Compliance Blog

On Friday, the credit union share insurance landscape was greatly altered in two major ways.  First, President Bush signed into law changes that temporarily increase share insurance protections from $100,000 to $250,000.  Second, NCUA loosened restrictions on how revocable trusts are insured.

Insurance Increase to $250K.

On Friday, President Bushed signed into law the "Wall Street bailout."  Part of the large bill included language that temporarily increases NCUSIF share insurance protection to $250,000.  Read all about it here.

Key points:

• The change is effective immediately.
• NCUA will not be able to issue a premium to insured credit unions as a result of this increase.
• We are on equal footing with the FDIC regarding insurance amounts.
• The increased coverage is set to expire on December 31, 2009.
• NCUA has indicated that it will update its "Your Insured Funds" brochure and other documents to reflect the $250,000 amount.   Now, does this mean you have to run out and change all of your NCUSIF signs on Monday?  At this point, no.  But this is something we'll monitor to see what NCUA expects.

Revocable trusts.  On Friday, NCUA promulgated an interim final rule to loosen insurance rules to make it easier for beneficiaries on revocable trusts to qualify for NCUSIF protection.  You can access the interim final rule here.

Here's a brief description of the change from NCUA's final rule.  Note that NCUA drafted much of this rule before President Bush signed the bill mentioned above.  The share insurance protection per beneficiary will be $250,000 through the end of 2009 - not $100,000.  So you'll have to adjust the amounts below.

NCUA is amending its share insurance rules to simplify coverage for revocable trust accounts. The amendments will make the rules easier to understand and apply without decreasing coverage, result in faster share insurance determinations in the event of a credit union closing, and help improve public confidence in the credit union system. The amendments eliminate the concept of “qualifying beneficiaries.”

Also, for members with revocable trust accounts totaling no more than $500,000, coverage will be determined without regard to the proportional beneficial interest of each beneficiary in the trust.
Under the amended rules, a trust account owner with up to five different beneficiaries named in all of his or her revocable trust accounts at one NCUA-insured institution will be insured up to $100,000 per beneficiary. Revocable trust account owners with more than $500,000 and more than five different beneficiaries named in the trust(s) will be insured for the greater of either: $500,000 or the aggregate amount of all the beneficiaries’ interests in the trust(s), limited to $100,000 per beneficiary.

The change is effective immediately.  NAFCU members: NAFCU will work on some sort of guidance to help you understand these changes.  Perhaps a FAQ document that highlights the changes.  Our goal will be to make it available by COB today.

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On Friday, NCUA Chairman Fryzel issued this letter to federal credit unions regarding advertisements that compare credit unions to banks.  Here is some of the language from the letter:

During the past week, I have received letters from individuals concerned that certain credit unions were running print advertisements implying that banks are not safe and that depositors should withdraw their funds from these institutions.

NCUA has asked the credit unions involved to discontinue the advertising and refrain from making such remarks.

This type of activity is, in my experience, uncharacteristic of credit unions. Credit unions do not need to criticize another financial institution regardless of its charter. Your performance is all that matters.