[Federal Register Volume 85, Number 109 (Friday, June 5, 2020)]
[Proposed Rules]
[Pages 34545-34548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11385]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 745

RIN 3133-AF11


Joint Ownership Share Accounts

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule.

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SUMMARY: The NCUA Board (Board) proposes to amend its share insurance 
regulation governing the requirements for a share account to be 
separately insured as a joint account by the National Credit Union 
Share Insurance Fund (NCUSIF). Specifically, the proposed rule would 
provide an alternative method to satisfy the membership card or account 
signature card requirement necessary for insurance coverage (signature 
card requirement). Under the proposal, even if an insured credit union 
cannot produce membership cards or account signature cards signed by 
the joint accountholders, the signature card requirement could be 
satisfied by information contained in the account records of the 
insured credit union establishing co-ownership of the share account. 
For example, the signature card requirement could be satisfied by the 
credit union having issued a mechanism for accessing the account, such 
as a debit card, to each co-owner or evidence of usage of the joint 
share account by each co-owner.

DATES: Comments must be received on or before July 6, 2020.

ADDRESSES: You may submit written comments, identified by RIN 3133-
AF11, 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.
     Fax: (703) 518-6319. Include ``[Your Name]--Comments on 
Proposed Rule: Joint Ownership Share Accounts'' in the transmittal.
     Mail: Address to Gerard S. Poliquin, Secretary of the 
Board, National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.
    Public Inspection: You may view all public comments on the Federal 
eRulemaking Portal at http://www.regulations.gov as submitted, except 
for those we cannot post for technical reasons. The NCUA will not edit 
or remove any identifying or contact information from the public 
comments submitted. Due to social distancing measures in effect, the 
usual opportunity to inspect paper copies of comments in the NCUA's law 
library is not currently available. After social distancing measures 
are relaxed, visitors may make an appointment to review paper copies by 
calling (703) 518-6540 or emailing [email protected].

FOR FURTHER INFORMATION CONTACT: Thomas I. Zells, Staff Attorney, 
Office of General Counsel, at 1775 Duke Street, Alexandria, VA 22314 or 
telephone: (703) 548-2478.

SUPPLEMENTARY INFORMATION:

I. Background
II. Legal Authority
III. Summary of the Proposed Rule
IV. Regulatory Procedures

I. Background

    The Board proposes to amend its share insurance regulation 
governing the requirements for a share account to be insured separately 
as a joint account.\1\ Specifically, this proposal addresses the 
requirement for separate joint account insurance that each co-owner of 
a joint account has personally signed a membership card or account 
signature card. In the event a federally insured credit union (FICU) 
could not produce from its records such membership cards or account 
signature cards, this proposal would explicitly permit the use of other 
evidence contained in a FICU's account records to satisfy the signature 
card requirement. The proposal discusses examples of such evidence more 
fully in the sections that follow.
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    \1\ 12 CFR 745.8.
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    This amendment would mirror a change made by the Federal Deposit 
Insurance Corporation (FDIC) in 2019 for federally insured depository 
institutions.\2\ This proposed rule is intended to facilitate the 
prompt payment of share insurance in the event of a FICU's failure by 
explicitly providing alternative methods that the NCUA could use to 
determine the owners of joint accounts, consistent with the NCUA's 
statutory authority. The Board emphasizes that this change is not in 
reaction to any observed current problem with respect to identifying 
qualifying joint accounts at credit unions and processing insurance 
payments timely. Rather, the Board is issuing this proposed rule 
because it is important to maintain parity between the nation's two 
federal deposit/share insurance programs and to provide credit union 
members with equal access to insurance coverage. These regulatory 
changes would promote further confidence in the credit union system and 
embody a forward-looking approach that would explicitly permit the use 
of new and innovative technologies and processes to meet the NCUA's 
policy objectives.
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    \2\ 84 FR 35022 (July 22, 2019).
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    Under the Federal Credit Union Act (FCU Act), the NCUA is 
responsible for paying share insurance to any member, or to any person 
with funds lawfully held in a member account, in the event of a FICU's 
failure up to the standard maximum share insurance amount (SMSIA), 
which is currently set at $250,000.\3\ The FCU Act states that the 
determination of the net amount of share insurance paid ``shall be in 
accordance with such regulations as the Board may prescribe'' and 
requires that,

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``in determining the amount payable to any member, there shall be added 
together all accounts in the credit union maintained by that member for 
that member's own benefit, either in the member's own name or in the 
names of others.'' \4\ However, the FCU Act also specifically 
authorizes the Board to ``define, with such classifications and 
exceptions as it may prescribe, the extent of the share insurance 
coverage provided for member accounts, including member accounts in the 
name of a minor, in trust, or in joint tenancy.'' \5\
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    \3\ 12 U.S.C. 1787(k)(1)(A), (6).
    \4\ 12 U.S.C. 1787(k)(1)(B).
    \5\ 12 U.S.C. 1787(k)(1)(C).
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    The NCUA has implemented these requirements by issuing regulations 
recognizing particular categories of accounts, such as single ownership 
accounts and joint ownership accounts.\6\ If an account meets the 
requirements for a particular category, the account is insured up to 
the $250,000 limit separately from shares held by the member in a 
different account category at the same FICU. For example, provided all 
requirements are met, shares in the single ownership category will be 
separately insured from shares in the joint ownership category held by 
the same member at the same FICU.
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    \6\ 12 CFR part 745.
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    Section 745.8 of the NCUA's regulations governs insurance coverage 
for joint ownership accounts.\7\ Joint ownership accounts include share 
accounts held pursuant to various forms of co-ownership under state 
law. For example, joint tenants could each hold an equal, undivided 
interest in a share account. Section 745.8 provides that only 
``qualifying joint accounts'' are insured separately from individually 
owned share accounts maintained by the co-owners.\8\ ``Qualifying joint 
accounts'' generally must satisfy two requirements: (1) Each co-owner 
has personally signed a membership card or account signature card; and 
(2) each co-owner possesses withdrawal rights on the same basis.\9\ If 
a joint account is not a qualifying joint account, each co-owner's 
actual ownership interest in the account is considered individually 
owned and added to any other accounts individually owned by the co-
owner and insured up to the SMSIA in the aggregate.\10\ This may result 
in some uninsured shares if a member's single ownership accounts at the 
same FICU, including shares in any non-qualifying joint accounts, 
exceed $250,000. Additionally, it is worth reiterating that, with 
limited exceptions, the FCU Act generally limits NCUA share insurance 
coverage to ``member accounts.'' \11\ Despite this general limitation, 
the FCU Act \12\ and the NCUA's regulations \13\ do allow a nonmember 
to become a joint owner with a member on a joint account with right of 
survivorship. The regulations provide that a nonmember's interest in 
such accounts will be insured in the same manner as the member joint-
owner's interest.
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    \7\ 12 CFR 745.8.
    \8\ Id.
    \9\ 12 CFR 745.8(c).
    \10\ 12 CFR 745.8(d).
    \11\ 12 U.S.C. 1752(5).
    \12\ 12 U.S.C. 1759(a).
    \13\ 12 CFR 745.8(e).
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    The signature requirement has been included in the regulation 
governing insurance coverage since its inception in 1971.\14\ The FDIC 
has had a substantially similar signature requirement since 1967.\15\ 
In originally adopting this requirement, the FDIC ``intended to address 
practices such as the addition of nominal co-owners to an account 
solely to increase deposit insurance coverage.'' \16\ The NCUA 
thereafter adopted a substantially similar requirement \17\ and views 
it as a reliable indicator of account ownership and important to 
ensuring consistency with the FCU Act, which expressly limits the net 
amount of share insurance payable to any member, or person with funds 
lawfully held in a member account, based on the member account 
classifications prescribed by the Board.\18\
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    \14\ 36 FR 2477 (Feb. 5, 1971).
    \15\ See 32 FR 10408, 10409 (July 14, 1967).
    \16\ 84 FR 35022, 35023 (July 22, 2019).
    \17\ The FCU Act generally requires that the NCUA determine 
``the net amount of share insurance payable . . . in accordance with 
this paragraph, and consistently with actions taken by the Federal 
Deposit Insurance Corporation under section 1821(a) of this title.'' 
12 U.S.C. 1787(k)(1)(A) (emphasis added).
    \18\ 12 U.S.C. 1787(k)(1).
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    Neither the FCU Act nor the NCUA's regulations define the terms 
``membership card'' or ``account signature card.'' In implementing 
Sec.  745.8, the NCUA has not required any particular format for a 
membership card or account signature card. Therefore, the agency has 
previously permitted FICUs to satisfy the requirement through various 
forms of documentation used in their account opening processes. The 
Board also wishes to reiterate that, consistent with the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act),\19\ the 
signature requirement may be satisfied electronically. This has been 
the NCUA's long-standing position.
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    \19\ Public Law 106-229, codified at 15 U.S.C. 7001(a).
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II. Legal Authority

    The Board has issued this proposed rule pursuant to its authority 
under the FCU Act. Under the FCU Act, the NCUA is the chartering and 
supervisory authority for FCUs and the Federal supervisory authority 
for FICUs.\20\ The FCU Act grants the NCUA a broad mandate to issue 
regulations governing both FCUs and FICUs. Section 120 of the FCU Act 
is a general grant of regulatory authority and authorizes the Board to 
prescribe rules and regulations for the administration of the FCU 
Act.\21\ Section 207 of the FCU Act is a specific grant of authority 
over share insurance coverage, conservatorships, and liquidations.\22\ 
Section 209 of the FCU Act is a plenary grant of regulatory authority 
to the NCUA to issue rules and regulations necessary or appropriate to 
carry out its role as share insurer for all FICUs.\23\ Accordingly, the 
FCU Act grants the Board broad rulemaking authority to ensure that the 
credit union industry and the NCUSIF remain safe and sound.
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    \20\ 12 U.S.C. 1752-1775.
    \21\ 12 U.S.C. 1766(a).
    \22\ 12 U.S.C. 1787(b)(1).
    \23\ 12 U.S.C. 1789(a)(11).
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III. Summary of the Proposed Rule

    The Board is proposing to amend Sec.  745.8 to explicitly provide 
for an alternative method to satisfy the signature card requirement. 
The proposed rule would specifically allow the signature card 
requirement to be satisfied by information contained in the account 
records of the FICU establishing the co-ownership of the share account, 
such as evidence that the FICU has issued a mechanism for accessing the 
account to each co-owner or evidence of usage of the share account by 
each co-owner. For example, under this proposal, the requirement could 
be satisfied by evidence that a FICU has issued a debit card to each 
co-owner of the account or evidence that each co-owner of the account 
has conducted transactions using the share account. These examples, 
however, are not intended to define the only forms of evidence of co-
ownership that could satisfy the signature requirement. To the 
contrary, the evidence found in a FICU's account records could take 
many other forms.
    The proposed rule only would affect a requirement in the NCUA's 
regulations that must be satisfied for a share account to be separately 
insured as a joint account; it would not affect any other legal 
requirements applicable to FICUs. FICUs may, for legal or other 
reasons, find it appropriate or necessary

[[Page 34547]]

to continue collecting customers' signatures.\24\ The changes made by 
the proposed rule would not modify or affect any state law requirements 
generally applicable to FICUs.
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    \24\ See, e.g., 12 CFR part 701, appendix A and corresponding 
state law requirements for federally insured, state-chartered credit 
unions.
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    The proposal also would not affect the general principles contained 
in Sec.  745.2 of the NCUA's share insurance regulations applicable in 
determining insurance of accounts.\25\ These general principles 
applicable in determining insurance of accounts would continue to apply 
to all share accounts, including joint ownership accounts.
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    \25\ 12 CFR 745.2.
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    The proposed rule would not introduce any new requirements for an 
account to be insured as a joint account, and would not reduce or 
affect insurance coverage for any account for which the existing joint 
account requirements are satisfied. The proposed rule simply would 
provide an alternative method to satisfy the existing signature card 
requirement. If each co-owner of a joint account signs, or has 
previously signed, a membership card or account signature card in 
accordance with the existing requirement and the FICU can produce it, 
then the proposed alternative method would be unnecessary. Assuming 
that the remaining qualifying joint account requirement is satisfied--
that is, both co-owners possess equal withdrawal rights--and all other 
membership requirements are met,\26\ the account would be insured as a 
joint account. The proposal would apply to all FICUs and would not 
impose any increased burden or new recordkeeping requirements for joint 
accounts.
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    \26\ With limited exceptions, the FCU Act generally limits NCUA 
share insurance coverage to ``member accounts.'' 12 U.S.C. 1752(5). 
Despite this general limitation, the FCU Act and the NCUA's 
regulations do allow a nonmember to become a joint owner with a 
member on a joint account with right of survivorship. 12 U.S.C. 
1759(a). The regulations provide that a nonmember's interest in such 
accounts will be insured in the same manner as the member joint 
owner's interest. 12 CFR 745.8(e).
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    The rule also provides non-quantifiable benefits to owners of joint 
accounts. By explicitly providing alternative methods that the NCUA 
could use to determine the owners of joint accounts, the proposed rule 
would further support a prompt share insurance determination in the 
event of a FICU's failure, alleviating delays in the recognition of 
account ownership and uncertainty regarding the extent of share 
insurance coverage. These benefits would promote confidence in the 
credit union system and NCUA-insured shares.
    The NCUA invites comments on all aspects of the proposal.

IV. Regulatory Procedures

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires that, in 
connection with a notice of proposed rulemaking, an agency prepare and 
make available for public comment an initial regulatory flexibility 
analysis that describes the impact of a proposed rule on small 
entities. A regulatory flexibility analysis is not required, however, 
if the agency certifies that the rule will not have a significant 
economic impact on a substantial number of small entities (defined for 
purposes of the RFA to include FICUs with assets less than $100 
million) and publishes its certification and a short, explanatory 
statement in the Federal Register together with the rule. The proposed 
rule explicitly allows the NCUA to look to information contained in the 
account records of a FICU in order to satisfy the signature card 
requirement at the time of a FICU's failure. As a result, it will not 
cause any increased burden on FICUs and will not have an impact on 
small credit unions. Accordingly, the NCUA certifies that the proposed 
rule will not have a significant economic impact on a substantial 
number of small credit unions.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to rulemakings in 
which an agency creates a new or amends existing information collection 
requirements.\27\ For the purpose of the PRA, an information collection 
requirement may take the form of a reporting, recordkeeping, or a 
third-party disclosure requirement. The proposed rule does not contain 
information collection requirements that require approval by OMB under 
the PRA.\28\ The proposed rule will merely allow the NCUA to look to 
information contained in the account records of a FICU in order to 
satisfy the signature card requirement at the time of a FICU's failure.
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    \27\ 44 U.S.C. 3507(d); 5 CFR part 1320.
    \28\ 44 U.S.C. Chap. 35.
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C. 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. This rulemaking will not 
have a 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 proposal does not constitute a policy 
that has federalism implications for purposes of the executive order.

D. Assessment of Federal Regulations and Policies on Families

    The NCUA has determined that this final rule will not affect family 
well-being within the meaning of Section 654 of the Treasury and 
General Government Appropriations Act, 1999.\29\
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    \29\ Public Law 105-277, 112 Stat. 2681 (1998).
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List of Subjects in 12 CFR Part 745

    Credit, Credit unions, Share insurance.

    By the National Credit Union Administration Board on May 21, 
2020.
Gerard Poliquin,
Secretary of the Board.

    For the reasons discussed above, the NCUA Board proposes to amend 
12 CFR part 745 as follows:

PART 745--SHARE INSURANCE AND APPENDIX

0
1. The authority citation for part 745 continues to read as follows:

    Authority:  12 U.S.C. 1752(5), 1757, 1765, 1766, 1781, 1782, 
1787, 1789; title V, Pub. L. 109-351; 120 Stat. 1966.
0
2. Revise Sec.  745.8(c) to read as follows:


Sec.  745.8   Joint ownership accounts.

* * * * *
    (c) Qualifying joint accounts. (1) A joint account is a qualifying 
joint account if each of the co-owners has personally signed a 
membership or account signature card and has a right of withdrawal on 
the same basis as the other co-owners. The signature requirement does 
not apply to share certificates, or to any accounts maintained by an 
agent, nominee, guardian, custodian or conservator on behalf of two or 
more persons if the records of the credit union properly reflect that 
the account is so maintained.
    (2) The signature card requirement of paragraph (c)(1) of this 
section also may be satisfied by information contained in the account 
records of the federally insured credit union establishing co-ownership 
of the share account, such as evidence that the institution has issued 
a mechanism for accessing the account

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to each co-owner or evidence of usage of the share account by each co-
owner.
* * * * *
[FR Doc. 2020-11385 Filed 6-4-20; 8:45 am]
 BILLING CODE 7535-01-P