Rule2026-16021
Credit Union Service Contracts
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
August 6, 2026
Effective
September 8, 2026
Issuing agencies
National Credit Union Administration
Abstract
The NCUA Board (Board) is revising its regulations governing the organization and operation of federal credit unions (FCUs) by eliminating a provision related to credit union service contracts. The Board intends to reduce administrative costs and compliance complexity with this revision, enabling FCUs to serve their members more efficiently.
Full Text
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<title>Federal Register, Volume 91 Issue 150 (Thursday, August 6, 2026)</title>
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[Federal Register Volume 91, Number 150 (Thursday, August 6, 2026)]
[Rules and Regulations]
[Pages 50674-50677]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-16021]
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NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Parts 701 and 721
RIN 3133-AF83
Credit Union Service Contracts
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
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SUMMARY: The NCUA Board (Board) is revising its regulations governing
the organization and operation of federal credit unions (FCUs) by
eliminating a provision related to credit union service contracts. The
Board intends to reduce administrative costs and compliance complexity
with this revision, enabling FCUs to serve their members more
efficiently.
DATES: This final rule is effective on September 8, 2026.
FOR FURTHER INFORMATION CONTACT: Rachel Ackmann, Senior Attorney,
Office of General Counsel, at (703) 518-6540 or at 1775 Duke Street,
Alexandria, VA 22314.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
NCUA originally issued rules related to FCUs entering service
contracts in the 1970s.\1\ In 1982, the rules governing service centers
and other FCU contracting activities were combined into one section to
enhance the scope of FCU contractual agreements. Section 701.26 has
remained largely unchanged since 1982 with one exception. A 1998
amendment removed a provision that treated advance payments to a vendor
for more than three \2\ months of service as an investment in a credit
union service organization, a change made to reduce regulatory burden
and provide FCUs with greater flexibility in managing vendor
contracts.\3\ Section 701.26 has not been amended since 1998.
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\1\ 39 FR 44422 (Dec. 24, 1974).
\3\ 63 FR 10756 (Mar. 5, 1998).
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B. Legal Authority
Section 107(1) of the Federal Credit Union Act (FCU Act) gives an
FCU the
[[Page 50675]]
power to enter into contracts.\4\ Additionally, the incidental powers
provision of the FCU Act expressly grants FCUs the power ``to exercise
such incidental powers as shall be necessary or requisite to enable it
to carry on effectively the business for which it is incorporated.''
\5\ Accordingly, FCUs have broad authority to enter into contractual
agreements to perform or engage in activities that are expressly
authorized by the FCU Act or are incidental to the business of credit
unions.
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\4\ 12 U.S.C. 1757(1).
\5\ 12 U.S.C. 1757(17).
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Additionally, the FCU Act includes a general grant of regulatory
authority, and it authorizes the Board to prescribe regulations for the
administration of the FCU Act.\6\ Therefore, the Board has authority to
regulate FCU contractual agreements.
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\6\ 12 U.S.C. 1766(a).
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Part 701 of NCUA's regulations codifies these FCU Act authorities
and governs the organization and structure of FCUs, including a wide
range of operational activities. The part establishes the framework for
essential functions such as lending, governance, member services, and
ensuring that FCUs operate in a safe and sound manner.
Section 701.26 defines a FCU's authority to enter contracts for
assets or services that relate to its daily operations. The regulation
covers contracts with third-party vendors and other organizations,
including credit unions, that offer services to credit unions. The
regulation also allows one FCU to represent one or more other credit
unions or organizations in contractual arrangements with a third party
and authorizes the sharing of fixed assets.\7\ Agreements must be in
writing and must advise all parties subject to the agreement that the
goods and services provided are subject to examination by NCUA to the
extent permitted by law. Section 701.26 does not give FCUs the
authority to provide services directly to other credit unions but
reflects authority to contract for assets or services that may be
offered to credit unions through shared service arrangements. That is,
Sec. 701.26 does not address FCUs directly offering services to other
credit unions.
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\7\ Examples of where an FCU may represent another credit union
or organization include sharing of management services, loan
operations, and negotiations with vendors for shared services or
products. 47 FR 30460 (July 14, 1982).
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On February 25, 2026, the Board issued a proposed rule to eliminate
Sec. 701.26 because it is unnecessary. The authority for an FCU to
enter contracts for operational services is inherent in its charter and
its general powers under the FCU Act.\8\ Additionally, the regulation's
principal requirement--that such agreements be in writing--is a
standard business practice, which exists regardless of whether it is
mentioned in NCUA's regulations. Accordingly, the Board proposed to
rescind Sec. 701.26 to reduce administrative costs and compliance
complexity, enabling FCUs to serve their members more efficiently.
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\8\ 91 FR 9185 (Feb. 25, 2026).
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II. Final Rule
A. Overview
This final rule follows publication of the proposed rule and takes
into consideration the comments received on the proposal. By the close
of the public comment period on April 27, 2026, the Board received 12
public comments. Comments were submitted by individuals, FCUs, state
credit union leagues, and national credit union trade associations.
After careful consideration of the issues raised by the commenters, the
Board has decided to adopt the proposal with one change. The final rule
amends NCUA's incidental powers rule to reflect FCU authority to
represent one or more other credit unions or organizations in
contractual arrangements with a third party and authorizes the sharing
of fixed assets.
B. Discussion of Public Comments
This section of the preamble discusses the significant issues
raised by the commenters, and the Board's responses to the comments.
One individual commenter opposed the proposed rule. This commenter
generally raised concern about NCUA's deregulatory efforts and stated
the proposal prioritized reducing regulatory obligations over
maintaining the safeguards necessary to protect credit union members,
but the commenter did not have comments specific to the proposed rule.
Another commenter did not outrightly oppose the proposed rule but
expressed substantial concerns. The commenter noted that service
provider relationships remain operationally significant to many FCUs
and can present third-party risk. The commenter was in favor of
removing outdated prescriptive language only if maintaining sound risk
management expectations, such as adopting clear guidance to replace it.
The commenter reasoned that without a clear framework, contracts may
omit essential provisions such as audit rights and information security
obligations. The commenter also suggested that removal could lead to
unclear expectations and inconsistent examiner interpretations across
regions on what is standard business practice.
The Board agrees with the commenter that third-party service
provider relationships remain operationally significant, and sound due
diligence related to contractual relationships is imperative to the
success of these relationships. The Board notes that it continues to
expect FCUs to adhere to standard business practices and maintain safe
and sound practices regarding third-party contracts, including that all
contracts should be written.\9\ However, Sec. 701.26 does not impose
any minimum standards for contracts, outside of the requirement for
contracts to be in writing. Therefore, while the Board agrees with the
importance of managing third-party relationships, the removal of Sec.
701.26 does not raise any concern regarding FCU management of third-
party relationships. The Board also does not believe that removal of
Sec. 701.26 leads to unclear expectations regarding standard business
practices.
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\9\ SL No. 07-01 (2007), available at <a href="https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/evaluating-third-party-relationships-0">https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/evaluating-third-party-relationships-0</a>.
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Most commenters supported removing Sec. 701.26. Commenters pointed
to redundance with the FCU Act, which includes authority for FCUs to
enter contracts for operational services. Other commenters stated that
it is unnecessary to explicitly state that FCUs must execute contracts
in writing, as that is standard business practice. One commenter noted
that state law may require contracts to be in writing. Many commenters
stated that removing Sec. 701.26 would streamline regulations, reduce
administrative costs, and allow FCUs to operate more efficiently
without compromising safety and soundness. The Board agrees with these
commenters as outlined in the proposed rule.
One commenter encouraged the Board to consider reaffirming, either
in the preamble to the final rule or through supervisory guidance, that
the removal of Sec. 701.26 does not alter existing expectations
regarding written contracts, vendor oversight, or safe and sound third-
party risk management practices. The Board is reaffirming that the
removal of Sec. 701.26 does not alter existing expectations regarding
written contracts, vendor oversight, or safe and sound third-party risk
management practices. To operate safely and soundly, FCUs must
carefully consider the potential risks these relationships
[[Page 50676]]
may present and how to manage them. FCUs should consider how contracts
address important terms, such as audit rights, information security
obligations, business continuity expectations, indemnification,
performance metrics, data ownership/return provisions, termination for
cause or convenience language, and dispute resolution terms.
The proposed rule specifically sought comments on whether part 721
should be updated to explicitly recognize the authority of FCUs, in
joint operations and other resource sharing situations, to act as a
representative of another credit union or organization. Commenters were
mixed. One commenter did not believe it was necessary as part 721
provides sufficient flexibility to include this authority, but a few
commenters recommended updating part 721. One commenter generally
stated that the absence of clear regulatory text may create uncertainty
for FCUs, examiners, and third-party partners. One commenter stated
that NCUA should clarify whether a corporate credit union may act in
such a representative capacity. Section 701.26 does not govern
corporate credit unions permissible activities and permissible
activities for corporate credit unions are subject to Sec. 704.12.
In response to commenters, the final rule amends part 721 to
explicitly recognize the authority of FCUs, in joint operations and
other resource sharing situations, to act as a representative of
another credit union or organization. The provision permits an FCU to
represent another credit union in contractual arrangements, but does
not authorize an FCU to provide any other services or activities to
FCUs, only to act as a representative.\10\
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\10\ 66 FR 40845 (Aug. 6, 2001).
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III. Regulatory Procedures
A. Executive Orders 12866, 13563, and 14192
Pursuant to Executive Order 12866 (``Regulatory Planning and
Review''), a determination must be made whether a regulatory action is
significant and therefore subject to review by the Office of
Information and Regulatory Affairs (OIRA), within the Office of
Management and Budget (OMB) in accordance with the requirements of the
Executive Order.\11\ Executive Order 13563 (``Improving Regulation and
Regulatory Review'') supplements and reaffirms the principles,
structures, and definitions governing contemporary regulatory review
established in Executive Order 12866.\12\ This final rule was drafted
and reviewed in accordance with Executive Order 12866 and Executive
Order 13563. OIRA has determined that this final rule is not a
``significant regulatory action'' as defined by section 3(f) of
Executive Order 12866.
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\11\ 58 FR 51735 (Oct. 4, 1993).
\12\ 76 FR 3821 (Jan. 21, 2011).
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Executive Order 14192 (``Unleashing Prosperity Through
Deregulation'') requires that any new incremental costs associated with
new regulations shall, to the extent permitted by law, be offset by the
elimination of existing costs associated with at least 10 prior
regulations.\13\ This final rule is considered an Executive Order 14192
deregulatory action.
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\13\ 90 FR 9065 (Feb. 6, 2025).
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B. Regulatory Flexibility Act
The Regulatory Flexibility Act \14\ generally requires an agency to
conduct a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements, unless the agency certifies that
the rule will not have a significant economic impact on a substantial
number of small entities. If the agency makes such a certification, it
shall publish the certification at the time of publication of either
the proposed rule or the final rule, along with a statement providing
the factual basis for such certification.\15\ For purposes of this
analysis, NCUA considers small credit unions to be those having under
$100 million in assets.\16\ The Board fully considered the potential
economic impacts of the regulatory amendments on small credit unions.
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\14\ 5 U.S.C. 601 et seq.
\15\ 5 U.S.C. 605(b).
\16\ 80 FR 57512 (Sept. 24, 2015).
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The final rule only removes an existing regulatory provision
related to FCU contracting. The regulation's requirement--that such
agreements be in writing--is a standard business practice, which exists
regardless of whether it is mentioned in NCUA's regulations. The Board
considers the regulation to be superfluous, and its removal streamlines
NCUA's regulations, thereby reducing burden.
Accordingly, NCUA certifies the final rule will not have a
significant economic impact on a substantial number of small credit
unions.
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) generally provides that
an agency may not conduct or sponsor, and not withstanding any other
provision of law, a person is not required to respond to, a collection
of information, unless it displays a currently valid OMB control
number. The PRA applies to rulemaking in which an agency creates a new
or amends existing information collection requirements. For purposes of
the PRA, an information collection requirement may take the form of a
reporting, recordkeeping, or a third-party disclosure requirement. NCUA
has determined that the changes in the rule do not create a new
information collection or revise an existing information collection as
defined by the PRA. Accordingly, no PRA submissions to OMB will be made
with respect to this rule.
D. Executive Order 13132 on Federalism
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests.\17\
NCUA, an agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order to adhere to fundamental federalism
principles. The changes only apply to and affect FCUs and do not affect
state-chartered credit unions. The final rule has no effect on states
or on the distribution of power and responsibilities among the various
levels of government. Therefore, the Board affirms it will not affect
the division of responsibilities between NCUA and state regulatory
authorities with oversight of federally insured, state-chartered credit
unions.
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\17\ 64 FR 43255 (Aug. 4, 1999).
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E. Assessment of Federal Regulations and Policies on Families
NCUA has determined that this final rule will not affect family
well-being within the meaning of Section 654 of the Treasury and
General Government Appropriations Act, 1999.\18\ The final rule relates
to FCUs' contractual requirements, and any effect on family well-being
is expected to be indirect.
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\18\ Public Law 105-277, 112 Stat. 2681 (1998).
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F. Congressional Review Act
Subtitle E of the Small Business Regulatory Enforcement Fairness
Act of 1996, also known as the Congressional Review Act (CRA),
generally provides for congressional review of agency rules.\19\ NCUA
must submit a report to Congress and the Comptroller General when it
issues a final rule, as defined by the CRA.\20\ An agency rule, in
addition to being subject to congressional oversight, may also be
subject to a delayed effective date if the rule is a ``major rule.''
OIRA has determined that this rule is not a ``major rule'' within the
meaning of the relevant sections of the
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CRA. NCUA will also file appropriate reports with Congress and the
Comptroller General so this rule may be reviewed.
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\19\ 5 U.S.C. 801-808.
\20\ 5 U.S.C. 804(3).
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List of Subjects
12 CFR Part 701
Advertising, Aged, Civil rights, Credit, Credit unions, Fair
housing, Individuals with disabilities, Insurance, Marital status
discrimination, Mortgages, Religious discrimination, Reporting and
recordkeeping requirements, Sex discrimination, Signs and symbols,
Surety bonds.
12 CFR Part 721
Incidental powers, Credit unions.
By the National Credit Union Administration Board, this 29th day
of July, 2026.
Melane Conyers-Ausbrooks,
Secretary of the Board.
For the reasons stated in the preamble, the NCUA Board amends 12
CFR parts 701 and 721 as follows:
PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS
0
1. The authority citation for part 701 is revised to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759,
1761, 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 12 U.S.C. 4311-
4312.
Sec. 701.26 [Removed and reserved]
0
2. Remove and reserve Sec. 701.26.
PART 721--INCIDENTAL POWERS
0
3. The authority citation for part 721 continues to read as follows:
Authority: 12 U.S.C. 1757(17), 1766 and 1789.
0
4. Amend Sec. 721.3, by adding paragraph (n) to read as follows:
Sec. 721.3 What categories of activities are preapproved as
incidental powers necessary or requisite to carry on a credit union's
business?
* * * * *
(n) Representative activities. Acting as a representative of and
entering into a contractual agreement with one or more credit unions or
other organizations for the purpose of sharing, utilizing, renting,
leasing, purchasing, selling, and/or joint ownership of fixed assets or
engaging in activities and/or services which relate to the daily
operations of credit unions.
[FR Doc. 2026-16021 Filed 8-5-26; 8:45 am]
BILLING CODE 7535-01-P
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</html>Indexed from Federal Register on August 6, 2026.
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