Compliance Blog

File this one under "read things more closely."  Last Wednesday, NCUA issued an interim final rule to amend Part 740 of its rules and regs to  give credit unions a great deal of flexibility regarding how they disclose share insurance protection in light of the recent increase to $250,000.  (Wow, that was a long sentence.  Sorry.)  In NCUA's words, taken from the preamble to the rule:

The temporary increase in the SMSIA from $100,000 to $250,000 until December 31, 2009 calls into question the usefulness of NCUA’s official sign, as depicted in Part 740 of NCUA’s rules, which includes a statement that member shares are insured to at least $100,000. Obviously, that understates the actual temporary coverage limit of $250,000. NCUA knows from recent experience in revising the official sign that requiring credit unions to replace the current sign with a revised sign would be an expensive and burdensome process. NCUA recognizes the need to balance this burden, which is especially heavy given the insurance increase is only temporary, with the need and desire to inform members they have increased insurance coverage to $250,000. In this regard, NCUA will revise its rules to provide insured credit unions with maximum flexibility. Specifically, insured credit unions will have the option to: 1) continue to display the current official sign in Part 740, reflecting the $100,000 limit, without penalty; 2) display any other version of the official sign distributed or approved by NCUA and appearing on NCUA’s official website through December 31, 2009 that reflects the temporary increase to $250,000; or 3) alter by hand or otherwise the current official sign to make it reflect the increase to $250,000 provided the altered sign is legible and otherwise complies with Part 740. An example of how an insured credit union could alter the sign by hand is to affix a sticker that reads “$250,000” over the portion of the current sign that reads “$100,000.” Also, insured credit unions that do not change or alter the official sign can inform members about the temporary increase in account insurance through additional signage, for example, posting a sign in their lobbies or a notice on their websites that for the period October 3, 2008 through December 31, 2009, accounts are insured for $250,000 per account. (Emphasis added.)

There you have it.  Kudos to NCUA for giving credit unions flexibility in deciding how to alert members to the temporarily-enhanced share insurance protection.  Read the interim final rule here.  The rule is effective immediately, but NCUA is still seeking comments. 

Now, here's one thing to think about.  From the preamble discussion above, it seems that a credit union could simply do nothing.  It could simply leave the old signs up and leave it at that.  But take a close look at the actual regulation's text:

...insured credit unions may continue to display the official sign depicted in paragraph (b) of this section but should inform members of the increased coverage through additional signage indicating the temporary increase in coverage, display other versions of the official sign distributed or approved by NCUA and appearing on NCUA’s official website, or alter by hand or otherwise the official sign depicted in paragraph (b) of this section for that purpose provided the altered sign is legible and otherwise complies with this part. (Emphasis added.)

From that, it seems clear that NCUA wants credit unions who choose to leave up their old signs to also notify members about the change via other means.

On a related note, NCUA has updated its share insurance estimator to reflect recent changes. Read all about it here.