Compliance Blog

Written by Steve Van Beek

The compliance deadline for the noninterest-bearing transaction account disclosure is Friday, June 24, 2011.  We have had a few questions about the language of the actual notice.  It is below: 

NOTICE OF CHANGES IN TEMPORARY NCUA INSURANCE COVERAGE FOR TRANSACTION ACCOUNTS

All funds in a “noninterest-bearing transaction account” are insured in full by the National Credit Union Administration through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from, the coverage of at least $250,000 available to members under the NCUA's general share insurance rules.

The term “noninterest-bearing transaction account” includes a traditional share draft account (or demand deposit account) on which the insured credit union pays no interest or dividend. It does not include any transaction account that may earn interest or dividends, a negotiable order of withdrawal (“NOW”) account, money-market deposit account, and Interest on Lawyers Trust Account (“IOLTA”), even if share drafts may be drawn on the account. For more information about temporary NCUA insurance coverage of transaction accounts, visit www.ncua.gov.

The notice is located in 12 C.F.R. 745.14(c)(1) of NCUA's Regulations (the full Part 745 is here).   

Credit unions do not have flexibility to change the language of the notice itself.  The notice must remain as listed above.  However, credit unions could include supplemental information near the notice which discusses which accounts at the credit union are fully insured and, perhaps, informing members to see a credit union employee for more information.  

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NCUA issued Legal Opinion Letter 11-0241 which addresses the share insurance coverage of inherited individual retirement accounts (IRAs).  The letter indicates share insurance coverage could continue for an inherited IRA if certain conditions are met.  The letter also cautions about complex IRS issues that pertain to inherited IRAs.  If your credit union offers IRAs, this would be a good letter to pass along to whoever manages that process (which might be you!).  

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The Federal Reserve has set a time and date for an open Board meeting to finalize the Interchange regulation.  The meeting will take place at 3:30 p.m., Wednesday, June 29, 2011.  We may not know any more about the final rule between now and the 29th but this advance notice does indicate the Fed will finalize the rule at this time.  More info in the NAFCU Today.