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Legal Opinion Summary
Topic:Incidental Authority/Promotional Activity: May a bank enter into an alliance with a land management company to help its customers obtain land management services?
ID Number:03-02
Issue Date:02/28/2003

A bank requested FCA approval of a strategic alliance that it and its affiliated associations proposed to enter into with a third party to make land management services available to eligible borrowers. The bank would enter into an agreement with a land management company. Under the agreement, neither the bank nor the associations would provide land management services. They would simply advertise the land management company's services to eligible borrowers. The bank would print leaflets, develop information for a website, and maintain a toll free number for customers. The land management company would pay a fee for this service. We concluded that the proposed alliance is promotional activity that the bank and associations can reasonably consider to be necessary or expedient to their business and thus authorized as an incidental power. By providing customers with information about land management services, the bank and associations are promoting themselves and their attentiveness to their customers' needs. We have considered similar activities, such as placing a Farm Credit logo on an affinity credit card (offered by a commercial bank) and helping customers fill out and mail applications for the card, to be within incidental authorities. In another example, an association placed a hyperlink on its website to make customers aware of the financial planning and insurance products offered by a third party. As is the case in this proposed alliance, the association was not offering the financial planning and insurance services, it was merely making its customers aware of the services offered by the third party. We also concluded in the hyperlink alliance case and others involving promotional services that an institution may receive fee income for providing these promotional services.