Share Certificate Maturity Notices
Written By: Reginald Watson, NAFCU Regulatory Compliance Counsel
Greetings Compliance Friends!
The NAFCU Compliance Team periodically receives questions on renewal notices for share certificate accounts, and unfortunately NCUA’s rules governing maturity notices are not in the clearest of formats. As discussed in a previous blog, credit unions are generally required to provide notice to members at least 30 days prior to any account changes that may reduce the annual percentage yield or adversely affect the member. When it comes to share certificates approaching maturity, section 707.5(b) of NCUA’s Truth in Savings Rule (TIS) provides more specific notice requirements which vary depending upon the length of the share certificate and whether or not it is set to renew automatically upon maturity. Understanding these requirements may become even more cumbersome when considering the breadth of a credit union’s changing product mix over time.
Although the terms of an agreement may not change upon the renewal of a share certificate, NCUA considers a share certificate renewal to represent a new formal banking relationship and thus a new account. That being said, full new account disclosures containing the information required by section 707.4(b) of TIS are not always required in every circumstance. The following chart outlines the minimum notice requirements applicable to different share certificate account types, and the minimum timing requirements for providing notice under NCUA’s Truth in Savings rules:
|
Share Certificate |
Automatic Renewal? |
Content Required |
How Advanced? |
|
One Month Or Less |
Yes |
No Notice Required |
|
|
One Month Or Less |
No |
No Notice Required |
|
|
Longer Than 1 Month, But Not More Than 1 Year |
Yes |
Either full new account disclosures under §707.4(b), or: · The date the existing account matures and the new maturity date. · Any changes in the account terms of the new account. · The new dividend rate and APY. · If the dividend rate and APY are unknown, the date when they will be determined, and a telephone number for the member to obtain the new dividend rate and APY. |
30 calendar days before maturity, or alternatively, |
|
Longer Than 1 Month, But Not More Than 1 Year |
No |
· No notice required. · If independently renewed by the member, full new account disclosures. |
|
|
Longer Than 1 Year |
Yes |
· The date the existing account matures. · Full new account disclosures. |
30 calendar days before maturity, or alternatively, 20 calendar days before the end of any grace period. |
|
Longer Than 1 Year |
No |
The maturity date and whether dividends will be paid after maturity. |
10 calendar days |
It is my understanding that many credit unions often make the business decision to provide the same maturity notice and full new account disclosures for all types of share certificate accounts as a matter of internal policy, but that is a risk-based decision.
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