[Federal Register Volume 83, Number 80 (Wednesday, April 25, 2018)]
[Rules and Regulations]
[Pages 17910-17913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08557]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 740

RIN 3133-AE78


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 (Board) is revising provisions of the NCUA's 
advertising rule to provide regulatory relief to federally insured 
credit unions (FICUs). The advertising rule requires FICUs to use the 
NCUA's official advertisement statement when advertising, and it 
currently permits three versions of that statement. Under this final 
rule, the Board is allowing FICUs the option of using a fourth

[[Page 17911]]

version: ``Insured by NCUA.'' To provide additional regulatory relief, 
the Board is: Expanding a current exemption from the advertising 
statement requirement regarding radio and television advertisements; 
and eliminating the requirement to include the official advertising 
statement on statements of condition required to be published by law.

DATES: This final rule becomes effective May 25, 2018.

FOR FURTHER INFORMATION CONTACT: Marvin Shaw, Staff Attorney, Office of 
General Counsel, telephone (703) 518-6553.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Federal Credit Union Act (Act) requires each FICU to display 
NCUA's ``official sign'' regarding National Credit Union Share 
Insurance Fund insurance of the FICU's share accounts. The sign 
includes language that the coverage is backed by the full faith and 
credit of the United States Government.\1\ Part 740 of the NCUA's 
regulations implements this statutory requirement and includes 
requirements relating to the NCUA's official advertising statement, 
each as discussed in more detail below.\2\
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    \1\ 12 U.S.C. 1785.
    \2\ 12 CFR part 740.
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A. Part 740 Requirements

    Part 740 prohibits any FICU from using advertising \3\ or making 
any representation which is inaccurate or deceptive or which 
misrepresents its services, contracts, financial condition, or the 
Truth in Savings requirements. It also prescribes requirements for both 
the NCUA's official advertisement statement that FICUs must make when 
advertising and the NCUA's official sign that FICUs must display.
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    \3\ This includes print, electronic and broadcast media, 
displays, signs, and stationary and other promotional material.
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    Currently, there are two versions of the NCUA's official 
advertising statement: (1) The longer version, which reads ``This 
credit union is federally insured by the National Credit Union 
Administration''; and (2) the shorter version, which reads ``Federally 
insured by NCUA.'' In accordance with part 740, a FICU may, as a third 
option, display the official sign in advertisements in lieu of making 
the official advertising statement. With certain exemptions discussed 
below, a FICU must use the official advertising statement in all of its 
advertisements, although it is at the FICU's discretion to choose among 
the three options noted.
    Section 740.5(c) of the NCUA's regulations enumerates several kinds 
of advertisements that, for practical reasons, are exempted from the 
general rule requiring the use of the official advertising 
statement.\4\ With respect to these exempted advertisements, the Board 
is focusing on the exemptions relating to radio and television 
advertisements of a certain duration.\5\
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    \4\ The following advertisements need not include the official 
advertising statement under the current rule: (1) Credit union 
supplies such as stationery (except when used for circular letters), 
envelopes, deposit slips, checks, drafts, signature cards, account 
passbooks, and noninsurable certificates; (2) Signs or plates in the 
credit union office or attached to the building or buildings in 
which the offices are located; (3) Listings in directories; (4) 
Advertisements not setting forth the name of the insured credit 
union; (5) 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; (6) 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; (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; (9) 
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; (10) 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; (11) 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.
    \5\ 12 CFR 740.5(c)(7) and (8).
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B. Regulatory History

    For many years, the NCUA's advertising and official sign 
regulations were essentially the same as those of the Federal Deposit 
Insurance Corporation (FDIC).\6\ In 2011, however, the Board amended 
part 740 by making the NCUA's advertising rules more stringent than 
FDIC's rules. Specifically, in 2011, while banks needed only to include 
the FDIC's official advertising statement in radio and television 
advertisements that exceeded 30 seconds, the NCUA's regulatory 
amendments required FICUs to include the NCUA's official advertising 
statement in all radio and television advertisements except those that 
were less than 15 seconds.\7\ This additional requirement, which the 
Board now believes is unnecessary, affected more FICU advertisements 
and disrupted the parity between bank and FICU regulatory burden. 
According to some FICUs, the 2011 amendments made it more difficult for 
FICUs to produce effective advertisements.
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    \6\ 12 CFR part 328.
    \7\ 76 FR 30521 (May 26, 2011). Prior to the 2011 amendments, 
the FDIC and the NCUA expressed the 30 second time frame in the same 
manner. Specifically, both agencies applied the exemption to radio 
and television advertisements that do not ``exceed'' thirty seconds. 
With the 2011 amendments, the NCUA lowered the exemption duration 
from 30 seconds to 15 seconds and changed the do not ``exceed'' 
language to advertisements that are ``less than'' the stated 
duration, both of which the Board now believes disadvantage FICUs 
compared to banks. For technical clarification, the purpose of this 
final rule and the 2017 proposal is to eliminate the unnecessary 
disadvantages imposed by the 2011 amendments.
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    The NCUA's 2011 amendments also required FICUs to include the 
advertising statement on statements of condition required to be 
published by law, a requirement not imposed on banks.

C. October 2017 Proposal

    On October 4, 2017 (2017 NPRM),\8\ the Board published a proposal 
to: (1) expand the radio and television advertisements exemption from 
15 seconds to 30 seconds; and (2) eliminate the requirement to include 
the official advertising statement on statements of condition required 
to be published by law. This proposal effectively reversed the 2011 
amendments and returned parity between banks and FICUs in this context. 
To provide additional regulatory relief, the Board also proposed to 
permit FICUs to use a fourth version of the official advertising 
statement, namely ``Insured by NCUA.'' The Board believes that these 
changes will provide FICUs with more flexibility without diminishing 
the purpose of part 740. In the 2017 NPRM, the Board sought comment on 
the proposed amendments and specifically requested comment about 
whether part 740 should be modified to address advertising on social 
media and mobile banking.
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    \8\ 82 FR 46173 (Oct. 4, 2017).
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II. Summary of Comments on 2017 NPRM

    The NCUA received 36 comments from federal and state credit unions, 
trade associations, credit union leagues, credit union employees, and 
an individual. These commenters generally supported the proposed rule, 
although a few commenters opposed discreet aspects of the proposal.
    In supporting the proposal, several commenters called the changes 
modest yet important. A few commenters emphasized that part 740's 
primary goal is to inform the public about share insurance.
    Commenters stated that the proposed rule would: (1) Provide 
regulatory relief

[[Page 17912]]

and flexibility, particularly allowing more efficient communications to 
members and potential members; (2) provide parity with banks regulated 
and insured by the FDIC; (3) allow credit unions to highlight more of 
their products and services; (4) decrease costs and obstacles; and (5) 
reduce burden and streamline advertising disclosures. Several 
commenters noted that the cumulative effect of the ``myriad federal and 
state regulations'' require credit unions to allocate significant 
resources to legal and compliance departments. They favored the 
proposal, even though they stated that the existing requirements are 
not overly burdensome.
    Each proposed amendment and the corresponding public comments 
recommending alternatives or modifications are discussed in more detail 
below.

III. Final Rule

A. Adding a Fourth Alternative Version of the Official Advertising 
Statement

    As noted, part 740 currently provides three options for the NCUA's 
official advertising statement: (1) ``This credit union is federally 
insured by the National Credit Union Administration''; (2) ``Federally 
insured by NCUA''; and (3) the official sign may be displayed in 
advertisements in lieu of the advertising statement.
    Virtually all commenters supported the proposal to add an 
additional version of the official advertising statement. Commenters 
expressed appreciation for this proposed alternative, stating that it 
provides regulatory relief. One commenter noted that the proposed 
version consists of 13 characters as opposed to 22 or 71 characters. 
Commenters stated that the change is especially meaningful for new 
social media platforms because it enhances flexibility while still 
conveying the important message regarding federal share insurance. They 
further posited that providing a shorter alternative makes advertising 
more cost effective because print and electronic advertising prices are 
often based on length and duration.
    One commenter recommended allowing an even shorter ten character 
message--``NCUA Insured'' or twelve character message ``Member 
NCUSIF.'' This commenter stated that this would provide parity with the 
FDIC advertising statement--``Member FDIC,'' thus enhancing 
flexibility.
    The Board agrees the proposed alternative will add flexibility 
without any adverse effect on potential members. However, it does not 
believe it necessary to adopt the suggested ``NCUA Insured'' or 
``Member NCUSIF.'' Therefore, the Board adopts this aspect of the 
proposal as proposed.

B. Expand Exemption for Radio and Television Advertisements

    As noted above, the current advertising rule exempts from the 
requirements of part 740 radio and television advertisements that are 
less than 15 seconds in duration. In the 2017 NPRM, the Board proposed 
to expand the radio and television advertisements exemption from 15 
seconds to 30 seconds. Virtually all commenters supported this aspect 
of the proposal. The commenters supported the Board's goal of restoring 
parity between FICUs and banks and noted this change would enhance a 
FICU's ability to communicate to members. The commenters stated that 
the previous reduction of the exemption in 2011 from 30 seconds to 15 
seconds was unnecessary and increased regulatory burden.
    The Board agrees and adopts this aspect of the proposal as 
proposed.

C. Eliminate Requirement Regarding Statements of Condition

    The 2011 amendments, for the first time, required FICUs to include 
the advertising statement on statements of condition required to be 
published by law. In the 2017 NPRM, the Board proposed to relieve FICUs 
of this burden. Of the commenters who addressed this aspect of the 
proposal, all agreed with it. They stated that the requirement is 
unnecessary and that relief from it restores parity with banks.
    The Board agrees with the commenters and adopts this aspect of the 
proposal as proposed.

D. Social Media, Mobile Banking, and Other Digital Communication

    Current part 740 focuses primarily on traditional forms of 
advertising such as print, radio, and television. In the 2017 NPRM, the 
Board requested comment on whether to modify the regulations to more 
precisely address advertising on social media, mobile banking, text 
messaging, and other digital communication platforms, such as Twitter 
and Instagram. The Board requested specific recommendations that would 
balance the goal of informing the public regarding federal share 
insurance coverage with the practical constraints inherent in social 
media advertising.
    Twelve commenters addressed this topic, noting that digital media 
typically are designed as extremely short forms of communication. 
Several commenters favored making no changes to part 740, stating that 
the proposal to permit the fourth version of the official advertising 
statement was sufficient to accommodate new forms of advertising. Other 
commenters recommended adding new exemptions to part 740 for various 
forms of digital advertisements provided the official advertising 
statement appears elsewhere in the FICU's advertisement. Others 
recommended modifying certain provisions of part 740 short of adding 
new exemptions. For example, one commenter recommended that, for text-
based messaging, the regulations should allow the official advertising 
statement to be expressed by a hashtag for Twitter, e.g., 
``#NCUAInsured'' or ``InsNCUA.'' Another commenter suggested allowing 
the use of an emoji that would indicate insured status that could be 
included in tweets or text messages.
    The Board has determined that, given the rapidly changing 
technological landscape, it is appropriate to delay taking action to 
amend part 740 regarding social media at this time. The Board believes 
that part 740 provides a sufficient framework to inform potential and 
current credit union members regarding federal share insurance coverage 
for advertisements made in traditional ways and on social media. 
Additionally, the NCUA's Office of General Counsel is authorized to 
provide guidance to any FICU with questions regarding part 740 in the 
context of advertising on social media.

Regulatory Procedures

Regulatory Flexibility Act

    The Regulatory Flexibility Act requires the NCUA to prepare an 
analysis to describe any significant economic impact a regulation may 
have on a substantial number of small entities.\9\ For purposes of this 
analysis, the NCUA considers small credit unions to be those having 
under $100 million in assets. The amendments provide regulatory relief 
without any costs to FICUs. Accordingly, the NCUA has determined and 
certifies that the final 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.
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    \9\ 5 U.S.C. 603(a).
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Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (``PRA'') applies to 
rulemakings in which an agency by rule creates a new paperwork burden 
on regulated entities or modifies an existing burden.\10\ For

[[Page 17913]]

purposes of the PRA, a paperwork burden may take the form of either a 
reporting or a recordkeeping requirement, both referred to as 
information collections. This rule does not constitute a ``collection 
of information'' within the meaning of section 3502(3) and would not 
increase paperwork requirements under the PRA or regulations of the 
Office of Management and Budget (OMB).
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    \10\ 44 U.S.C. 3507(d); 5 CFR part 1320.
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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, the 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 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. The NCUA has 
determined that this rule does not constitute a policy with federalism 
implications for purposes of the executive order.

Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act of 1996 
(Pub. L. 104-121) (SBREFA) provides generally for congressional review 
of agency rules. A reporting requirement is triggered in instances 
where the NCUA issues a final rule as defined in Section 551 of the 
Administrative Procedure Act. The NCUA does not believe this final rule 
is a ``major rule'' within the meaning of the relevant sections of 
SBREFA. As required by SBREFA, the NCUA has filed the appropriate 
documentation with OMB for review.

The Treasury and General Government Appropriations Act of 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.\11\
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    \11\ Public Law 105-277, 112 Stat. 2681 (1998).
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List of Subjects in 12 CFR Part 740

    Advertisements, Credit unions, Share insurance, Signs and symbols.

    By the National Credit Union Administration Board on April 19, 
2018.
Gerard S. Poliquin,
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.  740.5 by revising paragraphs (a), (b), (c)(7) and (c)(8) 
to 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 on its main internet page, except as provided 
in paragraph (c) of this section.
    (b)(1) The official advertising statement is in substance one of 
the following:
    (i) This credit union is federally insured by the National Credit 
Union Administration;
    (ii) Federally insured by NCUA;
    (iii) Insured by NCUA; or
    (iv) A reproduction of the official sign as described in Sec.  
740.4(b) may be used in lieu of the other statements included in this 
section. 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).
    (2) 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 which do not exceed thirty (30) seconds 
in time;
    (8) Advertisements by television, other than display 
advertisements, which do not exceed thirty (30) seconds in time;

* * * * *
[FR Doc. 2018-08557 Filed 4-24-18; 8:45 am]
 BILLING CODE 7535-01-P