RegWatch - CUNA HR/TD Council

CUNA Regulatory Affairs (edited by the HR/TD Council Regulatory Committee)
November 11, 2008 | COMMENTS

Regulatory Issues of Interest to CUNA HR/TD Council Members

In This Issue:

• NCUA Issues Share Insurance Sign Rules
• Agencies Approve “Red Flags” Exam Guidance; FTC Delays Enforcement for State-Chartered Credit Unions

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NCUA ISSUES SHARE INSURANCE SIGN RULES

NCUA has recently issued new rules regarding share insurance signs. One of these is an interim final rule that was approved by the NCUA Board shortly before the last Board meeting, which addresses how the signs should be revised in light of the recent action that increases the insurance limit to $250,000. The rule also provides share insurance coverage for mortgage servicing accounts to the same extent such coverage is provided by the Federal Deposit Insurance Corporation for banks and thrifts.

The rule provides a number of options for revising the current signs. Credit unions may replace the signs with new ones that will be available from NCUA or they may alter the current ones to indicate the new $250,000 limit, which may include placing a $250,000 sticker on the existing sign. Credit unions may also choose to post additional signs, such as a sign in the lobby or on the credit union's website or they may decide not to make any changes to the current signs. This rule became effective as of October 22, 2008 and comments may be submitted by December 22, 2008.

NCUA had also issued a proposed rule at its recent Board meeting to amend the share insurance sign requirements for federally insured credit unions participating in shared branching networks. Currently, for tellers accepting share deposits for both federally insured and nonfederally insured credit unions, there must be a second sign adjacent to the official NCUA insurance sign. The second sign must list each federally insured credit union served by the teller, along with a statement that only these credit unions are federally insured.

The proposed rule will replace the required list of credit unions with a general statement that not all of the credit unions served by the teller are federally insured and members should contact their credit union for further information.

Under the proposal, the revised second sign must be similar to the current official NCUA sign in terms of design, color, and font. NCUA will produce signs that meet these new requirements and will make them available at a reasonable cost.

The proposal will also clarify that tellers in nonfederally insured credit union branches may accept deposits for federally insured credit unions as part of a shared branching network. However, these credit union branches may not display the official NCUA sign and there would, therefore, be no need to display the second sign.

Comments on this proposal will be due by November 21, 2008.

-  Jeff Bloch, Senior Assistant General Counsel

AGENCIES APPROVE “RED FLAGS” EXAM GUIDANCE; FTC DELAYS ENFORCEMENT FOR STATE-CHARTERED CREDIT UNIONS

NCUA and the banking regulators recently approved guidelines that examiners will use to determine compliance with the identity theft “red flags” and the address discrepancy and change of address rules that were issued under the Fair and Accurate Credit Transactions (FACT) Act. The “red flags” rules require financial institutions and other creditors to develop a program designed to detect and prevent identity theft in connection with certain accounts. The address discrepancy and change of address rules require a user of consumer reports to develop reasonable policies and procedures to confirm that the report relates to the consumer whose report was requested when there is an address discrepancy and require credit and debit card issuers to develop policies to verify a change of address when there is a request for an additional or replacement card.

Compliance with these rules is required by November 1, 2008, and examiners will include an evaluation of a financial institution's compliance with these provisions during the next regularly scheduled examination. Click here for the guidelines for the identity theft rules, and click here and here for the guidelines for the address discrepancy and change of address rules.

In a related matter, the Federal Trade Commission (FTC) recently announced that it is postponing for six months enforcement of the red flag rules for entities under its jurisdiction, which includes state-chartered credit unions. FTC's action was primarily directed at non-financial institution creditors, such as automobile dealers and utility companies, which were unaware of these rules until recently. The FTC's suspension of its enforcement of the red flag rules will not apply to the address discrepancy or change of address rules that were issued along with the red flags rule.

Through a number of conversations with NCUA staff, the agency clarified that it has no plans to delay the effective date for enforcement of the identity theft red flags rule for federal credit unions, primarily because FTC's rationale for delaying enforcement for non-financial institution creditors does not apply to credit unions. The position of federal banking agencies is likely to be consistent with NCUA's. These agencies expect federal credit unions and banks to be in compliance as scheduled and have emphasized earlier that an institution's current policies and procedures on information security and fraud prevention can form the foundation of the required identity theft program, which should help to minimize compliance burdens.

- Jeff Bloch, Senior Assistant General Counsel