Compliance Blog

Posted by Anthony Demangone

Let's discuss NCUA's recent changes to its Truth in Savings rule that affect overdraft protection programs, shall we?  Today, let's focus on the changes to the periodic statement.

• Here's a link to the final rule.
• Remember, it takes effect January 1, 2010.

With the changes, all credit unions with an overdraft protection program must disclose on their periodic statement all ODP fees and NSF fees.  Before, only those credit unions that marketed their ODP programs had to make such disclosures.  The fees must be totaled for the current month and year-to-date.  NCUA provides a model form, B-12, which you can find on p. 3 of the final rule. 

Here are some questions we've received.

Does our disclosure have to look just like the model form?  The requirement is that your disclosure must be substantially similar to their model disclosure.  707.11(a)(3).  Is "substantially similar" defined?  Nope.  During their recent teleconference, the Fed indicated that for their Reg DD, they expect to see some sort of chart or table.  But that's the Fed speaking on their reg. NCUA has not issued any formal clarifying guidance on this issue concerning its Truth in Savings reg.  My two cents?  I understand that many statement vendors indicate that creation of a chart is difficult.  But the further away you get from the model form, the higher your compliance risk on this point.  Do the best you can, and if you can't provide a chart, I'd document why it isn't possible.

The model form shows totals for ODP and NSF fees.  We don't have an overdraft protection program.  But we do charge NSF fees.  Do we need to provide the chart and give monthly totals for NSF fees, even without an ODP program?  That's a good question, which the reg does not really address.  I think it is reasonable to reach the conclusion that you don't need to provide monthly and year-to-date totals for NSF fees if you do not have an ODP program.  Remember - these new requirements are found in section 707.11 of the Truth in Savings regulation.  That section is titled: "Additional requirements for overdraft services."  That being said, let me just throw this out there.  Many credit unions that do not offer overdraft protection programs may, in fact, offer such programs in the eyes of NCUA and the Fed.  If a debit card transaction overdraws the account because the gas station only sent through an authorization for $1, credit unions must clear that transaction.  Do you charge a fee in that situation?  The Fed clearly thinks that is an overdraft fee.  (See Reg E's changes.)  So, I bet the Fed would expect you to show those fees in the ODP portion of the disclosures, even though you probably don't think you have an ODP program.  NCUA has not opined on this issue.  So, take it for what it  is worth: food for thought.

We have a sort of overdraft service where we transfer funds from another share account owned by the member to cover an overdraft.  Or they can apply for a line of credit.  We do charge fees for those transfers.  Are those covered by this regulation?  No.  The reg clearly excludes these types of overdraft programs from its scope. 

We use "combined statements" that group all share accounts owned by the member.  There could be one checking account and 5 other savings/money market accounts on one periodic statement.  Our overdraft program covers all of these accounts.  Can we combine all fees into 1 chart or table?  Or does each account get its own?  Good question.  I wish I had the answer to that one.  The regulation talks about disclosing fees that take place on an account, but it doesn't clearly address what to do when more than one account or subaccount is on each periodic statement.

Editor's note.  The Fed indicated that it will provide updated guidance to address unanswered questions from its most recent tele-conference on concerning ODP.  The tele-conference did address issues regarding Reg DD, so the Fed may weigh in on some of these issues early in 2010 in its Consumer Compliance Outlook newsletter.

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• NAFCU members, the Book of Answers has been updated.
• NCUA has issue legal opinion letter 09-1067 to clarify share insurance protection for 529 accounts. Here's a snippet from the letter:

  You requested clarification regarding share insurance coverage of qualified tuition savings program accounts (529 accounts). Specifically, you asked whether 529 accounts are insured as public units or as member accounts. Under NCUA share insurance rules, 529 accounts may be insured as public units or, on a pass-through basis, so long as membership and traceability requirements are met.

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Now for the shameless plug.  NAFCU is offering a special holiday savings opportunity for its 2010 conferences and volunteer/new staff online training program.  If you use the promo code PREHOL when you sign up by 12/31/09, you'll save 10 percent. 

Here's my two cents.  If you know that you or someone else at your credit union is going to attend one of our conferences next year, this will save you money.  The same goes if you were going to purchase our volunteer/new employee online training. If you are going to spend the money, why not take advantage of the discount?   You may want to pass this along to your training coordinator or others who might sign up for conferences.   You can see our conference lineup here.

Editor's note: You don't have to be a NAFCU member to attend or use the promo code.