May an FCU receive compensation or a reimbursement of expenses for participating in the GAP insurance program?
NCUA’s regulations would permit an FCU to earn income by participating in the GAP insurance program as long as the sale of GAP insurance was directly related to the extension of credit by the FCU. 12 C.F.R. §721.2(b)(1). However, the FCU would be subject to any state laws governing the sale of insurance, including any limits on insurance commissions. If the sale of insurance is not directly related to the extension of credit, then an FCU could only be reimbursed for its costs. 12 C.F.R. §721.2(b)(2). When the NCUA Board promulgated the current Part 721 of NCUA Regulations, the preamble to the rule listed the types of insurance that may be directly related to an extension of credit. 50 Fed.Reg. 16462, April 26, 1985 (enclosed). While GAP insurance is not included on that list, it operates in the same manner as credit life insurance, which is included in the Board’s list. Both GAP insurance and credit life insurance are designed to pay off the member’s loan upon the occurrence of a speci
