[Federal Register Volume 66, Number 37 (Friday, February 23, 2001)]
[Proposed Rules]
[Pages 11239-11241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-4398]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 66, No. 37 / Friday, February 23, 2001 / 
Proposed Rules  

[[Page 11239]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 749


Records Preservation Program

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: NCUA proposes to revise its regulation establishing standards 
for vital record preservation. The proposal clarifies that a credit 
union may preserve records in electronic form, as authorized by the 
Electronic Signatures in Global and National Commerce Act. By 
eliminating the requirement that a credit union's financial officer be 
responsible for storing vital records, the revision permits a credit 
union's board of directors to determine which employee will be 
responsible for storing vital records under the record preservation 
program. It also incorporates an appendix to provide suggested 
guidelines to credit unions on retention periods for various types of 
records.

DATES: Comments must be received on or before April 24, 2001.

ADDRESSES: Direct comments to Becky Baker, Secretary of the Board. Mail 
or hand-deliver comments to: National Credit Union Administration, 1775 
Duke Street, Alexandria, Virginia 22314-3428. Fax comments to (703) 
518-6319. E-mail comments to [email protected]. Please send comments 
by one method only.

FOR FURTHER INFORMATION CONTACT: Dianne M. Salva, Staff Attorney, 
Division of Operations, Office of General Counsel, at the above address 
or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION: NCUA is proposing a revision of its 
regulation governing the preservation of vital records. The revision 
simplifies the regulation by converting it to a question and answer 
format. It also updates and clarifies the provision of the regulation 
that currently permits a credit union to store records in any format 
that can be used to reconstruct the credit union's files. By 
implementing the record retention provisions of the Electronic 
Signatures in Global and National Commerce Act, 15 U.S.C. 7001, the 
revision clarifies that credit unions may store records in any 
electronic format that is accurate, accessible and capable of being 
reproduced by printing, transmittal or other methods.
    The current regulation designates that the credit union's financial 
officer is responsible for vital records preservation duties. The Board 
finds that the credit union's board of directors may reasonably assign 
the duties to another staff member. The revision permits a credit 
union's board of directors to determine which employee will be 
responsible for carrying out the vital record preservation duties.
    Section 749.2 of the proposal restates the provision in the 
existing regulation that credit unions whose records are retained by 
off-site data processors are deemed to be in compliance for those 
records. The Board notes that credit unions should exercise care in the 
selection of an off-site data processor to ensure that it is capable of 
producing the records if requested.
    There is a need for guidance in the area of record retention based 
on the frequency of requests for assistance from credit unions. 
Although similar guidance is available in the NCUA Accounting Manual 
for Credit Unions, it will be more accessible as an appendix to the 
regulation. For those reasons, the revision incorporates an appendix 
that offers guidance on recommended retention periods for various types 
of credit union records.

Regulatory Procedures

Paperwork Reduction Act

    NCUA has determined that the proposed regulation does not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget.

Executive Order 13132

    Executive Order 13132 encourages independent regulatory agencies to 
consider the impact of their regulatory actions on state and local 
interests. In adherence to fundamental federalism principles, NCUA, an 
independent regulatory agency as defined in 44 U.S.C. 3502(5), 
voluntarily complies with the executive order. This proposed rule, if 
adopted, will apply only to all federally insured credit unions. It 
will not have substantial direct effects on the states, on the 
relationship between the national government and the states, or on the 
distribution of power and responsibilities among the various levels of 
government. NCUA has determined that the proposed rule does not 
constitute a policy that has federalism implications for purposes of 
the executive order.
    The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families.
    The NCUA has determined that this proposed rule will not affect 
family well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 
2681 (1998).

Agency Regulatory Goal

    NCUA's goal is to promulgate clear and understandable regulations 
that impose minimal regulatory burden. We request your comments on 
whether the proposed rule is understandable and minimally intrusive if 
implemented as proposed.

List of Subjects in 12 CFR Part 749

    Archives and records, Credit unions, Reporting and recordkeeping 
requirements.

    By the National Credit Union Administration Board on February 
15, 2001.
Becky Baker,
Secretary of the Board.
    For the reasons set forth in the preamble, it is proposed that 12 
CFR Part 749 is revised to read as follows:

[[Page 11240]]

PART 749--RECORDS PRESERVATION PROGRAM AND RECORD RETENTION 
APPENDIX

Sec.
749.0  What is covered in this part?
749.1  What are vital records?
749.2  What must a credit union do with vital records?
749.3  What is a vital records center?
749.4  What format may the credit union use for preserving records?
749.5  What format may credit unions use for maintaining writings, 
records or information required by other NCUA regulations?

Appendix A to Part 749--Record Retention Guidelines

    Authority: 12 U.S.C. 1766, 1783 and 1789, 15 U.S.C. 7001(d).


Sec. 749.0  What is covered in this part?

    This part describes the obligations of all federally insured credit 
unions to maintain a records preservation program to identify, store 
and reconstruct vital records in the event that the credit union's 
records are destroyed. It establishes flexibility in the format credit 
unions may use for maintaining writings, records or information 
required by other NCUA regulations. The appendix also provides guidance 
concerning the appropriate length of time credit unions should retain 
various types of operational records.


Sec. 749.1  What are vital records?

    Vital records include at least the following records, as of the 
most recent month-end:
    (a) A list of share, deposit, and loan balances for each member's 
account which:
    (1) Shows each balance individually identified by a name or number;
    (2) Lists multiple loans of one account separately; and
    (3) Contains information sufficient to enable the credit union to 
locate each member, such as address and telephone number, unless the 
board of directors determines that the information is readily available 
from another source.
    (b) A financial report, which lists all of the credit union's asset 
and liability accounts and bank reconcilements.
    (c) A list of the credit union's financial institutions, insurance 
policies, and investments. This information may be marked ``permanent'' 
and stored separately, to be updated only when changes are made.


Sec. 749.2  What must a credit union do with vital records?

    The board of directors of a credit union is responsible for 
establishing a vital records preservation program within 6 months after 
its insurance certificate is issued. The vital records preservation 
program must contain procedures for storing duplicate vital records at 
a vital records center and must designate the staff member responsible 
for carrying out the vital records duties. Records must be stored every 
3 months, within 30 days after the end of the 3-month period. 
Previously stored records may be destroyed when the current records are 
stored. The credit union must also maintain a records preservation log 
showing what records were stored, where the records were stored, when 
the records were stored, and who sent the records for storage. Credit 
unions, which have some or all of their records maintained by an off-
site data processor, are considered to be in compliance for the storage 
of those records.


Sec. 749.3  What is a vital records center?

    A vital records center is defined as a storage facility at any 
location far enough from the credit union's offices to avoid the 
simultaneous loss of both sets of records in the event of disaster.


Sec. 749.4  What format may the credit union use for preserving 
records?

    Preserved records may be in any format that can be used to 
reconstruct the credit union's records. Formats include paper 
originals, machine copies, micro-film or fiche, magnetic tape, or any 
electronic format that accurately reflects the information in the 
record, remains accessible to all persons who are entitled to access by 
statute, regulation or rule of law, and is capable of being reproduced 
by transmission, printing or otherwise.


Sec. 749.5  What format may credit unions use for maintaining writings, 
records or information required by other NCUA regulations?

    Various NCUA regulations require credit unions to maintain certain 
writings, records or information. Credit unions may use any format, 
electronic or other, for maintaining the writings, records or 
information that accurately reflects the information, remains 
accessible to all persons who are entitled to access by statute, 
regulation or rule of law, and is capable of being reproduced by 
transmission, printing or otherwise. The credit union must maintain the 
necessary equipment or software to permit an examiner access to the 
records during the examination process.

Appendix A to Part 749--Record Retention Guidelines

    Credit unions often look to NCUA for guidance on the appropriate 
length of time to retain various types of operational records. NCUA 
does not regulate in this area, but as an aid to credit unions it is 
publishing this appendix of suggested guidelines for record 
retention. NCUA recognizes that credit unions must strike a balance 
between the competing demands of space, resource allocation and the 
desire to retain all the records that they may need to conduct their 
business successfully. Efficiency requires that all records that are 
no longer useful be discarded, just as both efficiency and safety 
require that useful records be preserved and kept readily available.

A. What Format Should the Credit Union Use for Retaining Records?

    NCUA does not recommend a particular format for record 
retention. If the credit union stores records on microfilm, 
microfiche, or in an electronic format, the stored records must be 
accurate, reproducible and accessible to an NCUA examiner. If 
records are stored on the credit union premises, they should be 
immediately accessible upon the examiner's request; if records are 
stored by a third party or off-site, then they should be made 
available to the examiner within a reasonable time after the 
examiner's request. The credit union must maintain the necessary 
equipment or software to permit an examiner to review and reproduce 
stored records upon request. The credit union should also ensure 
that the reproduction is acceptable for submission as evidence in a 
legal proceeding.

B. Who is Responsible for Establishing a System for Record 
Disposal?

    The credit union's board of directors may approve a schedule 
authorizing the disposal of certain records on a continuing basis 
upon expiration of specified retention periods. A schedule provides 
a system for disposal of records and eliminates the need for board 
approval each time the credit union wants to dispose of the same 
types of records created at different times.

C. What Procedures Should a Credit Union Follow When Destroying 
Records?

    The credit union should prepare an index of any records 
destroyed and retain the index permanently. Destruction of records 
should ordinarily be carried out by at least two persons whose 
signatures, attesting to the fact that records were actually 
destroyed, should be affixed to the listing.

D. What Are the Recommended Minimum Retention Times?

    Record destruction may impact the credit union's legal standing 
to collect on loans or defend itself in court. Since each state can 
impose its own rules, it is prudent for a credit union to consider 
consulting with local counsel when setting minimum retention 
periods. A record pertaining to a member's account that is not 
considered a vital record may be destroyed once it is verified by 
the supervisory committee. Individual Share and Loan Ledgers should 
be

[[Page 11241]]

retained permanently. Records, for a particular period, should not 
be destroyed until both a comprehensive annual audit by the 
supervisory committee and a supervisory examination by the NCUA have 
been made for that period.

E. What Records Should be Retained Permanently?

    (1) Official records of the credit union that should be retained 
permanently are:
    (a) Charter, bylaws, and amendments.
    (b) Certificates or licenses to operate under programs of 
various government agencies, such as a certificate to act as issuing 
agent for the sale of U. S. savings bonds.
    (c) Current manuals, circular letters and other official 
instructions of a permanent character received from the NCUA and 
other governmental agencies.
    (2) Key operational records that should be retained permanently 
are:
    (a) Minutes of meetings of the membership, board of directors, 
credit committee, and supervisory committee.
    (b) One copy of each semiannual and annual (June 30 and December 
31) financial report NCUA 5300 or their equivalents.
    (c) One copy of each supervisory committee comprehensive annual 
audit report and attachments.
    (d) Supervisory committee records of account verification.
    (e) Applications for membership and joint share account 
agreements.
    (f) Journal and cash record.
    (g) General ledger.
    (h) Copies of the periodic statements of members, or the 
individual share and loan ledger. (A complete record of the account 
should be kept permanently.)
    (i) Bank reconcilements.
    (j) Listing of records destroyed.

F. What Records Should a Credit Union Designate for Periodic 
Destruction?

    Any record not described above is appropriate for periodic 
destruction unless it must be retained to comply with the 
requirements of consumer protection regulations. Periodic 
destruction should be scheduled so that the most recent of the 
following records are available for the annual supervisory committee 
audit and the NCUA examination. Records that may be periodically 
destroyed include:
    (a) Applications of paid off loans.
    (b) Paid notes.
    (c) Various consumer disclosure forms, unless retention is 
required by law.
    (d) Cash received vouchers.
    (e) Journal vouchers.
    (f) Canceled checks.
    (g) Bank statements.
    (h) Outdated manuals, canceled instructions, and nonpayment 
correspondence from the NCUA and other governmental agencies.

[FR Doc. 01-4398 Filed 2-22-01; 8:45 am]
BILLING CODE 7535-01-P