[Federal Register Volume 67, Number 187 (Thursday, September 26, 2002)]
[Proposed Rules]
[Pages 60604-60607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-24289]


 ========================================================================
 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. 67, No. 187 / Thursday, September 26, 2002 / 
Proposed Rules  

[[Page 60604]]



NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 740


Accuracy of Advertising and Notice of Insured Status

AGENCY: National Credit Union Administration (NCUA).

ACTION: Notice of proposed rulemaking and request for comments.

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SUMMARY: The NCUA Board proposes revising its rule governing 
advertising and the requirements for use of the official sign and 
official advertising statement regarding insured status. The purpose of 
the revision is to modernize the rule to address the growing use of the 
Internet for member transactions, the use of trade names, and clarify 
and streamline the existing rule for ease of reference.

DATES: Comments must be received on or before November 25, 2002.

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. You may 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:

Background

    The NCUA Board (Board) is proposing to revise its regulation 
concerning an insured credit union's (CU's) advertising practices and 
use of the official sign and official advertising statement to notify 
members of the CU's insured status. The NCUA policy to review 
regulations periodically to ``update, clarify and simplify existing 
regulations and eliminate redundant and unnecessary provisions'' 
prompted this revision. Interpretive Ruling and Policy Statement (IRPS) 
87-2, Developing and Reviewing Government Regulations.

Trade Names

    NCUA's Office of General Counsel (OGC) has issued several opinions 
interpreting Part 740 to permit CUs to use trade names in advertising. 
Several CUs have written to the OGC concerning the use of trade names 
in advertising. Some CUs prefer to use a trade name or signage with a 
name other than the official charter name. In one case, an OGC opinion 
approved the use of a trade name that is an abbreviation of the 
official charter name. To foster member recognition, another OGC 
opinion approved the use of a second name, other than the official 
charter name, to reflect the trade name of a sponsor. In yet another 
case, an OGC opinion permitted the use of a trade name that did not 
include the words, ``federal credit union.'' Since OGC has received 
multiple questions from CUs on this issue, the Board has determined 
that it could make the rule more informative by incorporating the OGC's 
interpretations into the regulatory text. Similarly, NCUA has issued 
guidance to CUs on the use of more than one name. NCUA Letter to Credit 
Unions No. 99-CU-17 (October 1999).
    While the use of more than one name or a trade name in 
advertisements is acceptable, a CU must use its official charter name 
in all official or legal documents and in communications with NCUA. Of 
utmost concern to NCUA is that the use of a trade name does not confuse 
members about the level of share insurance applicable to their 
accounts. For that reason, a CU using a trade name or a second name 
must use its official charter name on consumer disclosures, contracts, 
titles, liens, stocks or other documents that set out legal 
responsibilities or obligations. It must also ensure that its staff 
advises new members that accounts opened or deposits made in branches 
or facilities with different names are not separately insured. A CU 
must also ensure that it does not violate the rights of another party 
in a trade name. For ease of reference, the proposal revises Sec.  
740.2 to clarify that it does not prohibit the use of trade or second 
names, but that CUs must use the official charter name in legal 
documents.

Internet

    Currently, over 40 percent of all federally insured credit unions 
have a web site and almost half offer members the ability to perform 
transactions. Since increasing numbers of CUs are using the Internet to 
advertise their services and conduct transactions with members, the 
Board is concerned that members receive adequate notice about the 
availability of federal share insurance when they use the Internet to 
engage in transactions. Part 740 requires CUs to display the official 
sign at each station or window where insured account funds or deposits 
are usually received. 12 CFR 740.3. It also requires CUs to include the 
official advertising statement in advertisements. The proposal revises 
this provision to address the use of the official advertising sign and 
official advertising statement on the Internet more clearly.
    NCUA is aware that CUs use the Internet to offer services to 
current members and to invite new members to join. This does not differ 
from advertising on television, radio or newspapers. To the extent Part 
740 requires a CU to include the official advertising statement in 
advertisements in other media, the NCUA Board believes it should also 
require it for advertisements on the Internet. The proposal would 
require CUs to display the official advertising statement on their main 
or home page at minimum. Further, many CUs have links from their main 
or home page to subsidiary pages where a member may conduct 
transactions, such as deposits or fund transfers, and where nonmembers 
may apply for membership. These pages are analogous to a teller window 
or station at a CU office. The proposal would also require the CU to 
display the official sign on all subsidiary pages where a member may 
transfer or deposit funds or open an account.
    The Board notes that most CUs operating Internet sites already 
display the official sign and advertising statement in this manner and 
is pleased that the proposal will not add a significant regulatory 
burden.
    Since advertising on the Internet is so closely analogous to 
advertising in other media, the Board believes the requirement in Sec.  
740.2 for accuracy in advertising should also apply to electronic 
advertisements. The proposal,

[[Page 60605]]

therefore, amends Sec.  740.2 to include electronic media.
    Other proposed changes to the regulation are minor and editorial. 
For example, the proposal retitles the rule to reflect the content more 
clearly. It also reorganizes Sec.  740.2 into two sections for clarity 
and ease of reference. In the proposal, Sec.  740.2 covers accuracy in 
advertising and the new Sec.  740.3 covers advertising of excess 
insurance. Finally, without changing the meaning, the proposal 
clarifies and simplifies the language of the rule and headings by 
reducing excess verbiage and rewording it in a plain English style.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a proposed rule may have on 
a substantial number of small entities (primarily those under one 
million dollars in assets). This proposed rule will not have a 
significant economic impact on a substantial number of small credit 
unions, and therefore, no regulatory flexibility analysis is required.

Paperwork Reduction Act

    NCUA has determined that the proposed rule 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 to both federal and state credit unions. It does 
not, however, significantly change the current regulatory framework. It 
will not have a substantial direct effect on 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

    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 740

    Advertisements, Credit unions.

    By the National Credit Union Administration Board on September 
19, 2002.
Becky Baker,
Secretary of the Board.

    For the reasons set forth in the preamble, NCUA proposes to revise 
12 CFR part 740 as follows:

PART 740--ACCURACY OF ADVERTISING AND NOTICE OF INSURED STATUS

Sec.
740.0 Scope.
740.1 Definitions.
740.2 Accuracy of advertising.
740.3 Advertising of excess insurance.
740.4 Requirements for the official sign.
740.5 Requirements for the official advertising statement.

    Authority: 12 U.S.C. 1766, 12 U.S.C. 1781, 12 U.S.C. 1789.


Sec.  740.0  Scope.

    This part applies to all federally insured credit unions. It 
prescribes the requirements for the official sign insured credit unions 
must display and the requirements with regard to the official 
advertising statement insured credit unions must include in their 
advertisements. It requires that all other kinds of advertisements be 
accurate. It also establishes requirements for advertisements of excess 
insurance.


Sec.  740.1  Definitions.

    (a) Account or accounts as used in this part means share, share 
certificate or share draft accounts (or their equivalent under state 
law, as determined by the Board in the case of insured state credit 
unions) of a member (which includes other credit unions, public units, 
and nonmembers where permitted under the Act) in a credit union of a 
type approved by the Board which evidences money or its equivalent 
received or held by a credit union in the usual course of business and 
for which it has given or is obligated to give credit to the account of 
the member.
    (b) Insured credit union as used in this part means a credit union 
insured by the National Credit Union Administration (NCUA).


Sec.  740.2  Accuracy of advertising.

    No insured credit union may use any advertising (which includes 
print, electronic, or broadcast media, displays and signs, stationery, 
and other promotional material) or make any representation which is 
inaccurate or deceptive in any particular, or which in any way 
misrepresents its services, contracts, or financial condition, or which 
violates the requirements of Sec.  707.8 of this subchapter, if 
applicable. This provision does not prohibit an insured credit union 
from using a trade name or a name other than its official charter name 
in advertising or signage, so long as it uses its official charter name 
in communications with NCUA and for certificates of deposit, signature 
cards, loan agreements, account statements, checks, drafts and other 
legal documents.


Sec.  740.3  Advertising of excess insurance.

    Any advertising that mentions share or savings account insurance 
provided by a party other than the NCUA must clearly explain the type 
and amount of such insurance and the identity of the carrier and must 
avoid any statement or implication that the carrier is affiliated with 
the NCUA or the federal government.


Sec.  740.4  Requirements for the official sign.

    (a) Each insured credit union must continuously display the 
official sign described in paragraph (b) of this section at each 
station or window where insured account funds or deposits are normally 
received in its principal place of business and in all its branches, 
and on its Internet page, if any, where it accepts deposits or open 
accounts, 30 days after its first day of operation as an insured credit 
union.
    (b) The official sign shall be as depicted below, having a blue 
background with white lettering:
BILLING CODE 4910-15-P

[[Page 60606]]

[GRAPHIC] [TIFF OMITTED] TP26SE02.018

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    (1) NCUA will automatically supply all insured credit unions an 
initial supply of official signs at no cost for compliance with 
paragraph (a) of this section. If the initial supply is not adequate, 
the insured credit unions must immediately request additional signs 
from NCUA. Any credit union that does not have an adequate supply but 
requests additional signs from NCUA will not be considered to have 
violated paragraph (a) of this section unless the credit union fails to 
display the signs after receiving them.
    (2) Insured credit unions may purchase additional signs from 
commercial suppliers in additional colors, materials and sizes, for 
uses other than those required by paragraph (a) of this section.
    (c) An insured credit union must not receive account funds at any 
teller's station or window where any noninsured credit union or 
institution receives deposits. Excepted from this prohibition are 
credit union centers, service centers, or branches servicing more than 
one credit union where only some of the credit unions are insured by 
the NCUA. In such instances, immediately above or beside each official 
sign there must be another sign stating, ``Only the following credit 
unions serviced by this facility are federally insured by the NCUA----
--'' (the full name of each credit union insured will follow the word 
NCUA). The lettering must be of such size and print to be clearly 
legible to all members conducting share or share deposit transactions.
    (d) The Board may require any insured credit union, upon at least 
30 days' written notice, to change the wording of its official signs in 
a manner deemed necessary for the protection of shareholders or others.
    (e) For purposes of this section, the terms ``branch,'' 
``station,'' ``teller station,'' and ``window'' do not include 
automated teller machines or point of sale terminals.


Sec.  740.5  Requirements for the official advertising statement.

    (a) Each insured credit union must include the official advertising 
statement, prescribed in paragraph (b) of this section, in all of its 
advertisements, including on its main Internet page, except as provided 
in paragraph (c) of this section.
    (1) An insured credit union must include the official advertising 
statement in its advertisements thirty (30) days after its first day of 
operations as an insured credit union unless the Regional Director 
grants it an extension.
    (2) In cases where advertising copy not including the official 
advertising statement is on hand on the date the requirements of this 
section become operative, the insured credit union may use an overstamp 
or other means to include the official advertising statement until the 
supplies are exhausted.
    (b) The official advertising statement is in substance as follows: 
This credit union is federally insured by the National Credit Union 
Administration. The short title ``Federally insured by NCUA'' and a 
reproduction of the official sign may be used by insured credit unions 
at their option as the official advertising statement. The official 
advertising statement must be in a size and print that is clearly 
legible.
    (c) The following advertisements need not include the official 
advertising statement:
    (1) Statements of condition and reports of condition of an insured 
credit union which are required to be published by state or federal law 
or regulation;
    (2) Credit union supplies such as stationery (except when used for 
circular letters), envelopes, deposit slips, checks, drafts, signature 
cards, account passbooks, and noninsurable certificates;
    (3) Signs or plates in the credit union office or attached to the 
building or buildings in which the offices are located;
    (4) Listings in directories;
    (5) Advertisements not setting forth the name of the insured credit 
union;
    (6) Display advertisements in credit union directories, provided 
the name of the credit union is listed on any page in the directory 
with a symbol or other descriptive matter indicating it is insured;
    (7) Joint or group advertisements of credit union services where 
the names of insured credit unions and noninsured credit unions are 
listed and form a part of such advertisement;
    (8) Advertisements by radio that do not exceed thirty (30) seconds 
in time;
    (9) Advertisements by television, other than display 
advertisements, that do not exceed thirty (30) seconds in time;
    (10) Advertisements that because of their type or character would 
be impractical to include the official advertising statement, including 
but not limited to, promotional items such as calendars, matchbooks, 
pens, pencils, and key chains;
    (11) Advertisements that contain a statement to the effect that the 
credit union is insured by the National Credit Union Administration, or 
that its accounts and shares or members are

[[Page 60607]]

insured by the Administration to the maximum of $100,000 for each 
member or shareholder;
    (12) Advertisements that do not relate to member accounts, 
including but not limited to advertisements relating to loans by the 
credit union, safekeeping box business or services, traveler's checks 
on which the credit union is not primarily liable, and credit life or 
disability insurance.
    (d) The non-English equivalent of the official advertising 
statement may be used in any advertisement provided that the Regional 
Director gives prior approval to the translation.

[FR Doc. 02-24289 Filed 9-25-02; 8:45 am]
BILLING CODE 7535-01-P