this section.

Potential applicants may contact their
appropriate N C U A field office if

they have questions about whether their
offenses are covered under section 205(d).

(iv) The term offense committed
in paragraph (a)(1)(iii)(A) of

this section means the last date
of the underlying misconduct.

In instances with multiple offenses,
offense committed means the last date

of any of the underlying offenses.

(2) The term breach of trust means a
wrongful act, use, misappropriation, or

omission with respect to any property or
fund that has been committed to a person

in a fiduciary or official capacity, or
the misuse of one’s official or fiduciary

position to engage in a wrongful act,
use, misappropriation, or omission.

(b) Elements of the offense.

Whether a crime involves dishonesty or
breach of trust will be determined from

the statutory elements of the offense
itself or from court determinations that

the statutory provisions of the offense
involve dishonesty or breach of trust.

(c) Certain older offenses excluded.

— (1) Exclusions for certain older offenses.

Section 205(d) does not
apply to an offense if—

(i) It has been 7 years or more
since the offense occurred; or

(ii) The individual was incarcerated
with respect to the offense, and it has

been 5 years or more since the individual
was released from incarceration.

(iii) The term offense occurred means the
last date of the underlying misconduct.

In instances with multiple Covered
Offenses, offense occurred means the last

date of any of the underlying offenses.

(2) Offenses committed by individuals
21 years of age or younger.

For individuals who committed an offense
when they were 21 years of age or

younger, section 205(d) does not apply
to the offense if it has been more than

30 months since the sentencing occurred.

The term

sentencing occurred means the
date on which a court imposed

the sentence (as indicated by the

date on the court’s sentencing order),
not the date on which all conditions

of sentencing were completed.

(3) Limitation.

This paragraph (c) does not apply to
an offense described under 12 U.S.C.

1785(d)(2).

(d) Foreign convictions.

Individuals who are convicted of, or
enter into a pretrial diversion program

for, a criminal offense involving
dishonesty or breach of trust in any

foreign jurisdiction are subject to
section 205(d), unless the offense is

otherwise excluded by this subpart.

§ 752.4 What constitutes a
conviction under section 205(d)?

(a) Convictions requiring an application.

There must be a conviction of record.

Section 205(d) does not cover
arrests or pending cases not brought

to trial, unless the person has a
program entry as set out in § 752.5.

Section 205(d) does not cover acquittals
or any conviction that has been reversed

on appeal, unless the reversal was
for the purpose of re-sentencing.

A conviction with regard to which an
appeal is pending requires an application.

A conviction for which a pardon has
been granted requires an application.

(b) Convictions not
requiring an application.

When an individual is charged with a
Covered Offense and, in the absence of a

program entry as set out in § 752.5, is
subsequently convicted of an offense that

is not a Covered Offense, the conviction
is not subject to section 205(d).

(c) Expungement, dismissal, and sealing.

A conviction is not considered
a conviction of record and does

not require an application if—

(1) There is an order of expungement,
sealing, or dismissal that has been

issued regarding the conviction in
connection with such offense, or if a

conviction has been otherwise expunged,

sealed, or dismissed by
operation of law; and

(2) It is intended by the language in
the order itself, or in the legislative

provisions under which the order
was issued, or in other legislative

provisions, that the conviction shall be
destroyed or sealed from the individual’s

state, tribal, or federal record, even
if exceptions allow the conviction to

be considered for certain character
and fitness evaluation purposes.

(d) Youthful offenders.

An adjudication by a court against a
person as a “youthful offender” (or

similar term) under any youth-offender
law applicable to minors as defined

by state law, or any judgment as a
“juvenile delinquent” (or similar

term) by any court having jurisdiction
over minors as defined by state law,

does not require an application.

Such an adjudication does not constitute
a matter covered under section 205(d) and

is not a conviction or program entry for
determining the applicability of § 752.8.

§ 752.5 What constitutes a
pretrial diversion or similar

program under section 205(d)?

(a) The term “pretrial diversion or
similar program” (program entry) means

a program characterized by a suspension
or eventual dismissal or reversal of

charges or criminal prosecution upon
agreement by the accused to restitution,

drug or alcohol rehabilitation, anger
management, or community service.

Whether the outcome of a case constitutes
a program entry is determined by relevant

Federal, State, or local law, and, if
not so designated under applicable law,

then the determination of whether a
disposition is a program entry will be

made by the Board on a case-by-case basis.

(b) When a Covered Offense either is
reduced by a program entry to an offense

that would otherwise not be covered
by section 205(d) or is dismissed upon

successful completion of a program
entry, the offense remains a Covered

Offense for purposes of section 205(d).

The Covered Offense will require an
application unless it is de minimis as

provided by § 752.8 of this subpart.

(c) Expungements, dismissals, or sealings
of program entries will be treated

the same as those for convictions.

§ 752.6 What are the types of
applications that can be filed?

(a) The N C U A will
accept applications from—

(1) An individual; or

(2) An insured credit union
applying on behalf of an individual.

(b) An individual or an
insured credit union may file

applications at separate times.

Under either approach, the application(s)
must be filed with the appropriate N C U A

field office, as required by this subpart.

§ 752.7 When may an application be filed?

Except for situations in which
no application is required under

section 205(d) and this subpart,
an application must be filed when

there is a conviction by a court of
competent jurisdiction for a Covered

Offense by any adult or minor treated
as an adult or when such person has a

program entry regarding that offense.

Before ant application may be filed,
all of the sentencing requirements

associated with a conviction, or
conditions imposed by the program

entry, including but not limited
to, imprisonment, fines, conditions

of rehabilitation, and probation
requirements, must be completed, and

the case must be considered final by the
procedures of the applicable jurisdiction.

The N C U A’s application forms
as well as additional information

concerning section 205(d) can be
accessed on the N C U A’s website.

§ 752.8 What is the De minimis exemption?

(a) In general.

The prohibitions of section 205(d)
will not apply, and an application will

therefore not be required, where all of
the following de minimis criteria are met.

(Paragraph

(b)(4) of this section contains separate
exemption criteria from paragraphs

(a)-(b)(3), and an offense that qualifies
for exemption under paragraph (b)(4)

is excluded from consideration in the
criteria of paragraphs (a)-(b)(3).)

(1) The individual has been convicted of,
or has program entries for, no more than

two Covered Offenses, including those
subject to paragraph (b)(1)-(b)(3) of this

section; and for each Covered Offense, all
of the sentencing requirements associated

with the conviction, or conditions imposed
by the program entry, have been completed

(the sentence- or program-completion
requirement does not apply under

paragraph (b)(2) of this section).

(2) For each Covered Offense, the
individual could have been sentenced to

a term of confinement in a correctional
facility of 3 years or less and/or a fine

of $2,500 or less, and the individual
actually served 3 days or less of

jail time for each Covered Offense.

(3) Jail time under paragraph (a)(2) of
this section is calculated based on the

time an individual spent incarcerated as
a punishment or a sanction—not as pretrial

detention—and does not include probation
or parole where an individual was

restricted to a particular jurisdiction
or was required to report occasionally

to an individual or a specific location.

Jail time includes confinement to
a psychiatric treatment center in

lieu of a jail, prison, or house of
correction on mental-competency grounds.

The definition is not intended to include
either of the following: persons who are

restricted to a substance-abuse treatment
program facility for part or all of

the day; or persons who are ordered to
attend outpatient psychiatric treatment.

(4) If there are two convictions or
program entries for a Covered Offense,

each conviction or program entry was
entered at least 3 years prior to the

date an application would otherwise
be required, except as provided in

paragraph (b)(1) of this section.

(5) Each Covered Offense must not
have been committed against an

insured depository institution
or insured credit union.

(b) Other types of offenses for which
the de minimis exemption applies and

no application is required — (1) Age
of person at time of Covered Offense.

If there are two convictions or program
entries for a Covered Offense, and

the actions that resulted in both
convictions or program entries all

occurred when the individual was 21 years
of age or younger, then the de minimis

criteria in paragraph (a)(4) of this
section will be met if the convictions

or program entries were entered at
least 18 months prior to the date an

application would otherwise be required.

For this reduction in waiting time
to apply, the convictions or program

entries must meet the other de
minimis criteria in paragraph (a).

(2) Convictions or program entries
for insufficient funds checks.

The prohibitions of section 205(d)
will not apply, and an application

will therefore not be required, as
to convictions or program entries

of record based on the writing of
“bad” or insufficient funds check(s)

if the following conditions apply:

(i) The aggregate total face value of all
“bad” or insufficient funds check(s) cited

across all the conviction(s) or program
entry(ies) for “bad” or insufficient

funds checks is $2,000 or less;

(ii) No insured depository institution
or insured credit union was a payee

on any of the “bad” or insufficient
funds checks that were the basis of the

conviction(s) or program entry(ies); and

(iii) The individual has no
more than one other de minimis

offense under this section.

(3) Convictions or program entries
for small-dollar, simple theft.

The prohibitions of section 205(d)
will not apply, and an application

will therefore not be required, as to
convictions or program entries based on

the simple theft of goods, services, or
currency (or other monetary instrument)

if the following conditions apply:

(i) The value of the currency, goods,
or services taken was $1,000 or less;

(ii) The theft was not committed
against an insured depository

institution or insured credit union;

(iii) The individual has no more than
one other offense that is considered

exempt under this section; and

(iv) If there are two offenses—each of
which, by itself, is considered exempt

under this section, each conviction or
program entry was entered at least 3 years

prior to the date an application would
otherwise be required, or at least 18

months prior to the date an application
would otherwise be required if the

actions that resulted in the conviction
or program entry all occurred when the

individual was 21 years of age or younger.

(v) Simple theft excludes
burglary, forgery, robbery,

identity theft, and fraud.

(4) Convictions or program entries for
using fake identification, shoplifting,

trespassing, fare evasion, or driving
with an expired license or tag.

The prohibitions of section 205(d)
will not apply, and an application

will therefore not be required, as to
the following offenses, if 1 year or

more has passed since the applicable
conviction or program entry: using

fake identification; shoplifting;
trespassing; fare evasion; and driving

with an expired license or tag.

(c) Non-qualifying convictions
or program entries.

No conviction or program entry
for a violation of the Title 18

sections set out in 12 U.S.C.

1785(d)(2) can qualify under
any of the de minimis exemptions

set out in this section.

§ 752.9 How does an individual or a
credit union file an application?

Forms and instructions can be
obtained from the N C U A’s

website (www.N C U A.gov), and the
application(s) must be filed with the

appropriate field office Director.

An application may be filed by an
individual or by an insured credit union

on behalf of an individual, or by both.

The appropriate field office for a
credit union-sponsored application

is the office covering the state

where the insured credit union’s
home office is located, or the

Office of National Examinations

and Supervision.

The appropriate field office
for an application filed by an

individual is the office covering
the state where the person resides.

States covered by each N C U
A field office are listed in

section 790.2 of this chapter.

§ 752.10 How will the N C U
A evaluate an application?

(a) Criminal history records.

In reviewing an application,
the N C U A will—

(1) Primarily rely on the criminal
history record provided by the Federal

Bureau of Investigation (rap sheet); and

(2) Provide such record to the subject of
the application to review for accuracy.

(b) Certified copies.

The N C U A will not require an
applicant to provide certified copies

of criminal history records unless
the N C U A determines that there is

a clear and compelling justification
to require additional information to

verify the accuracy of the criminal
history record provided by the

Federal Bureau of Investigation.

(c) Ultimate determinations.

The ultimate determinations in assessing
an application are whether the person

has demonstrated their fitness to
participate in the conduct of the affairs

of an insured credit union, and whether
the affiliation or participation by the

person in the conduct of the affairs
of the credit union may constitute

a threat to the safety and soundness
of the credit union or the interests

of its members or threaten to impair
public confidence in the credit union.

(d) Individualized assessment.

When evaluating applications, the N
C U A will conduct an individualized

assessment that will consider:

(1) Whether the conviction or
program entry is subject to section

205(d) and the specific nature
and circumstances of the offense;

(2) Whether the participation directly
or indirectly by the person in any

manner in the conduct of the affairs
of the insured credit union constitutes

a threat to the safety and soundness

of the credit union or the interests
of its members or threatens to impair

public confidence in the credit union;

(3) Evidence of rehabilitation
including the person’s age at the

time of the conviction or program
entry, the time that has elapsed since

the conviction or program entry, and
the relationship of the individual’s

offense to the responsibilities
of the applicable position;

(4) The individual’s employment
history, letters of recommendation,

certificates documenting participation
in substance-abuse programs,

successful participation in job
preparation and educational programs,

and other relevant evidence;

(5) The ability of management of the
insured credit union to supervise

and control the person’s activities;

(6) The applicability of the
insured credit union’s fidelity

bond coverage to the person;

and

(7) For state-chartered, federally
insured credit unions, the opinion or

position of the state regulator; and

(8) Any additional factors in the
specific case that appear relevant

to the application or the individual.

(e) No re-consideration of guilt.

The question of whether a person,
who was convicted of a crime or who

agreed to a program entry, was guilty
of that crime will not be at issue

in a proceeding under this subpart
or under 12 CFR part 746, subpart B.

(f) Factors considered
for enumerated offenses.

The foregoing factors will also be
applied by the N C U A to determine

whether the interests of justice are
served in seeking an exception in the

appropriate court when an application is
made to terminate the 10-year ban prior

to its expiration date under 12 U.S.C.

1785(d)(2)(A) for
certain federal offenses.

(g) Mandatory conditions of approval.

All approvals or orders
will be subject to the

condition that the person be
covered by a fidelity bond to the

same extent as others in similar

positions.

If the N C U A has approved an application
filed by an individual and has issued

a consent order, the individual
must disclose the presence of the

conviction(s) or program entry(ies) to
all insured credit unions in the affairs

of which they wish to participate.

(h) Credit union-sponsored consent
applications: work at same employer.

When deemed appropriate by the N C U
A, credit union-sponsored applications

are to allow the individual to work for
the same employer (without restrictions

on the location) and across positions,
except that the prior consent of

the N C U A (which may require a new
application) will be required for any

proposed significant changes in the
individual’s security-related duties

or responsibilities, such as promotion
to an officer or other positions that

the employer determines will require
higher security screening credentials.

(i) Work at a different employer
after certain approvals.

In situations in which an approval has
been granted for a person to participate

in the affairs of a particular insured
credit union and the person subsequently

seeks to participate at another insured
credit union, another application must

be submitted and approved by the N C U A
prior to the person participating in the

affairs of the other insured credit union.

§ 752.11 What will the N C U A do
if the application is denied?

(a) The N C U A will inform the applicant
in writing that the application has been

denied and summarize or cite the relevant
considerations specified in § 752.10.

(b) The denial will also notify the
applicant of the right to request

reconsideration from the field office,
or to file an appeal with the Board,

and will include a description of
applicable filing deadlines and

time frames for agency responses.

The field office and the Board will
apply the review process contained

in 12 CFR part 746, subpart B, to any
request for reconsideration or appeal.

For credit union-sponsored
applications, either the institution

or the subject individual (or

both, as a consolidated request) may file
a request for reconsideration or appeal.

The request for

review must include a statement of the
underlying facts that form the basis

of the request for reconsideration or
appeal, a statement of the basis for the

denial to which the applicant objects
and the alleged error in such denial,

and any other support, materials, or
evidence relied upon by the applicant

that were not previously provided.

This concludes the N C U A Letter to
credit unions on Fair Hiring in Banking

If your Credit union could use assistance
with your exam, reach out to Mark Treichel

on LinkedIn, or at mark Treichel dot com.

This is Samantha Shares and
we Thank you for listening.