[Federal Register Volume 76, Number 102 (Thursday, May 26, 2011)]
[Rules and Regulations]
[Pages 30521-30523]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-12825]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 740

RIN 3133-AD83


Accuracy of Advertising and Notice of Insured Status

AGENCY: National Credit Union Administration (NCUA).

ACTION: Final rule.

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SUMMARY: The NCUA Board is amending certain provisions of NCUA's 
official advertising statement rule. Specifically, insured credit 
unions will be required to include the statement in a greater number of 
radio and television advertisements, annual reports, and statements of 
condition required to be published by law. The NCUA Board also is 
defining the term ``advertisement'' and clarifying size requirements 
for the official advertising statement in print materials.

DATES: The rule is effective June 27, 2011. To minimize the costs to 
credit unions and provide ample opportunity to prepare for the 
revisions, the mandatory compliance date is January 1, 2012.

FOR FURTHER INFORMATION CONTACT: Frank Kressman, Senior Staff Attorney, 
Office of General Counsel, at the above address or telephone (703) 518-
6540.

SUPPLEMENTARY INFORMATION: 

A. Background

    Section 740.5 of NCUA's regulations requires each insured credit 
union to include NCUA's official advertising statement in all of its 
advertisements, including on its main Internet page. 12 CFR 740.5(a). 
The official advertising statement is in substance as follows: ``This 
credit union is federally insured by the National Credit Union 
Administration.'' Insured credit unions, at their option, may use the 
short title ``Federally insured by NCUA'' or a reproduction of NCUA's 
official sign, as depicted in Sec.  740.4(b), as the official 
advertising statement. 12 CFR 740.4(b); 12 CFR 740.5(b).
    The official advertising statement must be in a size and print that 
is clearly legible. 12 CFR 740.5(b). If the official sign is used as 
the official advertising statement, an insured credit union may alter 
the font size to ensure its legibility as provided in Sec.  
740.4(b)(2). 12 CFR 740.4(b)(2); 12 CFR 740.5(b).
    As noted in the current rule, however, a number of advertisements 
need not include the official advertising statement.\1\ Among those 
currently

[[Page 30522]]

exempted advertisements are radio and television advertisements that do 
not exceed 30 seconds in time. In December 2010, the NCUA Board 
proposed to rescind these exemptions. 75 FR 82323 (December 30, 2010). 
In that proposal, NCUA stated that it believes it is important for 
consumers of those kinds of advertisements to know that the share 
accounts in the advertising credit union are Federally insured by NCUA. 
The NCUA Board also stated in the proposal that it believes the 
benefits to consumers and credit unions of rescinding these exemptions, 
namely, enhanced consumer confidence and NCUA name recognition, far 
outweigh the minor inconvenience associated with requiring the 
inclusion of the official advertising statement.
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    \1\ Exempted advertisements in the current rule include: (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 insurance amount 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. 12 CFR 740.5(c).
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    With respect to print advertisements, the NCUA Board proposed to 
clarify the requirement that the official advertising statement must be 
in a size and print that is clearly legible. 12 CFR 740.5(b). NCUA's 
regulations do not dictate a specific font size be used for the 
official advertising statement, and NCUA stated it continues to believe 
this makes sense considering advertisements can range from small 
magazine advertisements to very large billboard advertisements. The 
NCUA Board proposed to require, however, that in any particular 
advertisement, in addition to legibility, the font size for the 
official advertising statement may be no smaller than the smallest font 
size used in other portions of the advertisement intended to convey 
information to the consumer. 75 FR 82323 (December 30, 2010).
    Also, the NCUA Board stated in the proposal that it believes an 
insured credit union's annual report and other statements of condition 
required to be published by law are significant and a form of 
advertisement and must include the official advertising statement in a 
prominent position. Accordingly, the NCUA Board proposed to amend Sec.  
740.5 in this regard. Id.
    In summary, the proposal rescinded three exemptions from the 
general rule requiring the use of the official advertising statement. 
Those three included radio and television advertisements that do not 
exceed 30 seconds in time and annual reports and other statements of 
condition required to be published by law. All other exemptions in 
Sec.  740.5(c) remain in place.
    Finally, the NCUA Board sought to clarify the advertising statement 
rule by proposing a definition of the term ``advertisement'' which had 
previously never been defined. Id. The proposed definition is 
consistent with that used by the Federal Deposit Insurance Corporation 
in its official advertising statement rule. 12 CFR part 328.

B. Summary of Comments and Discussion

    NCUA received only fourteen comments on the proposal. One commenter 
fully supported the proposal in its entirety. Thirteen commenters 
opposed some portion of it. The aspect of the proposal commenters 
expressed the most concern about is rescinding the exemption from using 
the official advertising statement for radio and television 
advertisements that do not exceed 30 seconds. Many commenters noted 
that radio advertisements are their most cost effective form of 
advertising and are often 10 seconds or less in duration. Commenters 
stated that requiring the use of the official advertising statement in 
such short advertisements would detract from their effectiveness or 
increase their cost. One commenter added this would also apply to short 
television advertisements. A number of commenters noted the added 
expense could cause some credit unions to reduce the number of 
advertisements they place.
    NCUA is sensitive to the needs of credit unions to have access to 
affordable advertising outlets that effectively broadcast their 
messages. Accordingly, based on the comments, NCUA is amending the 
proposed requirement for using the official advertising statement with 
respect to radio and television advertisements. Specifically, NCUA will 
require the use of the official advertising statement for all radio and 
television advertisements 15 seconds in length or longer. In other 
words, all radio and television advertisements less than 15 seconds in 
duration are exempt from the requirement to use the official 
advertising statement. This adjustment, adopted in the final rule, 
exempts those advertisements commenters consider their most cost 
effective while still enhancing consumer confidence and NCUA name 
recognition.
    Some commenters stated that if the radio and television 
advertisement aspect of the proposal is adopted, then NCUA should 
grandfather advertisements already made. Other commenters more 
generally asked for an extended compliance date if any aspect of the 
proposal is adopted. To accommodate these requests, although the 
effective date of the rule will be 30 days after publication in the 
Federal Register, the mandatory compliance date for this final rule is 
January 1, 2012. This should suffice to minimize any expense or 
operational disruptions related to the final rule.
    A few commenters opposed having to include the official advertising 
statement on annual reports and statements of condition as they do not 
believe these documents are advertisements. Some of these commenters 
also asked for guidance from NCUA as to where they should place the 
official advertising statement on these documents. NCUA believes it is 
appropriate and minimally intrusive to include the statement in these 
documents. The statement must be legible and placed in a prominent 
position on the front cover of the document or on the first page 
readers see if there is no cover page.
    With respect to the size requirement proposal for print 
advertisements, one commenter supported it, and six commenters opposed 
it stating it would complicate the current standard, reduce the 
effectiveness of print advertisements, or result in some credit unions 
placing fewer print ads. NCUA believes the proposed standard is fair, 
reasonable, and minimally intrusive so as not to confuse consumers or 
detract from the effectiveness of print ads. NCUA adopts it in the 
final rule.
    Some commenters expressed concern about the proposed definition of 
the term ``advertisement'' as too broad. The proposed definition is the 
same as the current definition of ``advertisement'' used by the Federal 
Deposit Insurance Corporation in its official advertising statement 
rule. 12 CFR part 328. NCUA believes the proposed definition is 
reasonable and not too broad, and NCUA adopts it in this final rule.

C. Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires NCUA to prepare an analysis 
to describe any significant economic impact a regulation may have on a 
substantial number of small credit unions (those under $10 million in 
assets). The amendments enhance consumer confidence and do not impose a 
burden on credit unions. Accordingly, the NCUA has determined and 
certifies

[[Page 30523]]

that this rule will not have a significant economic impact on a 
substantial number of small credit unions within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601-612.

Small Business Regulatory Enforcement Fairness 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. The Office of Information 
and Regulatory Affairs, an office within the Office of Management and 
Budget, has reviewed this rule and determined that, for purposes of 
SBREFA, this is not a major rule.

Paperwork Reduction Act

    This rule does not contain a ``collection of information'' within 
the meaning of section 3502(3) of the Paperwork Reduction Act of 1995 
(44 U.S.C. 3502(3)) and would not increase paperwork requirements under 
the Paperwork Reduction Act of 1995 or 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. This rule would not have substantial direct 
effect 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

    NCUA has determined that this rule would 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).

List of Subjects in 12 CFR Part 740

    Advertisements, Credit unions, Signs and symbols.

    By the National Credit Union Administration Board on May 19, 
2011.
Mary F. Rupp,
Secretary of the Board.

    For the reasons discussed above, the NCUA Board 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 redesignating current paragraphs (b) and (c) as 
paragraphs (c) and (d), respectively, and by adding a new paragraph (b) 
to read as follows:


Sec.  740.1  Definitions.

* * * * *
    (b) Advertisement as used in this part means a commercial message, 
in any medium, that is designed to attract public attention or 
patronage to a product or business.
* * * * *

0
3. Amend Sec.  740.5(a) as follows:
0
a. Revise paragraph (a).
0
b. Revise the third sentence of paragraph (b).
0
c. Remove paragraph (c)(1) and redesignate paragraphs (c)(2) through 
(c)(12) as paragraphs (c)(1) through (c)(11) respectively.
0
d. Revise redesignated paragraphs (c)(7) and (c)(8).
    The revisions read as follows:


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, but not limited to, annual reports and 
statements of condition required to be published by law, and on its 
main Internet page, except as provided in paragraph (c) of this 
section. For annual reports and statements of condition required to be 
published by law, an insured credit union must place the official 
advertising statement in a prominent position on the cover page of such 
documents or on the first page a reader sees if there is no cover page.
* * * * *
    (b) * * * The official advertising statement must be in a size and 
print that is clearly legible and may be no smaller than the smallest 
font size used in other portions of the advertisement intended to 
convey information to the consumer. * * *
* * * * *
    (c) * * *
    (7) Advertisements by radio that are less than fifteen (15) seconds 
in time;
    (8) Advertisements by television, other than display 
advertisements, that are less than fifteen (15) seconds in time;
* * * * *
[FR Doc. 2011-12825 Filed 5-25-11; 8:45 am]
BILLING CODE 7535-01-P