OGC Legal Opinion

October 4, 2012

OGC Legal Opinion 12-0764 Definition of Fleet

NCUA's Office of General Counsel (OGC) was asked to revisit the definition of a "fleet" of vehicles pursuant to the Part 723.7 of NCUA Rules and Regulations pertaining to member business loans. At issue is that NCUA's MBL rule provides an exception to collateral and security requirements for commercial loans if the loan is to purchase certain types of vehicles unless the vehicle being purchased is to be part of a "fleet" of vehicles. See ยง723.7(a). However, because the final MBL rule did not contain a specific definition of a fleet, OGC filled in a specific definition in a 2005 Legal Opinion. See Legal Opinion 05-1038 MBL: Meaning of Fleet. In its 2005 Legal Opinion, OGC defined a "fleet" as two or more vehicles.

NCUA is now amending the definition of "fleet" to be five or more vehicles.

The new definition and this Legal Opinion is applicable to all federally insured credit unions, including state charters. However, federally insured state charters in states with state specific MBL rules may wish to check with their state regulator regarding the definition under state law. For example, since 2011 the state of Texas has interpreted a "fleet" of vehicles under its state specific MBL rule to be five or more vehicles under common ownership or management and being used for business or commercial purpose.

In addition to revising the number of vehicles constituting a "fleet" the OGC also revised the definition of what a vehicle is used for to determine if it should be counted for purpose of determining a "fleet." Under the old definition, a vehicle counted toward a "fleet" if it was used by a business "to deliver a product or provide services integral to the business." The OGC now believes this definition is too broad. Therefore, the complete definition of "fleet" as established by this new legal opinion is as follows:

A fleet is five or more vehicles that are centrally controlled and used for a business purpose, including for the purpose of transporting persons or property for commission or hire.

In making these changes, OGC cited changing business practices, trade industry standards, and Internal Revenue Service guidance for tax treatment. OGC also specifically noted its intention to provide regulatory relief to credit unions.