[Federal Register Volume 68, Number 85 (Friday, May 2, 2003)]
[Rules and Regulations]
[Pages 23381-23384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-10613]


=======================================================================
-----------------------------------------------------------------------

NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 740


Accuracy of Advertising and Notice of Insured Status

AGENCY: National Credit Union Administration.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The National Credit Union Administration (NCUA) is revising 
its rule governing advertising and the requirements for use of the 
official sign and official advertising statement regarding insured 
status. The revision modernizes and streamlines the rule for ease of 
reference and addresses the growing use of the Internet for member 
transactions and the use of trade names in advertising.

EFFECTIVE DATE: This rule is effective July 1, 2003.

FOR FURTHER INFORMATION CONTACT: Dianne M. Salva, Staff Attorney, 
Division of Operations, Office of General Counsel, at the National 
Credit Union Administration, 1775 Duke Street, Alexandria, Virginia, 
22314, or telephone: (703) 518-6540.

SUPPLEMENTARY INFORMATION:

I. Background

    On September 19, 2002, the NCUA Board (the Board) approved the 
publication of a proposal to update and streamline Part 740, NCUA's 
regulation requiring accuracy and honesty in insured credit union (CU) 
advertising and governing a CU's use of the official sign and official 
advertising statement to inform members of federal share insurance 
coverage. 67 FR 60604 (September 26, 2002).
    The Official Sign: The regulation requires CUs to display the 
official sign, which sets out in large type ``NCUA'' and in smaller 
type states, ``Your savings federally insured to $100,000,'' at each 
teller station or window where insured account funds or deposits are 
normally received. The purpose of the rule is to ensure that, at the 
time they deposit funds or transact business with an insured CU, 
members are informed of the fact that federal share insurance applies 
to their accounts.
    The Official Advertising Statement: The regulation, although 
containing various exemptions, also requires a CU to include the 
official advertising statement in any advertising including marketing 
materials in print, radio or television. The official advertising 
statement must state in substance, ``This credit union is federally 
insured by the National Credit Union Administration.'' Alternatively, 
the CU may use the short form advertising statement, ``Federally 
insured by NCUA'' with a reproduction of the official sign described 
above.
    The proposal clarified the rule's application to Internet 
advertisements and member transactions on CU Web sites. It also 
incorporated legal interpretations permitting CUs to use trade or other 
names in advertisements and made other minor changes, including 
rewording it in a plain English style and placing the provisions 
regarding advertising excess insurance in a separate subsection.

II. Comments

    NCUA received fourteen comments from the public. Seven commenters 
expressed their support for the amendment permitting the use of trade 
names in advertising. The proposal stated that, while CUs may use trade 
or other names in advertising, they must use their official charter 
name in all official or legal documents. The proposal did not include 
share certificates among the official or legal documents in which CUs 
must identify themselves with their official charter name. This was an 
inadvertent omission that has been corrected in the final rule. The 
purpose in excluding the use of trade names in official or legal 
documents is to ensure that members do not misinterpret the level of 
share insurance available to them. The Board agrees with a commenter 
who suggested that if a CU used the full charter name the first time it 
appears in a legal document and an acronym later in the same document 
members would be sufficiently informed about the identity of the CU and 
the availability of share insurance.
    Thirteen commenters supported the requirement to use the official 
sign and official advertising statement on Internet Web sites, with 
five stating that the revised rule offered CUs flexibility and would 
not impose a significant burden. One commenter emphasized that the 
benefit to consumers would far outweigh any cost incurred by the credit 
union. Two state leagues stated that most of their credit unions were 
already in compliance.
    Six commenters, while supportive of the proposal, suggested that 
NCUA permit CUs to alter the official sign's color and font sizes to 
ensure it is legible and visually prominent on an Internet screen. 
Although the proposed rule did not suggest any changes to the color or 
font size of the official sign, the Board agrees that the official sign 
must be legible to fulfill the purpose of the rule. The Board believes 
that additional flexibility may be helpful given the size constraints 
of an Internet screen and the rule's requirement that the sign appear 
on the same page where other information will also appear. For that 
reason, the Board is including in the final rule a provision that CUs 
may vary the font size of the text within the official sign to ensure 
the text is legible. The Board also recognizes that CUs may find the 
requirement in the current rule that the official sign appear in blue 
with white lettering to be unduly restrictive. Many CUs devote 
significant resources to the design and aesthetics of their Web sites, 
with a focus on attracting both new and existing members to view the 
information and transact business. Some commenters were concerned that 
the traditional colors might be less visible or contrast with CU Web 
site designs. The Board is most concerned that the message of the 
official sign is conveyed clearly. The Board also does not want CUs to 
be unnecessarily restricted in the color or design of their Web sites 
by the

[[Page 23382]]

need to display the official sign in only the traditional colors of 
blue and white. In the past, NCUA has been asked to consider similar 
flexibility in the color of the official signs CUs display at teller 
windows or stations at ``brick and mortar'' locations. The Board sees 
no reason why CUs should not use the colors of their choosing on the 
official signs they display both on CU Web sites and in their lobbies. 
For these reasons, the Board has eliminated from the final rule the 
requirement that the official sign , have a blue background with white 
lettering. NCUA will continue to supply CUs with official signs, but 
will produce them only in the traditional blue and white.
    Six commenters also stated that it is unnecessary to require the 
official sign or advertising statement on Internet pages other than the 
credit union main page. As an alternative two commenters suggest that 
the rule only require the official sign on the main page and the log-on 
screen where members identify themselves in order to conduct 
transactions on-line, or a membership application page or pages 
advertising deposit-related products. The Board agrees with these 
suggestions. All CU Internet sites that permit members to conduct 
transactions require members to identify themselves on a log-on screen. 
Displaying the official sign there will provide adequate notice of 
federal share insurance to the member. Further, displaying the official 
sign or advertising statement on the page where a viewer can apply for 
membership or see an advertisement for an insured deposit or share-
related product will ensure that the message about federal share 
insurance is available when it is most relevant.
    One commenter suggested that CUs that currently do not display an 
official sign or advertising statement on their Web sites may need 
additional time to comply with the proposed changes. The Board wishes 
to permit CUs ample opportunity to incorporate the official sign and 
advertising statement into their Web sites, so it is adopting an 
effective date 60 days following publication of the final rule.
    The final rule is identical to the proposed rule with the exception 
of minor editorial changes, the addition of share certificates among 
the official or legal documents in which CUs must identify themselves 
with their official charter name, the provision permitting CUs to use 
alternative font sizes in the official sign displayed on their Internet 
Web sites and the elimination of the color requirement for the official 
sign.

III. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact any proposed regulation may 
have on a substantial number of small entities (those under $1 million 
in assets). The final amendments will not have a significant economic 
impact on a substantial number of small credit unions and, therefore, a 
regulatory flexibility analysis is not required.

Paperwork Reduction Act

    NCUA has determined that the final 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 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. The executive order states that: ``National 
action limiting the policymaking discretion of the states shall be 
taken only where there is constitutional and statutory authority for 
the action and the national activity is appropriate in light of the 
presence of a problem of national significance.'' This rule will apply 
to both federal and state credit unions. It does not significantly 
change the current regulatory framework. It will not have a substantial 
direct effect on states, 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 rule does not constitute a policy that has 
federalism implications for purposes of this executive order.

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this rule will not affect family well-
being within the meaning of section 654 of the Treasury and General 
Government Appropriations Act, 1999, Public Law 105-277, 112 Stat. 2681 
(1998).

Agency Regulatory Goal

    NCUA's goal is to promulgate clear and understandable regulations 
that impose minimal regulatory burden. The regulatory change is 
understandable and imposes minimal regulatory burden.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) provides generally for congressional review of agency 
rules. A reporting requirement is triggered in instances where NCUA 
issues a final rule as defined by Section 551 of the Administrative 
Procedure Act. 5 U.S.C. 551. The Office of Management and Budget has 
found that this rule is not a major rule for purposes of the Small 
Business Regulatory Enforcement Fairness Act of 1996.

List of Subjects 12 CFR Part 740

    Advertisements, Credit unions.

    By the National Credit Union Administration Board on April 
24,2003.
Becky Baker,
Secretary of the Board.

0
For the reasons set forth in the preamble, NCUA revises 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.

0
The authority citation for part 740 continues to read as follows:

    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

[[Page 23383]]

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 share certificates or 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, 30 
days after its first day of operation as an insured credit union. Each 
insured credit union must also display the official sign on its 
Internet page, if any, where it accepts deposits or open accounts, but 
it may vary the font sizes from that depicted in paragraph (b) of this 
section to ensure its legibility.
    (b) The official sign shall be as depicted below:
    [GRAPHIC] [TIFF OMITTED] TR02MY03.009
    
    (1) NCUA will automatically supply all insured credit unions an 
initial supply of official signs with a blue background and white 
lettering 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.

[[Page 23384]]

    (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) If advertising copy without 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 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. 03-10613 Filed 5-1-03; 8:45 am]
BILLING CODE 7535-01-P