Compliance Blog

Written by Eliott C. Ponte, Regulatory Compliance Counsel

The NCUA and other banking regulators recently issued interagency guidance to encourage financial institutions to develop and implement programs to expand youth savings programs.  While this guidance does not create any federal regulator policy or establish new industry expectations, it does provide answers to frequently asked questions related to the establishment of these programs.  In total, there are 10 frequently asked questions and a section that provides a host of other hyperlinked resources. Below are highlights from the interagency guidance:

Minors Savings Accounts

The guidance reaffirms that there is no federal law prohibiting minors from opening share accounts, and the issue of having such an account is governed by state contract law.  While some states have laws specific to minors opening share accounts, credit unions in states without these laws will need to rely on state contact law.  The guidance further states that minors generally do not have legal capacity to enter into a contract, which includes any account agreement with a credit union.  Thus, such an agreement with a minor may be “voidable.”  Whether it is legally permissible for a credit union to open an account for a minor without requiring a responsible adult to be the custodian or co-owner is a determination that a credit union should make in consultation with local counsel

Minors with a Custodial Account Receiving ATM or Debit Card

The guidance clarifies that each state's Uniform Transfers to Minors Act or Uniform Gifts to Minors Act govern the rules concerning the issuance of ATM and debit cards.  The guidance states that because a custodian manages the funds in an account on behalf of the minor, a minor with a custodial account should not be provided with an ATM or debit card that permits withdrawals.

Customer Identification Program (CIP)

The guidance provides answers to various CIP issues that arise when a minor or their custodian opens an account.  Specifically, the guidance states that when a minor opens a savings account without the involvement of a custodian (e.g., mother, guardian, etc.), the minor is considered the customer for CIP purposes.  However, when a custodian opens an account for the minor, the custodian is considered the customer.  The guidance reiterates requirements under CIP are the same as for an adult: the credit union must obtain a name, date of birth, address, and identification number. 

 

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