Faulty Marketing Threatens Safe Deposit Integrity

David P. McGuinn, Credit Union Magazine
April 3, 2007

If your credit union provides safe deposit box services, beware faulty marketing practices that might create confusion, erode consumer confidence, or evoke accusations of false advertising.

Almost anyone who has a credit union account recognizes the National Credit Union Administration (NCUA) logo as the government's safety net that insures deposits up to $100,000 in the event of an institution's failure. Depositors breathe easier knowing this protection is in place.

But one of the most widespread consumer misconceptions about safe deposit is the erroneous belief that NCUA protections also are extended to safe deposit contents.

If the safe deposit vault is located within an institution that secures all of its depositor's assets, wouldn't it be logical to assume that these insurance provisions cover everything within the very walls that display the NCUA logo?

Survey your staff and members and you might find that this misunderstanding exists with six of ten consumers and employees. This confusion can and must be avoided. Financial institutions should be scrupulous about when and where they display these insurance signs, statements, and logos.

First, educate renters about safe deposit boxes. Renters should understand not only the benefits of box use, but box and vault limitations. These boxes and vaults are resistant to fires, floods, bombs, and burglaries. However, no box or vault is impervious to such disasters, and financial institutions should never market them as such. Consumers must realize there's an element of risk, but this risk is much less than not using a box at all.

Second, apprise renters that safe deposit boxes are considered a rental storage space by government agencies. Box contents never fall under insured deposit regulations.

Review These Key Areas

To avoid situations that could be construed as deception, review several areas, including:

Renter's key envelopes . They should never bear the NCUA logo or financial institution name, logo, address, telephone number, member name, or box number. These elements imply protection that doesn't exist and, in the event of loss or theft, may aid a dishonest person.

Brochures . Federal regulations require a written disclosure that lists all service charges, fees, and other miscellaneous charges. If brochures contain information about safe deposit rental rates or lost key or box drilling charges, this could create a significant problem later. This problem exists because this brochure must display a logo or statement about NCUA deposit insurance. Box renters rightfully could assume this information means everything printed in this brochure has $100,000 of coverage.

Other marketing materials . Materials such as statement stuffers, drive-through envelopes, newspaper and television ads, and “on hold” telephone messages. If these materials mention your safe deposit area and also refer to NCUA, make corrections immediately.

Website . Listing box rental charges and the NCUA logo could create problems. To correct this situation, add a disclaimer in bold, eight-point (at least) type reading, "NCUA does not insure safe deposit contents."

Lobby signs . Display carefully worded lobby signs clearly stating “no insurance is provided on safe deposit box contents.” This gives members correct information and could protect your credit union if a disaster occurs. Many state safe deposit regulations also require providing a written disclosure to all new box renters and a copy mailed annually when the rent is due. Even without such a state law, these signs and disclosures should always be provided.

Employee training is the most critical area. Employees having frequent contact with members must receive thorough and continuous training. Make sure they can answer all questions relating to safe deposit security and insurance. Have a carefully worded safe deposit 'question and answer brochure' addressing common questions to make training easier.

Review and update your safe deposit procedures now and save yourself the embarrassment of integrity issues later.

Dave McGuinn is president of Safe Deposit Specialists in Houston, Texas. Contact him at 713-937-9929. This story appeared in Credit Union Magazine at www.creditunionmagazine.com and is reprinted with permission.