[Federal Register Volume 73, Number 205 (Wednesday, October 22, 2008)]
[Proposed Rules]
[Pages 62935-62937]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25116]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 740

RIN 3133-AD52


Accuracy of Advertising and Notice of Insured Status

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: Section 740.4 of NCUA's rules requires that a federally 
insured credit union continuously display the official NCUA sign at 
every teller station or window where insured funds or deposits are 
normally received. Section 740.4(c) requires that tellers accepting 
share deposits for both federally insured credit unions and 
nonfederally insured credit unions also post a second sign adjacent to 
the official NCUA sign. Currently, the rules require this second sign 
to list each federally insured credit union served by the teller along 
with a statement that only these credit unions are federally insured. 
Due to the evolution of shared branch networks it is now difficult for 
some tellers to comply with this second signage requirement and, 
accordingly, NCUA is proposing to revise the rule to replace the 
required listing of credit unions with a statement that not all of the 
credit unions served by the teller are federally insured and that 
members should contact their credit union if they need more 
information.

DATES: Comments must be received by November 21, 2008.

ADDRESSES: You may submit comments by any of the following methods. 
(Please send comments by one method only):
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     NCUA Web Site: http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     E-mail: Address to [email protected]. Include ``[Your 
name] Comments on FCU Bylaws'' in the e-mail subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for e-mail.
     Mail: Address to Mary Rupp, Secretary of the Board, 
National Credit Union Administration, 1775 Duke Street, Alexandria, 
Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public inspection: All public comments are available on the 
agency's Web site at http://www.ncua.gov/RegulationsOpinionsLaws/comments as submitted, except as may not be possible for technical 
reasons. Public comments will not be edited to remove any identifying 
or contact information. Paper copies of comments may be inspected in 
NCUA's law library, at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an e-mail to OGC [email protected].

FOR FURTHER INFORMATION CONTACT: Elizabeth Wirick, Staff Attorney, 
Office of General Counsel, National Credit Union Administration, 1775 
Duke Street, Alexandria, Virginia 22314-3428 or telephone: (703) 518-
6540.

SUPPLEMENTARY INFORMATION: 

A. Background

    Part 740 of NCUA's regulations addresses the notice and advertising 
requirements applicable to credit unions insured by the National Credit 
Union Share Insurance Fund (NCUSIF) administered by NCUA. 12 CFR part 
740. Section 740.4(a) requires these federally insured credit unions 
post a sign at all teller stations that normally receive deposits. This 
official NCUA sign reads: ``Your savings federally insured to at least 
$100,000 and backed by the full faith and credit of the United States 
Government'' accompanied by the acronym ``NCUA'' and the words 
``National Credit Union Administration, a U.S. Government Agency.'' 12 
CFR 740.4(a). The official NCUA sign informs and reassures members that 
their share deposits are guaranteed, to certain limits, by the U.S. 
Government in the event the credit union fails.
    Section 740.4(c) imposes additional requirements on federally 
insured credit unions participating in shared branch networks. 
Generally, federally insured credit unions are prohibited from 
accepting funds at teller stations or windows where nonfederally 
insured credit unions also receive deposits. 12 CFR 740.4(c). Tellers 
in shared branch networks (e.g., ``Credit union centers, service 
centers, or branches servicing more than one credit union'') are 
currently exempted from this prohibition, but only if they display a 
specific sign at each station or window above or beside the official 
NCUA sign. Id. This second sign must state that ``[o]nly the following 
credit unions serviced by this facility are federally insured by the 
NCUA,'' followed by the full name of each federally insured credit 
union displayed in lettering ``of such size and print to be clearly 
legible

[[Page 62936]]

to all members conducting share or share deposit transactions.'' Id.
    NCUA first adopted this requirement for a second sign in shared 
branches back in 1971. 36 FR 902, 903 (Jan. 25, 1971). The requirement 
ensures members of nonfederally insured credit unions are not confused 
regarding the insurance status of their accounts when those members 
make deposits through tellers shared with federally insured credit 
unions and that display the mandatory official NCUA sign. 63 FR 10743, 
10755 (March 5, 1998).
    During the past 37 years, however, the nature of shared branching 
has changed considerably. The first shared branches were local 
operations involving just a few credit unions. Now, some shared branch 
networks are national in scope and service hundreds, if not thousands, 
of individual credit unions.\1\ Under these circumstances, NCUA 
believes the requirement for by-name listing of each participating 
federally insured credit union is problematic. Since the vast majority 
of credit unions participating in the larger shared branch networks are 
federally insured, members must now sift through a lengthy list of 
credit unions to ascertain the insurance status of their particular 
credit union. The length of the list would also require a large, 
obtrusive sign, and it is difficult to keep the sign up-to-date as 
federally insured credit unions frequently join or leave these 
networks.
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    \1\ Two of the largest shared branch networks are Credit Union 
Service Centers (CUSC) and the Financial Service Centers Cooperative 
(FSCC). Currently, CUSC appears to have about 1,200 participating 
federally insured credit unions and 22 participating nonfederally 
insured credit unions. FSCC appears to have about 270 participating 
federally insured credit unions and 12 participating nonfederally 
insured credit unions. Further, these organizations interlink, 
allowing deposits to be made through participants in one 
organization for the accounts at participants in the other.
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    Share branch networks are not only increasing in size but are also 
changing in the nature of the facilities they employ. The earliest 
shared branches consisted of shared service facilities run by non-
credit union entities such as credit union service organizations. Now, 
some shared branch networks are structured to allow credit unions to 
use their own branches, rather than separate facilities, to service 
members of other credit unions. Given this trend, NCUA understands that 
some nonfederally insured credit unions participating in shared branch 
networks may accept deposits for federally insured credit unions at the 
nonfederally insured credit union's locations, and vice versa. The 
current rule does not adequately address the signage requirements in 
these situations, such as whether the official NCUA sign should be 
placed in nonfederally insured credit unions accepting federally 
insured share deposits.

B. Proposed Amendments to Part 740

    The proposed revision to Sec.  740.4(c) retains the general 
prohibition on federally insured credit unions receiving funds at any 
teller station or window where any nonfederally insured credit union 
also receives account funds. The proposal contains three exceptions to 
this prohibition.
    The first two exceptions permit tellers at federally insured credit 
unions and shared branches operated by non-credit union entities to 
receive deposits for nonfederally insured credit unions if these 
tellers post a second sign adjacent to the official NCUA sign. In lieu 
of a listing of all federally-insured credit unions, the revised second 
sign will state that the credit union or facility participates in a 
shared branch network and accepts deposits for members of other credit 
unions, not all of which are federally insured. The revised second sign 
will advise members to contact their credit union for information about 
its insurance status.
    The proposal requires the second sign to be conspicuous and to be 
similar to the official NCUA sign in terms of design, color, and font. 
NCUA will produce signs that meet this requirement and make the signs 
available for purchase at a reasonable cost. Credit unions may either 
use the NCUA-produced sign or produce their own sign, as long as the 
sign meets the requirements of the rule.
    The third exception to the general prohibition addresses signage 
requirements at nonfederally insured credit unions. The proposal 
clarifies that tellers in nonfederally insured credit unions may accept 
deposits for federally insured credit unions as part of a shared branch 
network. The proposal, however, forbids a nonfederally insured credit 
union from displaying the official NCUA sign, as this could be very 
confusing to the members of the nonfederally insured credit union. 
Also, since the credit union will not display the official sign, there 
is no need for it to display the second sign.
    The current prohibition applies to tellers that accept deposits 
from nonfederally insured credit unions and ``other institutions.'' As 
far as the Board is aware, banks and thrifts are the only types of non-
credit union institutions that take deposits, and, currently, they are 
all federally insured. Accordingly, there is no need for the rule to 
address ``other institutions'' and the proposed rule deletes that 
phrase. Also, although the rule only addresses deposit-taking, 
federally insured credit unions must ensure that if they participate in 
a shared branching network that includes a nondeposit investment sales 
function, that function is physically separated from the deposit-taking 
function. See NCUA Letter to Credit Unions No. 150, Sales of Mutual 
Funds, Annuities, and Other Non-Deposit Investments, December 1993.
    The proposed revisions also include additions to the definitions in 
Sec.  740.1. 12 CFR 740.1. The phrase ``nonfederally insured credit 
union'' is defined as a credit union with either no account insurance 
or with primary account insurance from an entity other than NCUA. The 
phrases ``insured credit union'' and ``federally insured credit 
union,'' as used in the rule, both refer to a credit union with NCUA 
account insurance.

C. 30-Day Comment Period

    NCUA seeks public comment on the proposals discussed above. NCUA is 
particularly interested in commenters' views about whether the 
proposals are adequate to ensure that credit union members understand 
the insurance status of their credit union accounts.
    As a matter of agency policy, the NCUA Board generally provides a 
60-day comment period for proposed regulations. NCUA's Interpretive 
Ruling and Policy Statement (IRPS) 87-2, 52 FR 35231 (Sept. 18, 1987), 
as amended by IRPS 03-02, 68 FR 31949 (May 29, 2003). In this case, the 
NCUA Board believes a 30-day comment period will suffice because the 
proposal simplifies an existing rule and eases compliance burdens for 
federally insured credit unions.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a rule may have on a 
substantial number of small credit unions, defined as those under ten 
million dollars in assets. This proposed rule will not impose any 
regulatory burden and in fact will ease existing compliance burdens on 
federally insured credit unions participating in shared branch networks 
and accepting deposits for both federally insured and nonfederally 
insured credit unions. The proposed rule will not have a significant 
economic impact on a substantial number of small credit unions, and, 
therefore, a regulatory flexibility analysis is not required.

[[Page 62937]]

Paperwork Reduction Act

    NCUA has determined that the proposed rule would not increase 
paperwork requirements under the Paperwork Reduction Act of 1995 and 
regulations of the Office of Management and Budget. 44 U.S.C. 3501 et 
seq.; 5 CFR part 1320.

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 proposed rule would not have substantial 
direct effects on the states, on the connection 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 this 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 the proposed rule would not affect 
family well-being within the meaning of Sec.  654 of the Treasury and 
General Government Appropriations Act, 1999, Public Law 105-277, 112 
Stat. 2681 (1998).

List of Subjects in 12 CFR Part 740

    Advertisements, Credit unions, Signs and symbols.

    By the National Credit Union Administration Board on October 16, 
2008.
Mary F. Rupp,
Secretary of the Board.
    For the reasons set forth above, NCUA proposes to amend 12 CFR part 
740 as follows.

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

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

    Authority: 12 U.S.C. 1766, 1781, 1785, and 1789.

    2. Amend Sec.  740.1 by revising paragraph (b), and adding 
paragraph (c), to read as follows:


Sec.  740.1  Definitions.

* * * * *
    (b) Insured credit union and federally insured credit union as used 
in this part mean a credit union with National Credit Union 
Administration share insurance.
    (c) Nonfederally insured credit union as used in this part means a 
credit union with either no account insurance or with primary account 
insurance provided by some entity other than the National Credit Union 
Administration.
    3. Amend Sec.  740.4 by revising paragraph (c) to read as follows:


Sec.  740.4  Requirements for the official sign.

* * * * *
    (c) To avoid any member confusion from the use of the official NCUA 
sign, federally insured credit unions are prohibited from receiving 
account funds at any teller station or window where any nonfederally 
insured credit union also receives account funds. As exceptions to this 
prohibition:
    (1) A teller in a branch of a federally insured credit union may 
accept account funds for nonfederally insured credit unions, but only 
if the teller displays a conspicuous sign next to the official sign 
that states ``This credit union participates in a shared branch network 
with other credit unions and accepts share deposits for members of 
those other credit unions. Not all of these other credit unions are 
federally insured. If you need information on the insurance status of 
your credit union, please contact your credit union directly.'' This 
sign must be similar to the official sign in terms of design, color, 
and font.
    (2) A teller in a facility operated by a non-credit union entity 
may accept account funds for both federally insured credit unions and 
nonfederally insured credit unions, but only if the teller displays a 
conspicuous sign next to the official sign stating ``This facility 
accepts share deposits for multiple credit unions. Not all of these 
credit unions are federally insured. If you need information on the 
insurance status of your credit union, please contact your credit union 
directly.'' This sign must be similar to the official sign in terms of 
design, color, and font.
    (3) A teller in a branch of a nonfederally insured credit union may 
accept account funds for federally insured credit unions. No teller in 
a nonfederally insured credit union may display the official NCUA sign.
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[FR Doc. E8-25116 Filed 10-21-08; 8:45 am]
BILLING CODE 7535-01-P