RegWatch - CUNA Marketing & Business Development Council

CUNA Regulatory Affairs (edited by the CMBDC Business Development/Legislation Committee)
December 18, 2008 | COMMENTS

Regulatory Issues of Interest to CUNA Marketing & Business Development Council Members

In This Issue:

• CUNA Comments on Recent Proposal to Amend the Share Insurance Sign Requirements
• CUNA Comments on Rule Regarding Share Insurance for Revocable Trusts

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CUNA COMMENTS ON RECENT PROPOSAL TO AMEND THE SHARE INSURANCE SIGN REQUIREMENTS

CUNA recently submitted a comment letter to the NCUA in response to a proposed rule that will amend the share insurance sign requirements for federally insured credit unions participating in shared branch networks. Currently, for tellers accepting share deposits for both federally insured and nonfederally insured credit unions, there must be a second sign adjacent to the official NCUA insurance sign. The second sign must list each federally insured credit union served by the teller, along with a statement that only those credit unions are federally insured. The proposed rule will replace the required list of credit unions with a general statement that not all of the credit unions served by the teller are federally insured and members should contact their credit union for further information.

As outlined in the letter, CUNA supports the goal of the proposed rule, which is to reduce the burden of the current share insurance sign requirements for shared branch networks. The letter also suggests additional flexibility for credit unions. This includes only requiring one sign in the branch in a conspicuous location that provides the general statement that not all credit unions served by the teller are federally insured or, instead of a sign, allowing tellers at credit unions that provide service to members of other credit unions the option of providing a separate disclosure to these nonmembers. A federally insured credit union that provides service to members of other credit unions should also have the option of indicating either on the sign or any separate disclosure that it is federally insured.

Click here for a copy of CUNA's letter.

- Jeff Bloch, Senior Assistant General Counsel

CUNA COMMENTS ON INTERIM FINAL RULE REGARDING SHARE INSURANCE FOR REVOCABLE TRUSTS

At its November Board meeting, the NCUA issued an interim final rule on share insurance for revocable trust accounts. The rule makes several changes that simplify the process for determining account coverage.

One of the major changes is the elimination of the “qualified beneficiary” requirement; beneficiaries previously had to be a spouse, child, grandchild, parent or sibling of the account owner. Share insurance coverage is now based on the existence of any beneficiary named in the revocable trust, as long as they are a natural person, charity, or non-profit organization. CUNA supports this change as it will likely increase eligible beneficiaries.

Another major change is to the method for determining the amount of account coverage. Previously, any unequal beneficial interests had to be accounted for when determining insurance coverage. For revocable trust accounts with $1,250,000 or less, the final rule does away with the previous requirement and insures each beneficiary up to $250,000. In the letter, CUNA states its support for this new method, as it is a much easier way to determine coverage.

Under the final rule, revocable trust accounts with more than $1,250,000 and more than five beneficiaries are insured for the greater of: $1,250,000 or the aggregate amount of the beneficiaries' interest, limited to $250,000 per beneficiary. Thus, it is necessary to account for each beneficiary's particular interest in measuring coverage for these accounts. While CUNA does not object to this method, it does suggest that the NCUA rewrite the section of the rule pertaining to these larger trust accounts as the wording is confusing.

In the letter, CUNA also took the opportunity to again encourage the NCUA to revisit its policy on share insurance coverage for IOLTA accounts. CUNA suggests that coverage be based on the membership status of the attorney establishing the account and not on his or her clients who contribute to the account.

A copy of CUNA's comment letter will be posted on our Regulatory Comment Call page shortly.

- Luke Martone, Regulatory Research Counsel