[Federal Register Volume 74, Number 41 (Wednesday, March 4, 2009)]
[Rules and Regulations]
[Pages 9347-9349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-4600]



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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: Final 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. The current rule requires 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 revising 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: This rule is effective April 3, 2009.

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

    NCUA proposed revisions to part 740 of its regulations, addressing 
the notice and advertising requirements applicable to credit unions 
insured by the National Credit Union Share Insurance Fund (NCUSIF) 
administered by NCUA, in October 2008. 73 FR 2935 (Oct. 22, 2008). 
Section 740.4(a) requires federally insured credit unions to 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 ``credit union centers, service centers, or branches servicing more 
than one credit union'' (i.e., shared branching networks) 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 
to all members conducting share or share deposit transactions.'' Id.
    As discussed in the proposal, the present rule has several 
shortcomings. For example, the current size of shared branching 
networks makes compliance with this section nearly impossible as an 
extremely large sign would be required to list the hundreds of 
federally insured credit unions participating in the largest shared 
branching networks, and it is difficult to keep the sign up-to-date as 
federally insured credit unions frequently join or leave these 
networks. 73 FR 62935, 62936 (Oct. 22, 2008). Additionally, shared 
branching activities increasingly take place in the branches of 
particular credit unions rather than at stand-alone sites operated by 
third parties such as credit union service organizations. Id. The 
current rule prescribes the same sign for shared branch locations that 
are credit union facilities as for locations operated by third parties. 
Finally, the current rule does not address signage requirements for 
branches of nonfederally insured credit unions participating in shared 
branching networks and accepting deposits for federally insured credit 
unions. Id.
    The proposed revisions to Sec.  740.4(c) retained 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, but set forth 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. 
Under the proposal, the language for the second sign for tellers at 
federally insured credit unions reads as follows:

    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.

The second sign for tellers at shared branches operated by non-credit 
union entities is as follows:

    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.

    The third exception to the general prohibition addresses signage 
requirements at nonfederally insured credit unions. The proposal 
clarified 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, prohibited 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.
    As discussed below, NCUA is adopting the rule as proposed with a 
slight revision to the second sign for shared branch locations at 
federally insured credit unions.

B. Comments and Final Rule

    NCUA received sixteen comments on the proposal. All commenters 
generally agreed the current rule is difficult to comply with and not 
particularly useful to credit union members. Most commenters supported 
the revisions as proposed by NCUA or with minor changes. A few 
commenters opposed any requirement for a second sign and recommended 
NCUA repeal the requirement.
    Three commenters who generally supported the proposal suggested the 
second sign should only be required at one, central location instead of 
next to every official insurance sign. NCUA has not adopted this 
suggestion in the final rule because members could be misled about the 
insurance status of their credit union if the second sign required by

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Sec.  740.4(c) is not adjacent to every official insurance sign. 
Similarly, NCUA did not adopt the suggestion of another commenter who 
requested that federally insured credit unions have the option to 
distribute a paper notice to ``guest'' members using the federally 
insured credit union as a shared branch instead of posting the second 
signs. One problem with this suggestion is that members are more likely 
to miss this notice if it is presented on a separate flyer at the 
entrance or accompanies the member's transaction information 
distributed by a teller. Another problem with this suggestion is that 
tellers may fail to distribute the notice to all guests, and it would 
be difficult for NCUA to assess compliance with this requirement. In 
contrast, the short, clear second sign gives members the information 
they need in a format they are most likely to notice and absorb. The 
straightforward requirement for a second sign also makes compliance 
with the regulation and assessing compliance with the regulation easier 
than would allowing a separate disclosure to guest members.
    Another commenter suggested that it would be more useful for the 
second sign to list the nonfederally insured credit unions 
participating in the shared branching network. This commenter stated 
that since the vast majority of credit unions are federally insured, a 
second sign listing the names of the nonfederally insured credit unions 
would be much shorter and give members exactly the information they 
need without the extra step of contacting their credit union. NCUA 
agrees this option would reduce the regulatory burden on credit unions 
and in theory could provide more complete information for credit union 
members. NCUA has not adopted this suggestion, however, because of 
concern that members of nonfederally insured credit unions would see 
the name of their nonfederally insured credit union on a sign 
immediately adjacent to the official NCUA insurance sign and could, if 
they did not read the sign very carefully, erroneously conclude their 
credit union was federally insured.
    Two commenters requested NCUA add a phrase to the second sign 
required by Sec.  740.4(c) for tellers at federally insured credit 
unions reiterating the credit union is federally insured, and NCUA has 
adopted this change in the final rule. The second sign for tellers in 
federally insured credit unions is amended to read as follows:

    This credit union participates in a shared branch network with 
other credit unions and accepts share deposits for members of those 
other credit unions. While this credit union is federally insured, 
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.

Like the commenters requesting this change, NCUA has observed an 
increasing focus on deposit insurance coverage among credit union 
members as turbulence in the financial marketplace continues. Although 
NCUA believes very few members would be confused by the second sign as 
proposed since it would be posted adjacent to the official insurance 
sign, NCUA agrees the suggested clarification is useful and adopts it 
in the final rule.
    Finally, one commenter opined that the proposal would permit 
federally insured credit unions flexibility to draft slightly differing 
language for the second sign required by Sec.  704.4(c). This is not 
true. While the design, color, and font of the second sign may depart 
from NCUA's template, the language must conform to the regulation 
exactly.
    As discussed in the proposal, the second sign required by Sec.  
740.4(c) must be conspicuous and 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.

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 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 Board certifies that this 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.

Small Business Regulatory Enforcement Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 
1996, Public Law 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 Procedures Act. 5 U.S.C. 551. NCUA does not believe this 
rule is a major rule for purposes of SBREFA.

Paperwork Reduction Act

    NCUA has determined that the rule will 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 rule will 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 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 rule will 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 February 
26, 2009.
Mary F. Rupp,
Secretary of the Board.

0
For the reasons set forth above, NCUA amends 12 CFR part 740 as 
follows.

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

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

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


0
2. Amend Sec.  740.1 by revising paragraph (b), and adding paragraph 
(c), to read as follows:

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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.


0
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. While this credit union is federally 
insured, 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. E9-4600 Filed 3-3-09; 8:45 am]
BILLING CODE 7535-01-P