Hiring at a federally insured credit union carries a federal screening requirement that most other employers never encounter. Section 205(d) of the Federal Credit Union Act bars a person convicted of a criminal offense involving dishonesty or breach of trust, or who agreed to enter a pretrial diversion or similar program for that kind of offense, from working at, serving as an official of, or otherwise participating in the affairs of an insured credit union, unless the National Credit Union Administration gives written consent first. This sits on top of, not instead of, the ordinary background check and FCRA process every employer already runs.
Credit unions, credit union service organizations, and the candidates themselves often misread this rule as a standard background check question on an application. It is a separate federal consent process with its own form, its own fingerprinting step, and its own timeline, and getting it wrong can put the credit union’s own federal insurance and charter at risk.
What Section 205(d) actually prohibits
The statute, codified in the Federal Credit Union Act and implemented through 12 CFR part 752, prohibits an insured credit union from knowingly hiring or retaining, and prohibits the covered person from accepting, a position if that person has been convicted of or has agreed to pretrial diversion or a similar program for a criminal offense involving dishonesty or a breach of trust. The prohibition reaches employees, officials, directors, and committee members, not just senior executives, and it applies regardless of how long ago the offense occurred unless one of the exceptions below applies.
There is no NCUA consent requirement for every criminal record. The rule is targeted at offenses that go to honesty and trustworthiness specifically, things like theft, embezzlement, forgery, and fraud, rather than every category of crime a background check might turn up.
The lesser offense exceptions Congress added
The Fair Hiring in Banking Act amended Section 205(d) to narrow the prohibition for certain low level conduct. According to NCUA’s own guidance, a category of designated lesser offenses is excluded from the consent requirement once one year has passed since the conviction or program entry. NCUA identifies those designated lesser offenses as use of fake identification, shoplifting, trespass, fare evasion, and driving with an expired license or tag. Outside of that narrow list, a conviction or diversion agreement for a dishonesty or breach of trust offense still triggers the consent requirement, and a credit union should not assume an offense qualifies for the exception without checking the current rule rather than guessing.
How the consent application works
A person covered by the prohibition, or the credit union on that person’s behalf, can apply for NCUA’s written consent using NCUA Form 3250. The application requires fingerprinting so NCUA can obtain an FBI criminal history record, and the applicant is given a chance to review that record for accuracy before NCUA decides the case. NCUA’s Office of General Counsel reviews each application and weighs factors such as the nature and circumstances of the offense, evidence of rehabilitation, and the specific duties of the position before deciding whether to grant consent. NCUA has said past applications have generally been resolved in a matter of weeks to a couple of months from receipt, though the agency is clear that timing depends on the individual case and is not promised.
A credit union sponsored application and an individual application use different sample cover letters but the same underlying form and standard. Either way, the credit union should not let the person begin covered duties before consent is granted, since the statute prohibits both the person from serving and the credit union from permitting it.
| Point of comparison | NCUA Section 205(d), credit unions | FDIC Section 19, banks |
|---|---|---|
| Covered institutions | Federally insured credit unions | FDIC insured banks and savings associations |
| Administering regulator | National Credit Union Administration | Federal Deposit Insurance Corporation |
| Core offenses covered | Dishonesty or breach of trust, including pretrial diversion for those offenses | Dishonesty, breach of trust, or money laundering, including pretrial diversion for those offenses |
| Consent vehicle | NCUA Form 3250 | A separate FDIC application process under its own rules |
| Lesser offense carve out | Designated lesser offenses excluded after a one year wait, per NCUA guidance | FDIC administers its own de minimis exceptions under Section 19, set out in its own rules |
The two statutes were written to work in parallel, and employers who operate across both bank and credit union structures, such as a holding company with both a bank and a credit union affiliate, need to track each regulator’s consent process separately. Section 205(d) consent from NCUA does not substitute for Section 19 consent from the FDIC, and the reverse is also true.
Section 205(d) does not replace the FCRA
Seeking NCUA consent only comes up for the specific dishonesty or breach of trust scenario described above. It does not replace the ordinary pre employment background check process, and it does not change the credit union’s obligations as an employer under the Fair Credit Reporting Act when it orders a consumer report from a background check company. Those obligations, set out in the Consumer Financial Protection Bureau’s Regulation V implementing the FCRA, still require a standalone disclosure, written authorization from the applicant, a pre-adverse action notice with a copy of the report and a summary of rights before any adverse decision, and a final adverse action notice if the decision stands.
A background check report will not necessarily surface every conviction that falls under Section 205(d), and state law on how far back a consumer report can go, along with the seven year guideline many states apply to older records, varies by state. A credit union should not assume a clean background check report means a person is automatically cleared under Section 205(d), since the two reviews ask different questions and rely on different sources, including the fingerprint based FBI record used in the NCUA consent process itself.
Roles that commonly trigger a closer look
Tellers, loan officers, accounting and finance staff, IT administrators with access to member funds or core systems, and anyone serving as a director, supervisory committee member, or senior official are the positions where credit unions most often run into a Section 205(d) question, simply because those roles handle member money or sit on the board. Credit unions that also originate mortgages should remember that loan officers may carry a separate NMLS registration background check requirement under the SAFE Act, which runs alongside, not in place of, the Section 205(d) screening.
Building this into the hiring process
A credit union that wants to stay ahead of this should ask about dishonesty or breach of trust convictions and pretrial diversion agreements directly during the background check process, in a way consistent with applicable state ban the box and fair chance laws, rather than relying solely on a general criminal history question. If an answer or a background check result raises a Section 205(d) issue, the credit union has a decision to make before day one: hold the offer open while an NCUA application is filed and decided, or decline to extend the offer. What it should not do is let the person start working in a covered role while an application is pending, since the statute does not create a grace period.
Working with a consumer reporting agency that understands how FCRA timing interacts with a federal consent requirement like this one, such as Reveal Background, helps a credit union keep its standard screening compliant while it handles the Section 205(d) question on its own separate track.
Frequently asked questions
Does Section 205(d) apply to every employee at a credit union?
It applies to anyone who would work at, serve as an official of, or otherwise participate in the affairs of the credit union, which in practice covers employees, officials, directors, and committee members, not only senior executives.
What counts as a breach of trust offense under this rule?
NCUA guidance does not provide a single exhaustive list, but offenses involving dishonesty or breach of trust generally include things like theft, embezzlement, forgery, and fraud. A credit union unsure whether a specific conviction qualifies should review the current rule and NCUA guidance rather than guess.
Is there any conviction that does not require NCUA consent?
Yes. NCUA guidance identifies a category of designated lesser offenses, including use of fake identification, shoplifting, trespass, fare evasion, and driving with an expired license or tag, that fall outside the consent requirement once one year has passed since conviction or program entry.
How is this different from the FDIC’s Section 19 rule for banks?
Both statutes prohibit hiring or retaining someone convicted of a dishonesty or breach of trust offense without the regulator’s consent, but NCUA administers Section 205(d) for federally insured credit unions while the FDIC administers Section 19, which also reaches money laundering offenses, for FDIC insured banks. Consent under one does not carry over to the other.
Does a credit union still need FCRA disclosure and authorization if Section 205(d) applies?
Yes. The FCRA disclosure, authorization, and adverse action process applies to the credit union’s ordinary consumer report based background check regardless of whether a Section 205(d) issue also comes up.
Can someone start working while an NCUA consent application is pending?
The statute prohibits both the person from serving and the credit union from permitting it until consent is granted, so a credit union should not let the person begin covered duties while an application is still pending.
This article is general information, not legal advice.
