For
12 U.S.C. 1752, 1757(6), 1766.
As used in this chapter:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i) For the purpose of establishing the reserves required by section 116 of the Federal Credit Union Act, all assets except the following shall be considered risk assets:
(1) Cash on hand.
(2) Deposits and/or shares in federally or state-insured banks, savings and loan associations, and credit unions that have a remaining maturity of 5 years or less.
(3) Assets that have a remaining maturity of 5 years or less and are insured by, fully guaranteed as to principal and interest by, or due from the U.S. Government, its agencies, the Federal National Mortgage Association. Federal Home Loan Mortgage Corporation, or the Government National Mortgage Association. Collateralized mortgage obligations that are comprised of government guaranteed mortgage loans shall be included in this asset category.
(4) Loans to other credit unions that have a remaining maturity of 5 years or less.
(5) Student loans insured under the provisions of title IV, Part B of the Higher Education Act of 1965 (20 U.S.C. 1071, et seq.) or similar state insurance programs that have a remaining maturity of 5 years or less.
(6) Loans that have a remaining maturity of 5 years or less and are fully insured or guaranteed by the Federal or a state government or any agency of either.
(7) Shares or deposits in a corporate credit union that have a remaining maturity of 5 years or less, other than Membership Capital Share Deposit accounts as defined in part 704.
(i) Is operated primarily for the purpose of serving other credit unions;
(ii) Is designated by the National Credit Union Administration as a corporate credit union; and
(iii) Limits natural person members to the minimum required by state or federal law to charter and operate the credit union.
(8) Common trust investments, including mutual funds, which deal exclusively in investments authorized by the Federal Credit Union Act that are either carried at the lower cost or market, or are marked to market value monthly.
(9) Prepaid expenses.
(10) Accrued interest on non-risk investments.
(11) Loans fully secured by a pledge of shares in the lending Federal credit union, equal to and maintained to at least the amount of the loan outstanding.
(12) Loans which are purchased from liquidating credit unions and guaranteed by the National Credit Union Administration.
(13) National Credit Union Share Insurance Fund Guaranty Accounts established with the authorization of the National Credit Union Administration
(14) Investments in shares of the National Credit Union Administration Central Liquidity Facility.
(15) Assets included in numbered items 2, 3, 4, 5, 6, and 7 with maturities greater than 5 years are exempt from risk assets if the asset is being carried on the credit union's records at the lower of cost or market, or are being marked to market value monthly.
(16) Assets included in numbered items 2, 3, 4, 5, 6, and 7, with remaining maturities greater than 5 years are exempt from risk assets provided they meet the following criteria, irrespective of whether or not the asset is being carried on the credit union's records at the lower of cost or market, or are being marked to market value monthly.
(17) Fixed Assets as defined in § 701.36(b).
(18) Deposit in the National Credit Union Share Insurance Fund representing a federally insured credit union's capitalization account balance of one percent of insured shares.
(j)(1)
(i) It is determined by the Board that the facts that caused the deficient share-asset ratio no longer exist; and
(ii) The likelihood of further depreciation of the share-asset ratio is not probable; and
(iii) The return of the share-asset ratio to its normal limits within a reasonable time for the credit union concerned is probable; and
(iv) The probability of a further potential loss to the insurance fund is negligible.
(2) For purposes of this section, the following definitions are used:
(i)
(ii)
(k) For purposes of determining the amount required to be transferred to regular reserves under sections 116 and 201(b)(6) of the Federal Credit Union Act,
(1) Dividends received on shares in the National Credit Union Administration Central Liquidity Facility;
(2) Dividends received by credit unions on special share accounts held in Agent members of the Central Liquidity Facility authorized by § 725.7 of this chapter; and
(3) Interest received by an Agent member of the Central Liquidity Facility to the extent of interest paid to the Facility by the Agent member. In the case of an Agent member of the Central Liquidity Facility that is a group of central credit unions—
(i) Interest received by the Agent group representative, as defined in § 725.1(b) of this chapter, to the extent of interest paid to the Facility by the Agent group representative; and
(ii) Interest received by each central credit union in the Agent group (other than the Agent group representative) to the extent of interest paid by each such central credit union to the Agent group representative on Agent group representative loans, as defined in § 725.1(b) of this chapter. Non-operating gains and losses are not included in gross income.
12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a, 1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by 15 U.S.C. 1601
National Credit Union Administration policies concerning chartering, field of membership modifications, and conversions are set forth in Interpretive Ruling and Policy Statement 99-1, Chartering and Field of Membership Policy. Copies may be obtained by contacting NCUA at the address found in § 790.2 of this chapter. The IRPS is incorporated into this section.
(a)
(b)
(1)
(2)
(3)
(4)
(c)
(d)
(1) The administrative fee for a delinquent payment shall be an amount fixed from time to time by the National Credit Union Administration Board and based upon the administrative costs of such delinquent payments to the Administration in the preceding year.
(2) The costs of collection shall be the actual hours expended by Administration personnel multiplied by the average hourly salary and benefits costs of such personnel as determined by the National Credit Union Administration Board.
(3) The interest rate charged on any delinquent payment shall be the U.S. Department of the Treasury Tax and Loan Rate in effect on the date when the payment is due as provided in 31 U.S.C. 3717.
(4) If a credit union makes a combined payment of its operating fee and its share insurance deposit as provided in § 741.4 of this chapter and such payment is delinquent, only one administrative fee will be charged and interest will be charged on the total combined payment.
(a)
(b)
(1)
(2)
(3) Except as provided in paragraph (b)(4) of this section for corporate credit unions, “troubled condition” means any insured credit union that has one or a combination of the following conditions:
(i) Has been assigned
(A) A 4 or 5 Camel composite rating by the NCUA in the case of a federal credit union, or
(B) An equivalent 4 or 5 Camel composite rating by the state supervisor in the case of a federally insured, state-chartered credit union, or
(C) A 4 or 5 Camel composite rating by NCUA based on core workpapers received from the state supervisor in the
(ii) Has been granted assistance as outlined under section 116 or 208 of the Federal Credit Union Act.
(4) In the case of a corporate credit union, “troubled condition” means any insured corporate credit union that has one or a combination of the following conditions:
(i) Has been assigned
(A) A 4 or 5 Corporate Risk Information System (CRIS) rating by NCUA in either the Financial Risk or Risk Management composites, in the case of a federal corporate credit union, or
(B) An equivalent 4 or 5 CRIS rating in either the Financial Risk or Risk Management composites by the state supervisor in the case of a federally insured, state-chartered corporate credit union in a state that has adopted the CRIS system, or an equivalent 4 or 5 CAMEL composite rating by the state supervisor in the case of a federally insured, state-chartered corporate credit union in a state that uses the CAMEL system, or
(C) A 4 or 5 CRIS rating in either the Financial Risk or Risk Management composites by NCUA based on core workpapers received from the state supervisor in the case of a federally insured, state-chartered credit union in a state that does not use either the CRIS or CAMEL system. In this case, the state supervisor will be notified in writing by the Director of the Office of Corporate Credit Unions that the corporate credit union has been designated by NCUA as a troubled institution;
(ii) Has been granted assistance as outlined under Sections 116 or 208 of the Federal Credit Union Act.
(c)
(1) The credit union has been chartered for less than 2 years; or
(2) The credit union meets the definition of troubled condition as set forth in paragraph 701.14(b)(3) or (4).
(d)
(2) Waiver of prior notice requirement. Parties may petition the appropriate Regional Director for a waiver of the prior notice required under this section. Waiver may be granted if it is found that delay could harm the credit union or the public interest. Any waiver shall not affect the authority of NCUA to issue a Notice of Disapproval within 30 days of the waiver, or within 30 days of any subsequent required notice.
(3) Election of directors or credit committee members. (i) In the case of the election of a new member of the board of directors or credit committee member at a meeting of the members of a federally insured credit union, prior notice is not required. However, a completed notice must be filed with the appropriate Regional Director within 48 hours of the election.
(ii) If a director or credit committee member is disapproved by NCUA, the board of directors of the credit union may appoint its own alternate, to serve until the next annual meeting, contingent upon NCUA approval.
(e)
(f)
(a) A Federal credit union may make provision for reasonable retirement benefits for its employees and for officers who are compensated in conformance with the Act and the bylaws, either individually or collectively with other credit unions. In those cases where a Federal credit union is to be a plan trustee or custodian, the plan must be authorized and maintained in accordance with the provisions of part 724 of this chapter. Where the trustee or custodian is to a party other than the Federal credit union, the employee benefit plan must be maintained in accordance with the applicable laws governing employee benefit plans and such rules and regulations as may be promulgated by the Secretary of Labor, the Secretary of the Treasury, or any other Federal or state authority exercising jurisdiction over such plans.
(b) No Federal credit union shall occupy the position of a fiduciary, as defined in the Employee Retirement Income Security Act of 1974 and rules and regulations promulgated thereunder by the Secretary of Labor, unless provision has been made for appropriate liability insurance as provided under section 410(b) of the Employee Retirement Income Security Act of 1974.
(a)
(b)
(i)(A) Rates of interest and amounts of finance charges, including:
(
(
(
(
(B) Late charges; and
(C) Closing costs, application, origination, or other fees;
(ii) Terms of repayment, including:
(A) The maturity of loans and lines of credit;
(B) The amount, uniformity, and frequency of payments, including the accrual of unpaid interest if payments are insufficient to pay all interest due;
(C) Balloon payments; and
(D) Prepayment limits;
(iii) Conditions related to:
(A) The amount of the loan or line of credit;
(B) The purpose of the loan or line of credit;
(C) The type or amount of security and the relation of the value of the security to the amount of the loan or line of credit;
(D) Eligible borrowers; and
(E) The imposition and enforcement of liens on the shares of borrowers and accommodation parties.
(2)
(i) Insurance laws;
(ii) Laws related to transfer of and security interests in real and personal property (see, however, paragraph (g)(6) of this section concerning the use and exercise of due-on-sale clauses);
(iii) Conditions related to:
(A) Collection costs and attorneys’ fees;
(B) Requirements that consumer lending documents be in “plain language;” and
(C) The circumstances in which a borrower may be declared in default and may cure default.
(3)
(4)
(5)
(c)
(2)
(3)
(4)
(5)
(6)
(7)
(ii)
(B)
(C)
(8)(i) Except as otherwise provided herein, no official or employee of a Federal credit union, or immediate family member of an official or employee of a Federal credit union, may receive, directly or indirectly, any commission, fee, or other compensation in connection with any loan made by the credit union.
(ii) For the purposes of this section:
(iii) This section does not prohibit:
(A) Payment, by a Federal credit union, of salary to employees;
(B) Payment, by a Federal credit union, of an incentive or bonus to an employee based on the credit union's overall financial performance;
(C) Payment, by a Federal credit union, of an incentive or bonus to an employee, other than a senior management employee, in connection with a loan or loans made by the credit union, provided that the board of directors of the credit union establishes written policies and internal controls in connection with such incentive or bonus and monitors compliance with such policies and controls at least annually.
(D) Receipt of compensation from a person outside a Federal credit union by a volunteer official or non senior management employee of the credit union, or an immediate family member of a volunteer official or employee of the credit union, for a service or activity performed outside the credit union, provided that no referral has been made by the credit union or the official, employee, or family member.
(d)
(2)
(3)
(4)
(i) Add:
(A) The amount of the current application.
(B) The outstanding balances of loans, including the used portion of an approved line of credit, extended to or endorsed, cosigned or guaranteed by the official.
(C) The total unused portion of approved lines of credit extended to or endorsed, cosigned or guaranteed by the official.
(ii) From the above total subtract:
(A) The amount of shares pledged by the official on loans or lines of credit
(B) The amount of shares to be pledged by the official on the loan or line of credit applied for.
(5)
(i) An official,
(ii) An immediate family member of an official, or
(iii) Any individual having a common ownership, investment or other pecuniary interest in a business enterprise with an official or with an immediate family member of an official,
(e)
(f)
(1) A loan to finance the purchase of a mobile home if the mobile home will be used as the member-borrower's residence and the loan is secured by a first lien on the mobile home,
(2) A second mortgage loan (or a nonpurchase money first mortgage loan in the case of a residence on which there is no existing first mortgage) if the loan is secured by a residential dwelling which is the residence of the member-borrower, and
(3) A loan to finance the repair, alteration, or improvement of a residential dwelling which is the residence of the member-borrower.
(g)
(2)
(3)
(4)
(5)
(6)
(ii) In the case of a contract involving a long-term (greater than twelve years), fixed rate first mortgage loan which was made or assumed, including a transfer of the liened property subject to the loan, during the period beginning on the date a State adopted a constitutional provision or statute prohibiting the exercise of due-on-sale clauses, or the date on which the highest court of such state has rendered a decision (or if the highest court has not so decided, the date on which the next highest court has rendered a decision resulting in a final judgment if such decision applies statewide) prohibiting such exercise, and ending on October 15, 1982, a Federal credit union may exercise a due-on-sale clause in the case of a transfer which occurs on or after November 18, 1982, unless exercise of the due-on-sale clause would be based on any of the following:
(A) The creation of a lien or other encumbrance subordinate to the lender's security instrument which does not relate to a transfer of rights of occupancy in the property;
(B) The creation of a purchase money security interest for household appliances;
(C) A transfer by devise, descent, or operation of law on the death of a joint tenant or tenant by the entirety;
(D) The granting of a leasehold interest of 3 years or less not containing an option to purchase;
(E) A transfer to a relative resulting from the death of a borrower;
(F) A transfer where the spouse or children of the borrower become an owner of the property;
(G) A transfer resulting from a decree of a dissolution of marriage, a legal separation agreement, or from an incidental property settlement agreement, by which the spouse of the borrower becomes an owner of the property;
(H) A transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property; or
(I) Any other transfer or disposition described in regulations promulgated by the Federal Home Loan Bank Board.
(7)
(h) [Reserved]
(i)
(1)
(A) A contract market designated for trading such contracts by the Commodity Futures Trading Commission, or
(B) By a Federal credit union and a primary dealer in Government securities that are counterparties in an over-the-counter transaction.
(ii)
(iii)
(iv)
(v)
(vi)
(A) A member of the Association of Primary Dealers in United States Government Securities; or
(B) Any parent, subsidiary, or affiliated entity of such primary dealer where the member guarantees (to the satisfaction of the FCU's board of directors) over-the-counter sales of financial options contracts by the parent, subsidiary, or affiliated entity to a Federal credit union.
(vii)
(2)
(i) If the real estate loans are to be sold on the secondary market within ninety (90) days of closing;
(ii) If the positions are entered into:
(A) Through a contract market designated by the Commodity Futures Trading Commission for trading such contracts, or
(B) With a primary dealer in Government securities;
(iii) If the positions are entered into pursuant to written policies and procedures which are approved by the Federal credit union's board of directors, and include, at a minimum:
(A) The Federal credit union's strategy in using financial options contracts and its analysis of how the strategy will reduce sensitivity to changes in price or interest rates in its commitments to originate real estate loans at specified interest rates;
(B) A list of brokers or other intermediaries through which positions may be entered into;
(C) Quantitative limits (e.g., position and stop loss limits) on the use of financial options contracts;
(D) Identification of the persons involved in financial options contract transactions, including a description of these persons’ qualifications, duties, and limits of authority, and description of the procedures for segregating these persons’ duties,
(E) A requirement for written reports for review by the Federal credit union's board of directors at its monthly meetings, or by a committee appointed by the board on a monthly basis, of:
(iv) If the Federal credit union has received written permission from the appropriate NCUA Regional Director to engage in financial options contracts transactions in accordance with this § 701.21(i) and its policies and procedures as written.
(3)
(ii) The records described in § 701.21(i)(2)(iii)(E) must be retained for
(4)
(i) In accordance with standards established by the NCUA Board in the Accounting Manual for Federal Credit Unions, available from NCUA, Administrative Office, 1776 G St. NW., Washington, DC 20456, or such other instruction as may be deemed appropriate; or
(ii) To the extent not inconsistent with NCUA Board instruction, in accordance with generally accepted accounting standards or principles.
(a) For purposes of this section:
(1)
(2)
(3)
(4)
(5)
(6)
(b) Subject to the provisions of this section any Federal credit union may participate in making loans with eligible organizations within the limitations of the board of director's written participation loan policies,
(1) No Federal credit union shall obtain an interest in a participation loan if the sum of that interest and any (other) indebtedness owing to the Federal credit union by the borrower exceeds 10 per centum of the Federal credit union's unimpaired capital and surplus;
(2) A written master participation agreement shall be properly executed, acted upon by the Federal credit union's board of directors, or if the board has so delegated in its policy, the investment committee or senior management official(s) and retained in the Federal credit union's office. The master agreement shall include provisions for identifying, either through a document which is incorporated by reference into the master agreement or directly in the master agreement, the participation loan or loans prior to their sale; and
(3) A Federal credit union may sell to or purchase from any participant the servicing of any loan in which it owns a participation interest.
(c) An originating lender which is a Federal credit union shall:
(1) Originate loans only to its members;
(2) Retain an interest of at least 10 per centum of the face amount of each loan;
(3) Retain the original or copies of the loan documents; and
(4) Require the credit committee or loan officer to use the same underwriting standards for participation loans used for loans that are not being sold in a participation agreement unless there is a participation agreement in place prior to the disbursement of the loan. Where a participation agreement is in place prior to disbursement, either the credit union's loan policies or the participation agreement shall address any variance from non-participation loan underwriting standards.
(d) A participant Federal credit union that is not an originating lender shall:
(1) Participate only in loans it is empowered to grant, having a participation policy in place which sets forth the loan underwriting standards prior to entering into a participation agreement;
(2) Participate in participation loans only if made to its own members or members of another participating credit union;
(3) Retain the original or a copy of the written participation loan agreement and a schedule of the loans covered by the agreement; and
(4) Obtain the approval of the board of directors or investment committee of the disbursement of proceeds to the originating lender.
(a) For purposes of this section:
(1)
(2)
(b)
(i) Eligible obligations of its members, from any source, if either: (A) They are loans it is empowered to grant or (B) they are refinanced with the consent of the borrowers, within 60 days after they are purchased, so that they are loans it is empowered to grant;
(ii) Eligible obligations of a liquidating credit union's individual members, from the liquidating credit union;
(iii) Student loans, from any source, if the purchaser is granting student loans on an ongoing basis and if the purchase will facilitate the purchasing credit union's packaging of a pool of such loans to be sold or pledged on the secondary market; and
(iv) Real estate-secured loans, from any source, if the purchaser is granting real estate-secured loans pursuant to § 701.21 on an ongoing basis and if the purchase will facilitate the purchasing credit union's packaging of a pool of such loans to be sold or pledged on the secondary mortage market. A pool must include a substantial portion of the credit union's members' loans and must be sold promptly.
(2) A Federal credit union may make purchases in accordance with this paragraph (b), provided:
(i) The board of directors or investment committee approves the purchase;
(ii) A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the purchasers office; and
(iii) For purchases under paragraph (b)(1)(ii) of this section, any advance written approval required by § 741.8 of this chapter is obtained before consummation of such purchase.
(3) The aggregate of the unpaid balance of eligible obligations purchased under paragraph (b) of this section shall not exceed 5 percent of the unimpaired capital and surplus of the purchaser. The following can be exculded in calculating this 5 percent limitation:
(i) Student loans purchased in accordance with paragraph (b)(1)(iii) of this section;
(ii) Real estate loans purchased in accordance with paragraph (b)(1)(iv) of this section;
(iii) Eligible obligations purchased in accordance with paragraph (b)(1)(i) of this section that are refinanced by the purchaser so that it is a loan it is empowered to grant;
(iv) An indirect lending or indirect leasing arrangement that is classified as a loan and not the purchase of an eligible obligation because the Federal credit union makes the final underwriting decision and the sales or lease contract is assigned to the Federal credit union very soon after it is signed by the member and the dealer or leasing company.
(c)
(1) The board of directors or investment committee approves the sale; and
(2) A written agreement and a schedule of the eligible obligations covered by the agreement are retained in the seller's office.
(d)
(i) The board of directors or investment committee approves the pledge;
(ii) Copies of the original loan documents are retained; and
(iii) A written agreement covering the pledging arrangement is retained in the office of the credit union that pledges the eligible obligations.
(2) The pledge agreement shall identify the eligible obligations covered by the agreement.
(e)
(f)
(a) The board of directors of a Federal credit union may authorize an interest refund to members who paid interest to the credit union during any dividend period and who are members of record at the close of business on the last day of such dividend period. Interest refunds may be made for a dividend period only if dividends on share accounts have been declared and paid for that period.
(b) The amount of interest refund to each member shall be determined as a percentage of the interest paid by the member. Such percentage may vary according to the type of extension of credit and the interest rate charged.
(c) The board of directors may exclude from an interest refund:
(1) A particular type of extension of credit;
(2) Any extension of credit made at a particular interest rate; and
(3) Any extension of credit that is presently delinquent or has been delinquent within the period for which the refund is being made.
(a) A federal credit union may make charitable contributions and/or donate funds to recipients not organized for profit that are located in or conduct activities in a community in which the federal credit union has a place of business or to organizations that are tax exempt organizations under Section 501(c)(3) of the Internal Revenue Code and operate primarily to promote and develop credit unions.
(b) The board of directors must approve charitable contributions and/or donations, and the approval must be based on a determination by the board of directors that the contributions and/or donations are in the best interests of the federal credit union and are reasonable given the size and financial condition of the federal credit union. The board of directors, if it chooses, may establish a budget for charitable contributions and/or donations and authorize appropriate officials of the federal credit union to select recipients
A Federal credit union may act as a representative of and enter into a contractual agreement with one or more credit unions or other organizations for the purpose of sharing, utilizing, renting, leasing, purchasing, selling, and/or joint ownership of fixed assets or engaging in activities and/or services which relate to the daily operations of credit unions. Agreements must be in writing, and shall advise all parties subject to the agreement that the goods and services provided shall be subject to examination by the NCUA Board to the extent permitted by law.
(a)
(1)
An oral or written request for an extension of credit that is made in accordance with procedures established by a creditor for the type of credit requested;
(2)
(3)
(b)
(i) Any applicant or joint applicant;
(ii) Any person associated, in connection with a real estate-related loan application, with an applicant or joint applicant;
(iii) The present or prospective owners, lessees, tenants, or occupants of the dwelling for which a real estate-related loan is requested;
(iv) The present or prospective owners, lessees, tenants, or occupants of other dwellings in the vicinity of the dwelling for which a real estate-related loan is requested.
(2) With regard to a real estate-related loan, a Federal credit union may not consider a lending criterion or exercise a lending policy which has the effect of discriminating on the basis of race, color, national origin, religion, sex, handicap, or familial status (having children under the age of 18). Guidelines concerning possible exceptions to this provision appear in paragraph (e)(1) of this section.
(3) Consideration of any of the following factors in connection with a real estate-related loan is not necessary to a Federal credit union's business, generally has a discriminatory effect, and is therefore prohibited:
(i) The age or location of the dwelling;
(ii) Zip code of the applicant's current residence;
(iii) Previous home ownership;
(iv) The age or location of dwellings in the neighborhood of the dwelling;
(v) The income level of residents in the neighborhood of the dwelling.
(c)
(i) Any applicant or joint applicant;
(ii) Any person associated, in connection with a real estate-related loan application, with an applicant or joint applicant;
(iii) The present or prospective owners, lessees, tenants, or occupants of the dwelling for which a real estate-related loan is requested;
(iv) The present or prospective owners, lessees, tenants, or occupants of other dwellings in the vicinity of the dwelling for which a real estate-related loan is requested.
(2) With respect to a real-estate related loan, a Federal credit union may not rely upon an appraisal of a dwelling if it knows or should know that the appraisal is based upon consideration of a criterion which has the effect of discriminating on the basis of race, color, national origin, religion, sex, handicap, or familial status (having children under the age of 18). Guidelines concerning possible exceptions to this provision appear in paragraph (e)(1) of this section.
(3) A Federal credit union may not rely upon an appraisal that it knows or should know is based upon consideration of any of the following criteria, for such criteria generally have a discriminatory effect, and are not necessary to a Federal credit union's business:
(i) The age or location of the dwelling;
(ii) The age or location of dwellings in the neighborhood of the dwelling;
(iii) The income level of the residents in the neighborhood of the dwelling.
(4) Notwithstanding paragraph (c)(3) of this section, it is recognized that there may be factors concerning location of the dwelling which can be properly considered in an appraisal. If any such factor(s) is relied upon, it must be specifically documented in the appraisal, accompanied by a brief statement demonstrating the necessity of using such factor(s). Guidelines concerning the consideration of location factors appear in paragraph (e)(3) of this section.
(5) Each Federal credit union shall make available, to any requesting member/applicant, a copy of the appraisal used in connection with that member's real estate-related loan application. The appraisal shall be available for a period of 25 months after the applicant has received notice from the Federal credit union of the action taken by the Federal credit union on the real estate-related loan application.
(d)
(ii) Advertisements of real estate-related loans which are broadcast on the radio shall contain the following statement:
The (insert name) Federal Credit Union is an equal housing lender.
(2)
(3)
(e)
(2) Paragraph (b)(3) of this section prohibits consideration of certain factors because of their likely discriminatory effect and because they are not necessary to make sound real estate-related loans. For purposes of clarification, the prohibited use of location factors in this section is intended to prevent abandonment of areas in which a Federal credit union's members live or want to live. It is not intended to require loans in those areas that are geographically remote from the FCU's main or branch offices or that contravene the parameters of a Federal credit union's charter. Further, this prohibition does not preclude requiring a borrower to obtain flood insurance protection pursuant to the National Flood Insurance Act and part 760 of NCUA's Rules and Regulations, nor does it preclude involvement with Federal or state housing insurance programs which provide for lower interest rates for the purchase of homes in certain urban or rural areas. Also, the legitimate use of location factors in an appraisal does not constitute a violation of the provision of paragraph (b)(3) of this section, which prohibits consideration of location of the dwelling. Finally, the prohibited use of prior home ownership does not preclude a Federal credit union from considering an applicant's payment history on a loan which was made to obtain a home. Such action entails consideration of the payment record on a previous loan in determining creditworthiness; it does not entail consideration of prior home ownership.
(3)(i) Paragraph (c)(3) of this section prohibits consideration of the age or location of a dwelling in a real estate-related loan appraisal. These restrictions are intended to prohibit the use of unfounded or unsubstantiated assumptions regarding the effect upon loan risk of the age of a dwelling or the physical or economic characteristics of an area. Appraisals should be based on the present market value of the property offered as security (including consideration of specific improvements to be made by the borrower) and the likelihood that the property will retain an adequate value over the term of the loan.
(ii) The term “age of the dwelling” does not encompass structural soundness. In addition, the age of the dwelling may be used by an appraiser as a basis for conducting further inspections of certain structural aspects of the dwelling. Paragraph (c)(3) of this section does, however, prohibit an unsubstantiated determination that a house over X years in age is not structurally sound.
(iii) With respect to location factors, paragraph (c)(4) of this section recognizes that there may be location factors which may be considered in an appraisal, and requires that the use of any such factors be specifically documented in the appraisal. These factors will most often be those location factors which may negatively affect the short range future value (up to 3-5 years) of a property. Factors which in some cases may cause the market
(a)
(b)
(2) Before accepting any public unit or nonmember shares in excess of 20% of total shares, the board of directors must adopt a specific written plan concerning the intended use of these shares and forward a copy of the plan to the Regional Director. The plan must include:
(i) A statement of the credit union's needs, sources and intended uses of public unit and nonmember shares;
(ii) Provision for matching maturities of public unit and nonmember shares with corresponding assets, or justification for any mismatch; and
(iii) Provision for adequate income spread between public unit and nonmember shares and corresponding assets.
(3) A federal credit union seeking an exemption from the limits of paragraph (b)(1) of this section must submit to the Regional Director a written request including:
(i) The new maximum level of public unit and nonmember shares requested, either as a dollar amount or a percentage of total shares;
(ii) The current plan adopted by the credit union's board of directors concerning the use of new public unit and nonmember shares;
(iii) A copy of the credit union's latest financial statement; and
(iv) A copy of the credit union's loan and investment policies.
(4) Where the financial condition and management of the credit union are sound and the credit union's plan for the funds is reasonable, there will be a presumption in favor of granting the request. When granted, exemptions will normally be for a two-year period. The Regional Director will provide a written explanation for an exemption that is granted for a lesser time period.
(5) The Regional Director will provide a written determination on an exemption request within 30 calendar days after receipt of the request. The 30 day period will not begin to run until all necessary information has been submitted to the Regional Director. All denials may be appealed to the NCUA Board in a timely manner. Appeals should be submitted through the Regional Director.
(6) Upon expiration of an exemption, nonmember shares currently in the credit union in excess of the limits established pursuant to (b)(1) of this section will continue to be insured by the National Credit Union Insurance Fund within applicable limits. No new shares in excess of the limits established pursuant to (b)(1) of this section shall be accepted. Existing share certificates in excess of the limits established pursuant to (b)(1) of this section may remain in the credit union only until maturity.
(c) The limitations herein do not apply to accounts maintained in accordance with § 701.37 (Treasury Tax
(a)
(b)
(2) For purposes of this section, the term
(i) Payment (by reimbursement to an official or direct credit union payment to a third party) for reasonable and proper costs incurred by an official in carrying out the responsibilities of the position to which that person has been elected or appointed, if the payment is determined by the board of directors to be necessary or appropriate in order to carry out the official business of the credit union, and is in accordance with written policies and procedures, including documentation requirements, established by the board of directors. Such payments may include the payment of travel costs for officials and one immediate family member per official;
(ii) Provision of reasonable health, accident and related types of personal insurance protection, supplied for officials at the expense of the credit union:
(iii) Indemnification and related insurance consistent with paragraph (c) of this section.
(c)
(2) Indemnification shall be consistent either with the standards applicable to credit unions generally in the state in which the principal or home office of the credit union is located, or with the relevant provisions of the Model Business Corporation Act. A Federal credit union that elects to provide indemnification shall specify whether it will follow the relevant state law or the Model Business Corporation Act. Indemnification and the method of indemnification may be provided for by charter or bylaw amendment, contract or board resolution, consistent with the procedural requirements of the applicable state law or the Model Business Corporation Act, as specified. A charter or bylaw amendment must be approved by the National Credit Union Administration.
(3) A Federal credit union may purchase and maintain insurance on behalf of its officials and employees against any liability asserted against them and expenses incurred by them in their official capacities and arising out of the performance of their official duties to the extent such insurance is permitted by the applicable state law or the Model Business Corporation Act.
(a)
(2) The term
(i) In documenting its low-income membership, a credit union that serves a geographic area where a majority of residents fall at or below the annual income standard is presumed to be serving predominantly low-income members. In applying the standards, Regional Directors shall make allowances for geographical areas with higher costs of living. The following is the exclusive list of geographic areas with the differentials to be used:
(ii) The term
(3) The term
(b)
(1) Prior to offering secondary capital accounts, the credit union shall adopt, and forward to the appropriate NCUA Regional Director, a written plan for use of the funds in the secondary capital accounts and subsequent liquidity needs to meet repayment requirements upon maturity of the accounts.
(2) The secondary capital account must be established as a uninsured secondary capital account or other form of non-share account.
(3) The maturity of the secondary capital account must be for a minimum of five years.
(4) The secondary capital account must not be redeemable prior to maturity.
(5) The secondary capital account shall not be insured by the National Credit Union Share Insurance Fund or any governmental or private entity.
(6) The secondary capital account holder's claim against the credit union must be subordinate to all other claims including those of shareholders, creditors and the National Credit Union Share Insurance Fund.
(7) Funds deposited into the secondary capital account, including interest accrued and paid into the secondary capital account, must be available to cover operating losses realized by the credit union that exceed its net available reserves and undivided earnings (
(8) The secondary capital account may not be pledged or provided by the account-holder as security on a loan or other obligation with the credit union or any other party.
(9) In the event of merger or other voluntary dissolution of the credit union, other than merger into another low-income designated credit union, the secondary capital accounts will, to the extent they are not needed to cover losses at the time of merger or dissolution, be closed and paid out to the account-holder.
(10) A secondary capital account contract agreement must be executed between an authorized representative of the account holder and the credit union accurately establishing the terms and conditions of this section and containing no provisions inconsistent therewith.
(11) A disclosure and acknowledgment as set forth in the Appendix to this section must be provided to and executed by an authorized representative of the secondary capital account holder at the time of entering into the account agreement, and original copies of the account agreement and the disclosure and acknowledgment must be retained by the credit union for the term of the agreement.
(c)
(i) Four to less than five years remaining maturity—80 percent.
(ii) Three to less than four years remaining maturity—60 percent.
(iii) Two to less than three years remaining maturity—40 percent.
(iv) One to less than two years remaining maturity—20 percent.
(v) Less than one year remaining maturity—0 percent.
(2) The credit union will reflect the full amount of the secondary capital on deposit in a footnote to its financial statement.
Disclosures and acknowledgment in the following form must be provided to any investor in secondary capital accounts in a low-income designated credit union.
An original, signed copy must be retained by the credit union.
I,
•
• The funds committed to the secondary capital account are committed for a period of
• The secondary capital account is not a share account and the funds committed to the secondary capital account are not insured by the National Credit Union Share Insurance Fund or any other governmental or private entity.
The funds committed to the secondary capital account and any interest paid into the account may be used by
By initialing below,
• In the event of liquidation of
At 64 FR 72270, Dec. 27, 1999, § 701.34 was amended by revising paragraph (b)(7) and the appendix to § 701.34 was amended by revising the second paragraph of the next to the last bulleted portion and adding a third paragraph to that portion, effective Jan. 26, 2000. For the convenience of the user, the superseded text is set forth as follows:
(b) * * *
(7) Funds in the secondary capital account (including both principal and interest) must be available to cover operating losses realized by the credit union that exceed its net available reserves and undivided earnings (i.e., reserves and undivided earnings exclusive of allowance accounts for loan and investment losses), and to the extent funds are so used, the credit union shall under no circumstances restore or replenish the account. Losses shall be distributed pro-rata among all secondary capital accounts held by the credit union at the time the losses are realized.
The funds committed to the secondary capital account and any interest paid to the account may be used by
(a) Federal credit unions may offer share, share draft, and share certificate accounts in accordance with section 107(6) of the Act (12 U.S.C. 1757(6)) and the board of directors may declare dividends on such accounts as provided in section 117 of the Act (12 U.S.C. 1763).
(b) A Federal credit union shall accurately represent the terms and conditions of its share, share draft, and share certificate accounts in all advertising, disclosures, or agreements, whether written or oral
(c) A Federal credit union may, consistent with this section, parts 707 and 740 of this subchapter, other federal law, and its contractual obligations, determine the types of fees or charges and other matters affecting the opening, maintaining and closing of a share, share draft or share certificate account. State laws regulating such activities are not applicable to federal credit unions.
(d) For purposes of this section, “state law” means the constitution, statutes, regulations, and judicial decisions of any state, the District of Columbia, the several territories and possessions of the United States, and the Commonwealth of Puerto Rico.
(a) A Federal credit union's ownership in fixed assets shall be limited as described in this chapter.
(b)
(1) Premises includes any office, branch office, suboffice, service center, parking lot, other facility, or real estate where the credit union transacts or will transact business.
(2) Furniture, Fixtures, and Equipment includes all office furnishings, office machines, computer hardware and software, automated terminals, heating and cooling equipment.
(3) Fixed Assets means premises and furniture, fixtures and equipment as these terms are defined above.
(4) Investments in fixed assets means:
(i) Any investment in real property (improved or unimproved) which is being used or is intended to be used as premises;
(ii) Any leasehold improvement on premises;
(iii) The aggregate of all capital and operating lease payments pursuant to lease agreements for fixed assets;
(iv) Any investment in the bonds, stock, debentures, or other obligations of a partnership or corporation, including any entity described in part 712, holding any fixed assets used by the Federal credit union and any loans to such partnership or corporation; or
(v) Any investment in furniture, fixtures and equipment.
(5) Abandoned premises means former Federal credit union premises from the date of relocation to new quarters, and property originally acquired for future expansion for which such use is no longer contemplated.
(6) Immediate family member means a spouse or other family members living in the same household.
(7) Shares mean all savings (regular shares, share drafts, share certificates, other savings) and retained earnings means regular reserve, reserve for contingencies, supplemental reserves, reserve for losses and undivided earnings.
(8) Senior management employee means the credit union's chief executive officer (typically this individual holds the title of President or Treasurer/Manager), any assistant chief executive officers (e.g., Assistant President, Vice President or Assistant Treasurer/Manager) and the chief financial officer (Comptroller).
(c)
(2) A Federal credit union shall submit such statement and reports as the NCUA regional director may require in support of any investment in fixed assets in excess of the limit specified above.
(3) If the Administration determines that the proposal will not adversely affect the credit union, an aggregate dollar amount or percentage of assets will be approved for investment in fixed assets. Once such a limit has been approved, and unless otherwise specified by the regional director, a Federal credit union may make future acquisitions of fixed assets, provided the aggregate of all such future investments in fixed assets does not exceed an additional 1 percent of the shares and retained earnings of the credit union over the amount approved.
(4) Federal credit unions shall submit their requests to the NCUA regional office having jurisdiction over the geographical area in which the credit union's main office is located. The regional office shall inform the requesting credit union, in writing, of the date the request was received. If the credit union does not receive notification of the action taken on its request within 45 calendar days of the request was received by the regional office, the credit union may proceed with its proposed investment in fixed assets.
(d)
(2) A Federal credit union shall endeavor to dispose of “abandoned premises” at a price sufficient to reimburse the Federal credit union for its investment and costs of acquisition. Current documents must be maintained reflecting the Federal credit union's continuing and diligent efforts to dispose of “abandoned premises.” After “abandoned premises” have been on the Federal credit union's books for 4 years, the property must be publicly advertised for sale. Disposition must occur through public or private sale within 5 years of abandonment, unless otherwise approved in writing by the Administration.
(e)
(i) A director, member of the credit committee or supervisory committee, or senior management employee of the Federal credit union, or immediate family member of any such individual.
(ii) A corporation in which any director, member of the credit committee or supervisory committee, official, or senior management employee, or immediate family members of any such individual, is an officer or director, or has a stock interest of 10 percent or more.
(iii) A partnership in which any director, member of the credit committee or supervisory committee, or senior management employee, or immediate family members of any such individual, is a general partner, or a limited partner with an interest of 10 percent or more.
(2) The prohibition contained in paragraph (e)(1) of this section, also applies to any employee not otherwise covered if the employee is directly involved in investments in fixed assets unless the board of directors determines that the employee's involvement does not present a conflict of interest.
(3) All transactions with business associates or family members not specifically prohibited by this paragraph (e) must be conducted at arm's length and in the interest of the credit union.
(a)
(2)
(3)
(4)
(b) Subject to regulation of the United States Treasury Department, a Federal credit union may serve as a Treasury tax and loan depositary, a depositary of Federal taxes, a depositary of public money, and a financial agent of the United States Government. In serving in these capacities, a Federal credit union may maintain the accounts defined in subsection (a), pledge collateral, and perform the services described under United States Treasury Department regulations for institutions acting in these capacities.
(c) Funds held in a TT&L Remittance Account, a TT&L Note Account, a Treasury General Account, and a U.S. Treasury Time Deposit—Open Account shall be considered deposits of public funds. Funds held in a TT&L Remittance Account and a TT&L Note Account shall be added together and insured up to a maximum of $100,000 in the aggregate. Funds held in a Treasury General Account and a U.S. Treasury Time Deposit—Open Account shall be added together and insured up to a maximum of $100,000 in the aggregate.
(d) Funds held in a TT&L Remittance Account, a TT&L Note Account, a Treasury General Account, and U.S. Treasury Time Deposit—Open Account are not subject to the 60-day notice requirement of Article III, section 5(a) of the Federal Credit Union Bylaws.
(a) Federal credit unions may borrow from a natural person, provided:
(1) The borrowing is evidenced by a signed promissory note which sets forth the terms and conditions regarding maturity, prepayment, interest rate, method of computation, and method of payment;
(2) The promissory note and any advertisement for such funds contains conspicuous langauge indicating that:
(i) The note represents money borrowed by the credit union;
(ii) The note does not represent shares and, therefore, is
(a)
(1)
(2)
(3)
(4)
(5)
(b)
(c)
(1)
(2)
(3)
(d)
(2)
(3)
12 U.S.C. 1762 and 1766.
Federal credit unions shall establish and maintain such reserves as may be required by the Act, or by regulation, or in special cases by the Board. A Federal credit union which has a Regular Reserve in excess of the greater applicable percent established by section 116 of the Federal Credit Union Act may transfer the excess to a supplemental reserve or to the Undivided Earnings Account:
(a) Each Federal credit union shall establish and maintain a Regular Reserve, as provided by section 116 of the Federal Credit Union Act. The totals of the Regular Reserve, the Allowance for Loan Losses Account, and the Allowance for Investment Losses shall be combined for determining the applicable percentage of gross income to be transferred to the Regular Reserve.
(b) Charges to the Regular Reserve for loan losses shall be made in accordance with full and fair disclosure and as set forth in the Accounting Manual for Federal Credit Unions.
(c) Charges to the Regular Reserve for losses other than loan losses shall also be subject to the following conditions:
(1) Charges for losses other than loan losses may be made pursuant to authorization of the board of directors if the credit union's ratio of capital to assets is greater than 6 percent and the charge reduces the ratio by no more than
(2) Charges for losses other than loan losses that do not meet the conditions of paragraph (c)(1) of this section must receive the written approval of the regional director for Federal credit unions.
(d) The Board may decrease the reserve requirements as set forth in section 116 of the Act when, in its opinion, such decrease is necessary or desirable.
(a) “Full and fair disclosure” is the level of disclosure which a prudent person would provide to a member of a Federal credit union, the National Credit Union Administration, or, at the discretion of the board of directors, a creditor in order to fairly inform any or all of them of the financial condition and the results of operations of the credit union.
(b)(1) Federal credit union financial statements shall provide for full and fair disclosure of all assets, liabilities, and members’ equity, including such valuation allowance accounts as may be necessary to present fairly the financial position; and all income and expenses necessary to present fairly the results of operations for the period concerned.
(2) Full and fair disclosure will further be accomplished by: (i) Selecting one of the accounting bases provided for in the Accounting Manual for Federal Credit Unions which shall be either the modified cash basis or the accrual basis of accounting, and by (ii) use of appropriate financial statements described in the Accounting Manual for Federal Credit Unions, or financial statements of equivalent format.
(c)(1) The maintenance of a valuation allowance for loan losses shall not eliminate the requirement for transferring a percentage of gross income before the payment of each dividend to
(2) As a minimum, adjustments to the valuation allowance for loan losses shall be made prior to the distribution or posting of any dividend to the accounts of members so that the valuation allowance established fairly presents the value of loans and probable losses for all categories of loans. The valuation allowance must encompass:
(i) Specifically identified doubtful or troubled loans;
(ii) Pools of classified loans;
(iii) Pools of loans (e.g., consumer, credit card, etc.); and
(iv) A general portion for all other loans.
(3)(i) Adjustments to the valuation allowance for loan losses will be recorded in the expense account “Provision for Loan Losses.”
(ii) Whenever additions to the valuation allowance for loan losses cause a deficit in the regular reserve account, such deficits shall be transferred first to undivided earnings and, if this shall cause a deficit in undivided earnings, then to other segregations of undivided earnings that may exist, exclusive of the Special Reserve for Losses, should such be required by the Board in accordance with § 702.1 of this part. These amounts are eligible for return to undivided earnings as provided for in the Accounting Manual for Federal Credit Unions.
(iii) Dividends shall not exceed the amount available for that purpose after provisions have been made for the statutory transfer to the regular reserve account and the removal of any deficit in the regular reserve account.
(d) The Statement of Financial Condition, when presented to members, creditors, or to the National Credit Union Administration, shall contain a dual declaration by the treasurer and by the president, or in the absence of the president, by any other officer designated by the board of directors of the reporting credit union to make such declaration, that the report and related financial statements are true and correct to the best of their knowledge and belief and present fairly the financial position and the results of operations for the period covered.
(e) Upon written application by the board of directors of a Federal credit union, the Board may waive, in whole or in part, the requirement for the maintenance of the valuation allowance for loan losses in amounts which are in excess of the statutory requirements of section 116 of the Federal Credit Union Act but are required under paragraph (c)(3)(ii) of this section. Such application shall set forth the justification for the requested waiver and shall be addressed to the appropriate Regional Director.
12 U.S.C. 1757(7), 1757(8), 1757(15).
62 FR 33001, June 18, 1997, unless otherwise noted.
This part 703 interprets several of the provisions of Sections 107(7), 107(8), and 107(15) (B) and (C) of the Federal Credit Union Act (“Act”), 12 U.S.C. 1757(7), 1757(8), 1757(15) (B) and (C), which list those securities, deposits, and other obligations in which a federal credit union (“you”) may invest.
This part 703 does not apply to:
(a) Investment in loans to members and related activities, which is governed by §§ 701.21, 701.22, 701.23, and part 723 of this chapter;
(b) The purchase of real estate-secured loans pursuant to Section 107(15)(A) of the Act, which is governed by § 701.23 of this chapter;
(c) Investment in credit union service organizations, which is governed by part 712 of this chapter;
(d) Investment in fixed assets, which is governed by § 701.36 of this chapter;
(e) Investment by corporate credit unions, which is governed by part 704 of this chapter; or
(f) Investment activity by state-chartered credit unions, except as provided in § 741.3(a)(3) of this chapter.
Your (a federal credit union's) board of directors must establish a written investment policy that is consistent with the Act, this part, and other applicable laws and regulations. The investment policy may be part of a broader, asset-liability management policy. Your board must review the policy at least annually. The policy must address the following items:
(a) The purposes and objectives of your investment activities.
(b) The characteristics of the investments you may make. The characteristics of an investment are such things as its issuer, maturity, index, cap, floor, coupon rate, coupon formula, call provision, average life, and interest rate risk.
(c) How you will manage your interest rate risk, including the amount of risk you can take with your investments in relation to your net capital and earnings.
(d) How you will manage your liquidity risk.
(e) How you will manage your credit risk. The policy must list specific institutions, issuers, and counterparties you may use, or criteria for their selection, and limits on the amounts you may invest with each. Counterparty means the party on the other side of a transaction.
(f) How you will manage your concentration risk, which can result from single or related issuers, lack of geographic distribution, holdings of obligations with similar characteristics, such as maturities and indexes, holdings of bonds having the same trustee, and holdings of securitized loans having the same originator, packager, or guarantor.
(g) Who of your officials or employees has investment authority and the extent of that authority. The individuals given investment authority must be professionally qualified by education and/or experience to exercise that authority in a prudent manner and to fully comprehend and assess the risk characteristics of investments and investment transactions under that authority. Only your officials and employees may be voting members of any investment-related committee.
(h) If you use third-party entities to purchase or sell investments (“broker-dealers”), the specific broker-dealers you may use. You must maintain the documentation the board used to approve a broker-dealer as long as the broker-dealer is approved and until the documentation has been audited in accordance with § 701.12 of this chapter and examined by NCUA.
(i) If you use a third-party entity to safekeep your investments, the specific entities you may use.
(j) How you will handle an investment that either is outside board policy after purchase or fails a requirement of this part.
(k) If you engage in trading activities, how you will conduct those activities. The policy should address the following:
(1) The persons who have purchase and sale authority;
(2) Trading account size limitations;
(3) Allocation of cash flow to trading accounts;
(4) Stop loss or sale provisions;
(5) Dollar size limitations of specific types, quantity and maturity to be purchased;
(6) Limits on the length of time an investment may be inventoried in the trading account; and
(7) Internal controls, including appropriate segregation of duties.
(a) You (a federal credit union) must classify a security as hold-to-maturity, available-for-sale, or trading, in accordance with generally accepted accounting principles and consistent with your documented intent and ability regarding the security.
(b) Except as provided in paragraph (c) of this section, you must retain discretionary control over the purchase and sale of investments. NCUA does not consider you to have delegated discretionary control when you are required to authorize a recommended purchase or sale transaction prior to its execution and you, in practice, review such recommendations and authorize such transactions.
(c)(1) You may delegate discretionary control over the purchase and sale of investments, within established parameters, to a person other than your official or employee, provided that the person is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940 (15 U.S.C. 80b).
(2) In determining whether to transact business with an investment adviser, you must analyze his or her background and information available from state or federal securities regulators, including any enforcement actions against the adviser or associated personnel.
(3) You may not compensate an investment adviser with discretionary control over the purchase and sale of investments on a per transaction basis or based on capital gains, capital appreciation, net income, performance relative to an index, or any other incentive basis.
(4) When you have delegated discretionary control over the purchase and sale of investments to a person other than your official or employee, you do not direct the holdings under that person's control. Therefore, you must classify those holdings as either available-for-sale or trading.
(5) You must obtain a report from your investment adviser, at least monthly, that details your investments under his or her control and how they are performing.
(6) Your aggregate delegation of discretionary control over the purchase and sale of investments under this paragraph (c) is limited to 100 percent of net capital at the time of delegation.
(d) Except for investments that are issued or fully guaranteed as to principal and interest by the U.S. government or its agencies, enterprises, or corporations or fully insured (including accumulated interest) by the National Credit Union Administration or the Federal Deposit Insurance Corporation, you must conduct and document a credit analysis of the issuing entity and/or investment before you purchase the investment. You must update the analysis at least annually as long as you hold the investment.
(e) You must notify your board of directors as soon as possible, but no later than the next regularly scheduled board meeting, of any investment that either is outside board policy after purchase or has failed a requirement of this part. You must document the board's action regarding the investment in the minutes of the board meeting, including a detailed explanation of any decision not to sell an investment that has failed a requirement of this part. Within 5 days after the board meeting, you must notify the appropriate regional director in writing of an investment that has failed a requirement of this part.
(f) You must maintain documentation regarding an investment transaction as long as you hold the investment and until the documentation has been both audited and examined. The
(a) Except as provided in paragraph (c) of this section, you (a federal credit union) may use a third-party entity to purchase and sell investments (a “broker-dealer”) as long as the broker-dealer either is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) or is a depository institution whose broker-dealer activities are regulated by a federal regulatory agency.
(b) In determining whether to buy or sell investments through a broker-dealer, you must analyze and annually update the following factors:
(1) The background of any sales representative with whom you are doing business.
(2) Information available from State or Federal securities regulators and securities industry self-regulatory organizations, such as the National Association of Securities Dealers and the North American Securities Administrators Association, about any enforcement actions against the broker-dealer, its affiliates, or associated personnel.
(3) If the broker-dealer is acting as your counterparty, the ability of the broker-dealer and its subsidiaries or affiliates to fulfill commitments, as evidenced by capital strength, liquidity, and operating results. You should consider current financial data, annual reports, reports of nationally recognized statistical rating agencies, relevant disclosure documents, and other sources of financial information.
(c) The requirements of paragraph (a) of this section do not apply when you purchase a certificate of deposit or share certificate directly from a bank, credit union, or other depository institution.
(a) Your (a federal credit union's) purchased investments and repurchase collateral must be in your possession, recorded as owned by you through the Federal Reserve Book-Entry System, or held by a board-approved safekeeper under a written custodial agreement. A custodial agreement is a contract in which a third party agrees to exercise ordinary care in protecting the securities held in safekeeping for its customers.
(b) You must obtain an individual confirmation statement for each investment purchased or sold.
(c) Any safekeeper you use must be regulated and supervised by either the Securities and Exchange Commission or a federal or state depository institution regulatory agency.
(d) You must obtain and reconcile monthly a statement of purchased investments and repurchase collateral held in safekeeping.
(e) All purchases and sales of investments must be delivery versus payment (
(a) At least quarterly you (a federal credit union) must prepare a written report listing all of your shares and deposits in banks, credit unions, and other depository institutions, that have one or more of the following features:
(1) Embedded options;
(2) Remaining maturities greater than 3 years; or
(3) Coupon formulas that are related to more than one index or are inversely related to, or multiples of, an index.
(b) The requirement described in paragraph (a) of this section does not
(c) Where you do not have an investment-related committee, each member of your board of directors must receive a copy of the report described in paragraph (a) of this section. Where you have an investment-related committee, each member of the committee must receive a copy of the report, and each member of the board must receive a summary of the information in the report.
(a) Prior to purchasing or selling a security, except for new issues purchased at par or at original issue discount, you (a federal credit union) must obtain, either:
(1) Price quotations on the security from at least two broker-dealers; or
(2) A price quotation on the security from an industry-recognized information provider.
(b) At least monthly, you must determine the fair value of each security you hold. You may determine fair value by obtaining a price quotation on the security from an industry-recognized information provider, a broker-dealer, or a safekeeper.
(c) At least annually, your supervisory committee (itself or through its external auditor) must independently assess the reliability of monthly price quotations you receive from a broker-dealer or safekeeper. Your supervisory committee (or external auditor) must follow Generally Accepted Auditing Standards, which require either recomputation or reference to market quotations.
(d) Where you are unable to obtain a price quotation required by this section for the precise security in question, you may obtain a quotation for a security with substantially similar characteristics.
(a) At least monthly, you (a federal credit union) must prepare a written report setting forth, for each security you hold, the fair value and dollar change since the prior month-end, with summary information for the entire portfolio.
(b) At least quarterly, you must prepare a written report setting forth the sum of the fair values of all fixed and variable rate securities you hold that have one or more of the following features:
(1) Embedded options;
(2) Remaining maturities greater than 3 years; or
(3) Coupon formulas that are related to more than one index or are inversely related to, or multiples of, an index.
(c) Where the amount calculated in paragraph (b) of this section is greater than your net capital, the report described in that paragraph must provide a reasonable and supportable estimate of the potential impact, in percentage and dollar terms, of an immediate and sustained parallel shift in market interest rates of plus and minus 300 basis points on:
(1) The fair value of each security in your portfolio;
(2) The fair value of your portfolio as a whole; and
(3) Your net capital.
(d) Where you do not have an investment-related committee, each member of your board of directors must receive a copy of the reports described in paragraphs (a) through (c) of this section. Where you have an investment-related committee, each member of the committee must receive copies of the reports, and each member of the board must receive a summary of the information in the reports.
(a) You (a Federal credit union) may contract for the purchase or sale of a security as long as the delivery of the security is by regular-way settlement. Regular-way settlement means delivery of a security from a seller to a buyer within the time frame that the securities industry has established for that type of security.
(b) You may invest in a variable rate investment, as long as the index is tied to domestic interest rates and not, for example, to foreign currencies, foreign interest rates, or domestic or foreign
(c) You may purchase shares or deposits in a corporate credit union, except where the NCUA Board has notified you that the corporate credit union is not operating in compliance with part 704 of this chapter. Your aggregate purchase of member paid-in capital and membership capital in one corporate credit union is limited to one percent of your assets. Member paid-in capital and membership capital are defined in part 704 of this chapter.
(d) You may invest in a registered investment company or collective investment fund, as long as the prospectus of the company or fund restricts the investment portfolio to investments and investment transactions that are permissible for federal credit unions. For the purposes of this part, the following definitions apply:
(1) A
(2) A
(e) You may invest in fixed or variable rate CMOs/REMICs.
(f) You may purchase and hold a municipal security only if a nationally recognized statistical rating organization (NRSRO) has rated it in one of the four highest rating categories. A municipal security is a security as defined in Section 107(7)(K) of the Act. An NRSRO is a rating organization that the Securities and Exchange Commission has recognized as an NRSRO.
(g) You may sell federal funds to Section 107(8) institutions and credit unions, as long as the interest or other consideration received from the financial institution is at the market rate for federal funds transactions.
(h) You may invest in the following instruments issued by a Section 107(8) institution or branch:
(1) Yankee dollar deposits;
(2) Eurodollar deposits;
(3) Bankers acceptances;
(4) Deposit notes; and
(5) Bank notes with original weighted average maturities of less than five years.
(i) A repurchase transaction is a transaction in which you agree to purchase a security from a counterparty and to resell the same or an identical security to that counterparty at a specified future date and at a specified price. You may enter into a repurchase transaction as long as:
(1) The repurchase securities are legal investments for federal credit unions;
(2) You receive a daily assessment of the market value of the repurchase securities, including accrued interest, and maintain adequate margin that reflects a risk assessment of the repurchase securities and the term of the transaction; and
(3) You have entered into signed contracts with all approved counterparties.
(j) A reverse repurchase transaction is a transaction in which you agree to sell a security to a counterparty and to repurchase the same or an identical security from that counterparty at a specified future date and at a specified price. You may enter into reverse repurchase and collateralized borrowing transactions as long as:
(1) Any securities you receive are permissible investments for federal credit unions, you receive a daily assessment of their market value, including accrued interest, and you maintain adequate margin that reflects a risk assessment of the securities and the term of the transaction;
(2) Any cash you receive is subject to the borrowing limit specified in Section 107(9) of the Act, and any investments you purchase with that cash are permissible for federal credit unions and mature no later than the maturity of the transaction; and
(3) You have entered into signed contracts with all approved counterparties.
(k) You may enter into a securities lending transaction as long as:
(1) You receive written confirmation of the loan;
(2) Any collateral you receive is a legal investment for federal credit unions, you obtain a perfected first priority security interest in the collateral, you either take physical possession or control of the collateral or are recorded as owner of the collateral through the Federal Reserve Book-Entry Securities Transfer System; and you receive a daily assessment of the market value of the collateral, including accrued interest, and maintain adequate margin that reflects a risk assessment of the collateral and the term of the loan;
(3) Any cash you receive is subject to the borrowing limit specified in Section 107(9) of the Act, and any investments you purchase with that cash are permissible for federal credit unions and mature no later than the maturity of the transaction; and
(4) You have executed a written loan and security agreement with the borrower.
(l)(1) You may trade securities, including engaging in when-issued trading and pair-off transactions, as long as you can show that you have sufficient resources, knowledge, systems, and procedures to handle the risks.
(2) You must record any security you purchase or sell for trading purposes at fair value on the trade date. The trade date is the date you commit, orally or in writing, to purchase or sell a security.
(3) At least monthly, you must give your board of directors or investment-related committee a written report listing all purchase and sale transactions of trading securities and the resulting gain or loss on an individual basis.
(a) You (a federal credit union) may not purchase or sell financial derivatives, such as futures, options, interest rate swaps, or forward rate agreements, except as permitted under § 701.21(i) of this chapter.
(b) You may not engage in adjusted trading or short sales.
(c) You may not purchase stripped mortgage backed securities, residual interests in CMOs/REMICs, mortgage servicing rights, commercial mortgage related securities, or small business related securities.
(d) You may not purchase a zero coupon investment with a maturity date that is more than 10 years from the settlement date.
(a) Your (a federal credit unions) officials and senior management employees, and their immediate family members, may not receive anything of value in connection with your investment transactions. This prohibition also applies to any other employee, such as an investment officer, if the employee is directly involved in investments, unless your board of directors determines that the employee's involvement does not present a conflict of interest. This prohibition does not include compensation for employees.
(b) Your officials and employees must conduct all transactions with business associates or family members that are not specifically prohibited by paragraph (a) of this section at arm's length and in your best interest.
(c) Senior management employee means your chief executive officer (typically this individual holds the title of President or Treasurer/Manager), any assistant chief executive officers (e.g., Assistant President, Vice President, or Assistant Treasurer/Manager) and the chief financial officer (Comptroller).
(d) Immediate family member means a spouse or other family member living in the same household.
(a) Subject to safety and soundness considerations, you may hold a CMO/REMIC residual, SMBS, or zero coupon security with a maturity greater than 10 years, if you purchased the investment:
(1) Before December 2, 1991; or
(2) On or after December 2, 1991, but before January 1, 1998, if for the purpose of reducing interest rate risk and you meet the following:
(i) You have a monitoring and reporting system in place that provides the documentation necessary to evaluate the expected and actual performance of the investment under different interest rate scenarios;
(ii) You use the monitoring and reporting system to conduct and document an analysis that shows, before purchase, that the proposed investment will reduce your interest rate risk;
(iii) After purchase, you evaluate the investment at least quarterly to determine whether or not it actually has reduced your interest rate risk; and
(iv) You classify the investment as either trading or available-for-sale.
(b) All grandfathered investments are subject to the valuation and monitoring requirements of §§ 703.70, 703.80, and 703.90.
(a) Under the investment pilot program, NCUA will permit a limited number of federal credit unions to engage in investment activities prohibited by this part but permitted by statute.
(b) Except as provided in paragraph (c) of this section, before you (a federal credit union) may engage in additional activities, you must obtain written approval from
NCUA. To begin the approval process, you must submit a request to your regional director that addresses the following items:
(1) Board policies approving the activities and establishing limits on them.
(2) A complete description of the activities, with specific examples of how you will conduct them and how they will benefit you.
(3) A demonstration of how the activities will affect your financial performance, risk profile, and asset-liability management strategies.
(4) Examples of reports you will generate to monitor the activities.
(5) A projection of the associated costs of the activities, including personnel, computer, audit, etc.
(6) A description of the internal systems to measure, monitor, and report the activities, and the qualifications of the staff and/or official(s) responsible for implementing and overseeing the activities.
(7) The internal control procedures you will implement, including audit requirements.
(c) You need not obtain individual written approval to engage in investment activities prohibited by this part but permitted by statute where the activities are part of a third-party investment program that NCUA has approved under this paragraph (c). A third party seeking approval of such a program must submit a request to the Director of the Office of Examination and Insurance that addresses the following items:
(1) A complete description of the activities, with specific examples of how a credit union will conduct them and how they will benefit a credit union.
(2) A description of any risks to a credit union from participating in the program.
The following definitions apply to this part:
(2) Is of a type commonly dealt in on securities exchanges or markets or, when represented by an instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for investment; and
(3) Either is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations.
12 U.S.C. 1762, 1766(a), 1781, and 1789.
62 FR 12938, Mar. 19, 1997, unless otherwise noted.
(a) This part establishes special rules for all federally insured corporate credit unions. Non federally insured corporate credit unions must agree, by written contract, to both adhere to the requirements of this part and submit to examinations, as determined by NCUA, as a condition of receiving shares or deposits from federally insured credit unions. This part grants certain additional authorities to federal corporate credit unions. Except to the extent that they are inconsistent with this part, other provisions of
(b) The Board has the authority to issue orders which vary from this part. This authority is provided under Section 120(a) of the Federal Credit Union Act, 12 U.S.C. 1766(a). Requests by state-chartered corporate credit unions for waivers to this part and for expansions of authority under Appendix B of this part must be approved by the state regulator before being submitted to NCUA.
(1) Is chartered under Federal or state law as a credit union;
(2) Receives shares from and provides loan services to credit unions;
(3) Is operated primarily for the purpose of serving other credit unions;
(4) Is designated by NCUA as a corporate credit union;
(5) Limits natural person members to the minimum required by state or federal law to charter and operate the credit union; and
(6) Does not condition the eligibility of any credit union to become a member on that credit union's membership in any other organization.
(a)
(b)
(c)
(d)
(i) An expectation that the corporate credit union has or anticipates losses resulting in capital inadequacy;
(ii) Significant exposure exists, unsupported by adequate capital or risk management processes, due to credit, liquidity, market, fiduciary, operational, and similar types of risks;
(iii) A merger has been approved; or
(iv) An emergency exists because of a natural disaster.
(2) When NCUA determines that a different minimum capital ratio or reserve transfer level is necessary or appropriate for a particular corporate credit union, NCUA will notify the corporate credit union in writing of the proposed ratio or level and, if applicable, the date by which the ratio should be reached. NCUA also will provide an explanation of why the proposed ratio or level is considered necessary or appropriate for the corporate credit union.
(3)(i) The corporate credit union may respond to any or all of the items in the notice. The response must be in writing and delivered to NCUA within 30 calendar days after the date on which the corporate credit union received the notice. NCUA may shorten the time period when, in its opinion, the condition of the corporate credit union so requires, provided that the corporate credit union is informed promptly of the new time period, or with the consent of the corporate credit union. In its discretion, NCUA may extend the time period for good cause.
(ii) Failure to respond within 30 calendar days or such other time period as may be specified by NCUA shall constitute a waiver of any objections to any item in the notice. Failure to address any item in a response shall constitute a waiver of any objection to that item.
(iii) After the close of the corporate credit union's response period, NCUA will decide, based on a review of the corporate credit union's response and other information concerning the corporate credit union, whether a different minimum capital ratio or reserve transfer level should be established for the corporate credit union and, if so, the ratio or level and the date the requirement will become effective. The corporate credit union will be notified of the decision in writing. The notice will include an explanation of the decision, except for a decision not to establish a different minimum capital ratio or reserve transfer level for the corporate credit union.
(e)
(f)
(i) The capital ratio falls below the minimum requirement and is not restored to the minimum requirement by the next month end; or
(ii) Regardless of whether the capital ratio is restored by the next month end, the capital ratio falls below the minimum requirement for three months in any 12-month period.
(2) The capital restoration plan must, at a minimum, include the following:
(i) Reasons why the capital ratio fell below the minimum requirement;
(ii) Descriptions of steps to be taken to restore the capital ratio to the minimum requirement within specific time frames;
(iii) Actions to be taken to maintain the capital ratio at the minimum required level and increase it thereafter;
(iv) Balance sheet and income projections, including assumptions, for the current calendar year and one additional calendar year; and
(v) Certification from the board of directors that it will follow the proposed plan if approved by NCUA.
(3) The capital restoration plan must be submitted to NCUA within 30 calendar days of the occurrence. NCUA will respond to the corporate credit union regarding the adequacy of the plan within 45 calendar days of its receipt.
(g)
(2) A capital directive may order a corporate credit union to:
(i) Achieve adequate capitalization within a specified time frame by taking any action deemed necessary, including but not limited to the following:
(A) Increase the amount of capital to specific levels;
(B) Reduce dividends;
(C) Limit receipt of deposits to those made to existing accounts;
(D) Cease or limit issuance of new accounts or any or all classes of accounts;
(E) Cease or limit lending or making a particular type or category of loans;
(F) Cease or limit the purchase of specified investments;
(G) Limit operational expenditures to specified levels;
(H) Increase and maintain liquid assets at specified levels; and
(I) Restrict or suspend expanded authorities issued under Appendix B of this part.
(ii) Adhere to a previously submitted plan to achieve adequate capitalization.
(iii) Submit and adhere to a capital plan acceptable to NCUA describing the means and a time schedule by which the corporate credit union shall achieve adequate capitalization.
(iv) Meet with NCUA.
(v) Take a combination of these actions.
(3) Prior to issuing a capital directive, NCUA will notify a corporate credit union in writing of its intention to issue a capital directive.
(i) The notice will state:
(A) The reasons for the issuance of the directive; and
(B) The proposed content of the directive.
(ii) A corporate credit union must respond in writing within 30 calendar days of receipt of the notice stating that it either concurs or disagrees with the notice. If it disagrees with the notice, it must state the reasons why the directive should not be issued and/or propose alternative contents for the directive. The response should include all matters that the corporate credit union wishes to be considered. For good cause, including the following
(A) When the condition of the corporate requires, and the corporate credit union is notified of the shortened response period in the notice;
(B) With the consent of the corporate credit union; or
(C) When the corporate credit union already has advised NCUA that it cannot or will not achieve adequate capitalization.
(iii) Failure to respond within 30 calendar days, or another time period specified in the notice, shall constitute a waiver of any objections to the proposed directive.
(4) After the closing date of the corporate credit union's response period, or the receipt of the response, if earlier, NCUA shall consider the response and may seek additional information or clarification. Based on the information provided during the response period, NCUA will determine whether or not to issue a capital directive and, if issued, the form it should take.
(5) Upon issuance, a capital directive and a statement of the reasons for its issuance will be delivered to the corporate credit union. A directive is effective immediately upon receipt by the corporate credit union, or upon such later date as may be specified therein, and shall remain effective and enforceable until it is stayed, modified, or terminated by NCUA.
(6) A capital directive may be issued in addition to, or in lieu of, any other action authorized by law in response to a corporate credit union's failure to achieve or maintain the applicable minimum capital ratios.
(7) Upon a change in circumstances, a corporate credit union may request reconsideration of the terms of the directive. Requests that are not based on a significant change in circumstances or are repetitive or frivolous will not be considered. Pending a decision on reconsideration, the directive shall continue in full force and effect.
(a)
(b)
(c)
(1) Senior managers have an in-depth, working knowledge of their direct areas of responsibility and are capable of identifying, hiring, and retaining qualified staff;
(2) Qualified personnel are employed or under contract for all line support and audit areas, and designated back-up personnel or resources with adequate cross-training are in place;
(3) GAAP is followed, except where law or regulation has provided for a departure from GAAP;
(4) Accurate balance sheets, income statements, and internal risk assessments (
(5) Systems are audited periodically in accordance with industry-established standards;
(6) Financial performance is evaluated to ensure that the objectives of the corporate credit union and the responsibilities of management are met; and
(7) Planning addresses the retention of external consultants, as appropriate, to review the adequacy of technical, human, and financial resources dedicated to support major risk areas.
(a)
(1) Appropriate tests and criteria, if any, for evaluating standard investments and investment transactions prior to purchase; and
(2) Risk analysis requirements for any new investment type or transaction, not previously owned or marketed by the corporate credit union, considered for purchase by the corporate credit union and/or for sale to members.
(b)
(c)
(1) Securities, deposits, and obligations set forth in Sections 107(7), 107(8), and 107(15) of the Federal Credit Union Act, 12 U.S.C. 1757(7), 1757(8), and 1757(15), except as provided in this section;
(2) Deposits in, the sale of federal funds to, and debt obligations of corporate credit unions, Section 107(8) institutions, and state banks, trust companies, and mutual savings banks not domiciled in the state in which the corporate credit union does business;
(3) Corporate CUSOs, as defined in and subject to the limitations of § 704.11;
(4) Marketable debt obligations of corporations chartered in the United States. This authority does not apply to debt obligations that are convertible into the stock of the corporation;
(5) Asset-backed securities; and
(6) CMOs/REMICs.
(d)
(1) The corporate credit union, or its agent, nominee, or designee, receives written confirmation of the transaction and either takes physical possession or control of the repurchase securities or is recorded as owner of the repurchase securities through the Federal Reserve Book-Entry Securities Transfer System;
(2) The repurchase securities are legal investments for that corporate credit union;
(3) In the event of default, the corporate credit union sells the repurchase securities in a timely manner, subject to a bankruptcy stay, to satisfy the commitment of any net principal and interest owed to it by the counterparty;
(4) The corporate credit union receives daily assessment of the market value of the repurchase securities, including a market quote or dealer bid indication and any accrued interest, and maintains adequate margin that reflects a risk assessment of the repurchase securities and the term of the transaction;
(5) The corporate credit union has entered into signed contracts with all approved counterparties. Such contracts must address any supplemental terms and conditions necessary to meet the specific requirements of this part. Third party arrangements must be supported by tri-party contracts in which the repurchase securities are priced and reported daily and the tri-party agent ensures compliance; and
(6) The corporate credit union has sufficient market relationships established in advance to timely execute the disposition of the repurchase securities.
(e)
(1) The corporate credit union, or its agent, nominee, or designee, receives written confirmation of the loan, obtains a perfected first priority security interest in the collateral, and either takes physical possession or control of the collateral or is recorded as owner of the collateral through the Federal Reserve Book-Entry Securities Transfer System;
(2) The collateral is a legal investment for that corporate credit union;
(3) The corporate credit union, directly or through its agent, receives daily assessment of the market value of collateral, including a market quote or dealer bid indication and any accrued interest, and maintains adequate margin that reflects a risk assessment of the collateral and terms of the loan; and
(4) The corporate credit union, directly or through its agent, has executed a written loan and security agreement with the borrower, approved any form of agreement attached thereto, and obtained the right to approve any material modification to such agreement.
(f)
(g)
(1) Delivery and acceptance are mandatory;
(2) The transaction is clearly disclosed in the appropriate risk reporting required under § 704.8(b);
(3) If the corporate credit union is the purchaser, it has adequate cash flow projections evidencing its ability to purchase the instrument;
(4) If the corporate credit union is the seller, it owns the instrument on the trade date; and
(5) The transaction is settled on a cash basis at the settlement date.
(h)
(1) Purchasing or selling off balance sheet financial derivatives, such as futures, options, interest rate swaps, or forward rate agreements;
(2) Engaging in pair-off transactions, when-issued trading, adjusted trading, or short sales; and
(3) Purchasing stripped mortgage-backed securities, residual interests in CMO/REMICs, mortgage servicing rights, commercial mortgage related securities, or small business related securities.
(i)
(j)
(a)
(1) The approval process associated with credit limits;
(2) Due diligence analysis requirements;
(3) Maximum credit limits with each obligor and transaction counterparty, set as a percentage of the sum of reserves and undivided earnings and paid-in capital. In addition to addressing loans, deposits, and securities, limits with transaction counterparties must address aggregate exposures of all transactions, including, but not necessarily limited to, repurchase agreements, securities lending, and forward settlement of purchases or sales of investments; and
(4) Concentrations of credit risk (
(b)
(c)
(2) Except for investments in a wholesale corporate credit union, aggregate investments in repurchase and securities lending agreements with any one counterparty are limited to 400 percent of the sum of reserves and undivided earnings and paid-in capital.
(3) Except for investments in a wholesale corporate credit union, the aggregate of all investments in non secured obligations of any single domestic issuer is limited to 100 percent of the sum of reserves and undivided earnings and paid-in capital.
(4) For purposes of measurement, each new credit transaction must be evaluated in terms of the corporate credit union's sum of reserves and undivided earnings and paid-in capital at the time of the transaction. A subsequent reduction in the sum of reserves and undivided earnings and paid-in capital will require a suspension of additional transactions until maturities, sales or terminations bring existing exposures within the requirements of this part.
(d)
(2) The rating(s) must be monitored for as long as the corporate owns an instrument.
(3) At the time of purchase, asset-backed securities must be rated no lower than AAA (or equivalent), other long-term investments must be rated no lower than AA (or equivalent), and short-term investments must be rated no lower than A-1 (or equivalent).
(4) Any rated instrument that is downgraded by the NRSRO used to meet the requirements of this part at the time of purchase must be reviewed by the board or an appropriate committee within 30 calendar days of the downgrade. Instruments that fall below the minimum rating requirements of this part are subject to the requirements of § 704.10.
(2) At a minimum, the corporate credit union must maintain:
(i) A justification for each approved credit line;
(ii) Disclosure documents, if any, for all instruments held in portfolio. Documents for an instrument that has been sold must be retained until completion of the next NCUA examination; and
(iii) The latest available financial reports, industry analyses, internal and external analyst evaluations, and rating agency information sufficient to support each approved credit line.
(a)
(1) Loan types and limits;
(2) Required documentation and collateral; and
(3) Analysis and monitoring standards.
(b)
(c)
(2) The maximum aggregate amount in secured loans and irrevocable lines of credit to any one member credit union, excluding those secured by shares or marketable securities and member reverse repurchase transactions, shall not exceed 100 percent of capital or 200 percent of the sum of reserves and undivided earnings and paid-in capital, whichever is greater.
(d)
(e)
(f)
(g)
(h)
(a)
(1) The purpose and objectives of the corporate credit union's asset and liability activities;
(2) The tests that will be used to evaluate instruments prior to purchase;
(3) The maximum allowable percentage decline in net economic value (NEV), compared to current NEV;
(4) The minimum allowable NEV ratio;
(5) The maximum decline in net income (before reserve transfers), in percentage and dollar terms, compared to current net income;
(6) Policy limits and specific test parameters for the interest rate risk simulation tests set forth in paragraph (d) of this section; and
(7) The modeling of indexes that serve as references in financial instrument coupon formulas.
(b)
(c)
(d)
(i) Evaluate the risk in its balance sheet by measuring, at least quarterly, the impact of an instantaneous, permanent, and parallel shock in the Treasury yield curve of plus and minus 100, 200, and 300 basis points on its NEV, NEV ratio, and net interest income. If the base case NEV ratio falls below 2 percent at the last testing date, these tests must be calculated at least monthly until the base case NEV ratio again exceeds 2 percent;
(ii) Limit its risk exposure to levels that do not result in an NEV ratio below 1 percent; and
(iii) Limit its risk exposures to levels that do not result in a decline in NEV of more than 18 percent, except as provided in paragraph (e) of this section.
(2) A corporate credit union that owns an aggregate amount of instruments which possess unmatched embedded options in a book value amount which exceeds 200 percent of the sum of its reserves and undivided earnings and paid-in capital must conduct periodically, as appropriate, additional tests
(i) Changes in the shape of the Treasury yield curve;
(ii) Adjustments to prepayment projections used for amortizing securities to consider the impact of significantly faster/slower prepayment speeds;
(iii) Adjustments to the market spread assumptions for non Treasury instruments to consider the impact of widening spreads; and
(iv) Adjustments to volatility assumptions to consider the impact that changing volatilities have on embedded option values.
(e)
(2) The corporate credit union must meet additional management and infrastructure requirements and receive NCUA's written approval. The additional requirements are set forth in the NCUA publication Guidelines for Submission of Requests for Expanded Authority. The procedures for processing base-plus authority are the same as those set forth in Appendix B of this part for requesting expanded authorities.
(3) The corporate credit union must evaluate monthly the changes in NEV, NEV ratio, and net interest income for the tests set forth in paragraph (d)(1)(i) of this section.
(4) Regardless of the amount of instruments which possess unmatched embedded options, the corporate credit union must conduct periodically, as appropriate, the tests set forth in paragraph (d)(2) of this section.
(f)
(g)
(a)
(1) Evaluate the potential liquidity needs of its membership in a variety of economic scenarios;
(2) Regularly monitor sources of internal and external liquidity;
(3) Demonstrate that the accounting classification of investment securities is consistent with its ability to meet potential liquidity demands; and
(4) Develop a contingency funding plan that addresses alternative funding strategies in successively deteriorating liquidity scenarios. The plan must:
(i) List all sources of liquidity, by category and amount, that are available to service an immediate outflow of funds in various liquidity scenarios;
(ii) Analyze the impact that potential changes in fair value will have on the disposition of assets in a variety of interest rate scenarios; and
(iii) Be reviewed by the board or an appropriate committee no less frequently than annually or as market or business conditions dictate.
(b)
(a) Any corporate credit union in possession of an investment that fails to meet a requirement of this part must, within 30 calendar days of the failure, report the failed investment to its board of directors, supervisory committee, and NCUA. If the corporate credit union does not sell the failed investment, and the investment continues to fail to meet a requirement of this part, the corporate credit union must, within 30 calendar days of the failure, provide to NCUA a written action plan that addresses:
(1) The investment's characteristics and risks;
(2) The process to obtain and adequately evaluate the investment's market pricing, cash flows, and risk;
(3) How the investment fits into the credit union's asset and liability management strategy;
(4) The impact that either holding or selling the investment will have on the corporate credit union's earnings, liquidity, and capital in different interest rate environments; and
(5) The likelihood that the investment may again pass the requirements of this part.
(b) NCUA may require, for safety and soundness reasons, a shorter time period for plan development than that set forth in paragraph (a) of this section.
(c) If the plan described in paragraph (a) of this section is not approved by NCUA, the credit union must adhere to NCUA's directed course of action.
(a) A corporate CUSO is an entity that:
(1) Is at least partly owned by a corporate credit union;
(2) Primarily serves credit unions;
(3) Restricts its services to those related to the normal course of business of credit unions; and
(4) Is structured as a corporation, limited liability company, or limited partnership under state law.
(b) The aggregate of all investments in and loans to member and non member corporate CUSOs shall not exceed 15 percent of a corporate credit union's capital. However, a corporate credit union may loan to member and non member corporate CUSOs an additional 15 percent of capital if collateralized by assets in which the corporate credit union has perfected a security interest under state law. A corporate credit union may not use this authority to acquire control, directly or indirectly, of another financial institution, or to invest in shares, stocks, or obligations of another financial institution, insurance company, trade association, liquidity facility, or similar organization. A corporate CUSO must be operated as an entity separate from any credit union. A corporate credit union investing in or lending to a corporate CUSO must obtain a written legal opinion that the corporate CUSO is organized and operated in such a manner that the corporate credit union will not reasonably be held liable for the obligations of the corporate CUSO. This opinion must address factors that have led courts to “pierce the corporate veil,” such as inadequate capitalization, lack of separate corporate identity, common boards of directors and employees, control of one entity over another, and lack of separate books and records.
(c) An official of a corporate credit union which has invested in or loaned to a corporate CUSO may not receive, either directly or indirectly, any salary, commission, investment income, or other income, compensation, or consideration from the corporate CUSO. This prohibition also extends to immediate family members of officials.
(d) Prior to making an investment in or loan to a corporate CUSO, a corporate credit union must obtain a written agreement that the corporate CUSO will:
(1) Follow GAAP;
(2) Provide financial statements to the corporate credit union at least quarterly;
(3) Obtain an annual CPA opinion audit and provide a copy to the corporate credit union; and
(4) Allow the auditor, board of directors, and NCUA complete access to its books, records, and any other pertinent documentation.
(e) Corporate credit union authority to invest in or loan to a CUSO is limited to that provided in this section. A corporate credit union is not authorized to invest in or loan to a CUSO under part 712 of this chapter.
Except for correspondent services to a non member, natural person credit union branch office operating in the geographic area defined in the corporate credit union's charter, a corporate credit union may provide services only to its members, subject to the limitations of this part. A corporate credit union may not provide services to non members through agreements with other corporate credit unions or pursuant to § 701.26 of this chapter, except with the written permission of NCUA.
(a) A corporate credit union's ownership in fixed assets shall be limited as described in § 701.36 of this chapter, except that in lieu of § 701.36(c)(1) through (4) of this chapter, paragraph (b) of this section applies.
(b) A corporate credit union may invest in fixed assets where the aggregate of all such investments does not exceed 15 percent of the corporate credit union's capital. A corporate credit union desiring to exceed the limitation shall submit a written request to NCUA. Requests shall be supplemented by such statements and reports as NCUA may require. If the corporate credit union does not receive notification of the action taken on its request within 45 calendar days of the date all required information has been received, it may proceed with its proposed investment in fixed assets.
(a)
(1) At least a majority of directors, including the chair of the board, must serve on the board as representatives of member credit unions;
(2) The chair of the board may not serve simultaneously as an officer, director, or employee of a credit union trade association;
(3) A majority of directors may not serve simultaneously as officers, directors, or employees of the same credit union trade association or its affiliates (not including chapters or other subunits of a state trade association);
(4) For purposes of meeting the requirements of paragraphs (a)(2) and (a)(3) of this section, an individual may not serve as a director or chair of the board if that individual holds a subordinate employment relationship to another employee who serves as an officer, director, or employee of a credit union trade association; and
(5) In the case of a corporate credit union whose membership is composed of more than 25 percent non credit unions, the majority of directors serving as representatives of member credit unions, including the chair, must be elected only by member credit unions.
(b)
(2) Any vacancy on the board of a corporate credit union caused by a representative being unable to complete his or her term shall be filled by the board of the corporate credit union according to its bylaws governing the filling of board vacancies.
(c)
(2) An individual is “interested” in an entity if he or she:
(i) Serves as a director, officer, or employee of the entity;
(ii) Has a business, ownership, or deposit relationship with the entity; or
(iii) Has a business, financial, or familial relationship with an individual whom he or she knows has a pecuniary interest in the entity.
(3) In the event of the disqualification of any directors, by operation of paragraph (c)(1) of this section, the remaining qualified directors present at the meeting, if constituting a quorum with the disqualified directors, may exercise, by majority vote, all the powers of the board with respect to the matter under consideration. Where all of the directors are disqualified, the matter must be decided by the members of the corporate credit union.
(4) In the event of the disqualification of any committee member by operation of paragraph (c)(1) of this section, the remaining qualified committee members, if constituting a quorum with the disqualified committee members, may exercise, by majority vote, all the powers of the committee with respect to the matter under consideration. Where all of the committee members are disqualified, the matter shall be decided by the board of directors.
(d)
(2) The provisions of § 701.14 of this chapter apply to corporate credit unions, except that where “Regional Director” is used, read “NCUA Board.”
(a)
(b)
Services, facilities, personnel, or equipment shared with any party shall be supported by a written contract, with the duties and responsibilities of each party specified and the allocation of service fee/expenses fully supported and documented.
(a) This part does not expand the powers and authorities of any state-chartered corporate credit union, beyond those powers and authorities provided under the laws of the state in which it was chartered.
(b) A state-chartered corporate credit union that is not insured by the NCUSIF, but that receives funds from federally insured credit unions, is considered an “institution-affiliated party” within the meaning of Section 206(r) of the Federal Credit Union Act, 12 U.S.C. 1786(r).
(c) NCUA will notify, consult with, and provide explanation to the appropriate state supervisory authority before taking administrative action against a state-chartered corporate credit union.
(a)
(b)
(c)
(1) When the bond of a credit union is terminated in its entirety;
(2) When bond coverage is terminated, by issuance of a written notice, on an employee, director, officer, supervisory or credit committee member; or
(3) When a deductible is increased above permissible limits. Said notification shall be sent to NCUA and shall include a brief statement of cause for termination or increase.
(d)
(2) It is the duty of the board of directors of each corporate credit union to provide adequate protection to meet its unique circumstances by obtaining, when necessary, bond coverage in excess of the minimums in the table in paragraph (d)(1) of this section.
(e)
(2) A deductible may be applied separately to one or more insuring clauses in a blanket bond. Deductibles in excess of those showing in this section must have the written approval of NCUA at least 30 calendar days prior to the effective date of the deductibles.
(f)
(a)
(b)
(2) A wholesale corporate credit union shall make reserve transfers at the lower of .10 percent of its moving daily average net assets or the amount that would be required under § 704.3(c).
(i) Required transfers are to be made from earnings in either the prior calendar month or prior twelve-month period. Transfers made during the prior twelve-month period must be greater than or equal to the aggregate amount of required reserve transfers for each of the months in that twelve-month period.
(ii) NCUA and, in the case of state-chartered wholesale corporate credit unions, the state supervisory authority, must be notified within 30 calendar days of the close of any calendar month in which a wholesale corporate credit union's required reserve transfer exceeds earnings for that month. The notice must include the dollar amounts of the required reserve transfer and earnings for that month and for the prior twelve-month period. The notice must also provide an explanation of why the current month's required reserve transfer exceeded earnings for that month.
(c)
(2) A wholesale corporate credit union must obtain, at its expense, an annual third-party review of its asset and liability management modeling system.
This appendix contains sample forms intended for use by corporate credit unions to aid in compliance with the membership capital account and paid-in capital disclosure requirements of § 704.2. Corporate credit unions that use this form will be in compliance with those requirements.
(1) A membership capital account is not subject to share insurance coverage by the NCUSIF or other deposit insurer.
(2) A member credit union may withdraw membership capital with three years’ notice.
(3) Membership capital cannot be used to pledge borrowings.
(4) Membership capital is available to cover losses that exceed reserves and undivided earnings and paid-in capital.
(5) Where the corporate credit union is liquidated, membership capital accounts are payable only after satisfaction of all liabilities of the liquidation estate including uninsured obligations to shareholders and the NCUSIF.
I have read the above terms and conditions and I understand them. I further agree to maintain in the credit union's files the annual notice of terms and conditions of the membership capital account.
If the form is used for the annual notice requirement, it must be signed by the chair of the corporate credit union. The chair must then sign a statement which certifies that the form has been sent to member credit unions with membership capital accounts. The certification must be maintained in the corporate credit union's files and be available for examiner review.
(1) Paid-in capital is not subject to share insurance coverage by the NCUSIF or other deposit insurer.
(2) The funds are callable only at the option of the corporate credit union and only if the corporate credit union meets its minimum level of required capital after the funds are called.
(3) Paid-in capital is available to cover losses that exceed reserves and undivided earnings.
(4) Paid-in capital is subordinate to membership capital and the NCUSIF.
If the form is used when a paid-in capital instrument is created, it must also contain the following statement:
I have read the above terms and conditions and I understand them. I further agree to maintain in the credit union's files the annual notice of terms and conditions of the paid-in capital instrument.
If the form is used for the annual notice requirement, it must be signed by the chair of the corporate credit union. The chair must then sign a statement which certifies that the form has been sent to credit unions with paid-in capital accounts. The certification must be maintained in the corporate credit union's files and be available for examiner review.
A corporate credit union may obtain expanded authorities if it meets all of the requirements of this part 704, fulfills additional capital, management, infrastructure, and asset and liability requirements, and receives NCUA's written approval. The additional requirements and authorities are set forth in this Appendix and in the NCUA publication Guidelines for Submission of Requests for Expanded Authority. A corporate credit union which seeks expanded authorities must submit to NCUA a self-assessment plan which analyzes and supports its request. A corporate credit union may adopt expanded authorities when NCUA has provided final approval. If NCUA denies a request for expanded authorities, it will advise the corporate of the reasons for the denial and what it must do to resubmit its request. NCUA may revoke these expanded authorities at any time if an analysis indicates a significant deficiency. NCUA will notify the corporate credit union in writing of the identified deficiency. A corporate credit union may request, in writing, reinstatement of the revoked authorities by providing a self-assessment plan which details how it has corrected these deficiencies.
(a) In order to participate in the authorities set forth in paragraphs (b) through (d) of this Part I, a corporate credit union must:
(1) Have a minimum capital ratio of 5 percent;
(2) Evaluate monthly the changes in NEV, NEV ratio, and net interest income for the tests set forth in § 704.8(d)(1)(i); and
(3) Regardless of the amount of instruments which possess unmatched embedded options, conduct periodically, as appropriate, the tests set forth in § 704.8(d)(2).
(b) A corporate credit union which has met the requirements of paragraph (a) of this Part I is not bound by the concentration limits on investments set forth at § 704.6(c)(1) and (2). Instead, the corporate credit union must establish limits on such investments as a percentage of the sum of reserves and undivided earnings and paid-in capital that take into account the relative amount of credit risk exposure based upon, but not limited to, the legal and financial structure of the transaction, the collateral, all other types of credit enhancement, and the term of the transaction.
(c) A corporate credit union which has met the requirements of paragraph (a) of this Part I may:
(1) Except for investments in a wholesale corporate credit union, invest in non secured obligations of any single domestic issuer up to 150 percent of the sum of reserves and undivided earnings and paid-in capital;
(2) Purchase long-term investments rated no lower than AA-(or equivalent);
(3) Purchase asset-backed securities rated no lower than AA (or equivalent);
(4) Engage in short sales of permissible investments to reduce interest rate risk;
(5) Purchase principal only (PO) stripped mortgage-backed securities to reduce interest rate risk;
(6) Enter into a repurchase transaction where the collateral securities are rated no lower than A (or equivalent);
(7) Enter into a dollar roll transaction; and
(8) Engage in when-issued trading, when accounted for on a trade date basis.
(d) In performing the rate stress tests set forth in § 704.8(d)(1)(i), the NEV of a corporate credit union which has met the requirements of paragraph (a) of this Part I may decline as much as 35 percent.
(e) The maximum aggregate amount in unsecured loans and irrevocable lines of credit to any one member credit union, excluding pass-through and guaranteed loans from the CLF and the NCUSIF, shall not exceed 100 percent of the corporate credit union's capital. The board of directors will establish the limit, as a percent of the corporate credit union's capital plus pledged shares, for secured loans and irrevocable lines of credit.
(a) In order to participate in the authorities set forth in paragraphs (b)-(d) of this Part II, a corporate credit union must:
(1) Have a minimum capital ratio of 6 percent; and
(2) Evaluate monthly the changes in NEV, NEV ratio, and net interest income for the tests set forth in § 704.8(d)(1)(i); and
(3) Regardless of the amount of instruments which possess unmatched embedded options, conduct periodically, as appropriate, the tests set forth in § 704.8(d)(2).
(b) A corporate credit union which has met the requirements of paragraph (a) of this Part II is not bound by the concentration limits on investments set forth at § 704.6(c) (1) and (2). Instead, the corporate credit union must establish limits on such investments as a percentage of the sum of reserves and undivided earnings and paid-in capital, that take into account the relative amount of credit risk exposure based upon, but not limited to, the legal and financial structure of the transaction, the collateral, all other types of credit enhancement, and the term of the transaction.
(c) A corporate credit union which has met the requirements of paragraph (a) of this Part II may:
(1) Except for investments in a wholesale corporate credit union, invest in nonsecured obligations of any single domestic issuer up to 250 percent of the sum of reserves and undivided earnings and paid-in capital;
(2) Purchase long-term investments rated no lower than A− (or equivalent);
(3) Purchase asset-backed securities rated no lower than AA (or equivalent);
(4) Engage in short sales of permissible investments to reduce interest rate risk;
(5) Purchase principal only (PO) stripped mortgage-backed securities to reduce interest rate risk;
(6) Enter into a dollar roll transaction; and
(7) Engage in when-issued trading, when accounted for on a trade date basis.
(d) In performing the rate stress tests set forth in § 704.8(d)(1)(i), the NEV of a corporate credit union which has met the requirements of paragraph (a) of this Part II may decline as much as 50 percent.
(e) The maximum aggregate amount in secured and unsecured loans and irrevocable lines of credit to any one member credit union, excluding pass-through and guaranteed loans from the CLF and the NCUSIF, shall be established by the board of directors as a percentage of the corporate credit union's capital plus pledged shares.
(a) A corporate credit union which has met the requirements of paragraph (a) of either Part I or Part II of this Appendix may invest in:
(1) Debt obligations of a foreign country; and
(2) Deposits in, the sale of federal funds to, and debt obligations of foreign banks or obligations guaranteed by these banks.
(b) All foreign investments are subject to the following requirements:
(i) Short-term investments must be rated no lower than A-1 (or equivalent);
(ii) Long-term investments must be rated no lower than AA (or equivalent);
(iii) A sovereign issuer, and/or the country in which a bank issuer/guarantor is organized, must be rated no lower than AA (or equivalent) for political and economic stability;
(iv) A bank issuer/guarantor must be rated no lower than AA;
(v) For each approved foreign bank line, the corporate credit union must identify the specific banking centers and branches to which it will lend funds;
(vi) Non secured obligations of any single foreign issuer may not exceed 150 percent of the sum of reserves and undivided earnings and paid-in capital; and
(vii) Non secured obligations in any single foreign country may not exceed 500 percent of the sum of reserves and undivided earnings and paid-in capital.
A corporate credit union which has met the requirements of paragraph (a) of either Part I or Part II of this Appendix may engage in derivatives transactions which are directly related to its financial activities and which have been specifically approved by NCUA. A corporate credit union may use such derivatives authority only for the purposes of creating structured instruments and hedging its own balance sheet and the balance sheets of its members.
12 U.S.C. 1772c-1; 42 U.S.C. 9822 and 9822 note.
58 FR 21646, Apr. 23, 1993, unless otherwise noted.
Monies from the Community Development Revolving Loan Fund for Credit Unions are governed by this part.
(a) This part implements the Community Developments Revolving Loan Program for Credit Unions (Program) under the sole administration of the National Credit Union Administration.
(b) This part establishes the following:
(1) Definitions;
(2) The application process and requirements for qualifying for a loan under the program;
(3) How loan funds are to be made available and their repayment; and
(4) Technical assistance to be provided to participating credit unions.
(a) The Community Development Revolving Loan Program for Credit Unions is intended to support the efforts of participating credit unions through loans and technical assistance to those credit unions in:
(1) Providing basic financial and related services to residents in their communities; and
(2) Stimulating economic activities in the communities they service which will result in increased income, ownership and employment opportunities for low-income residents, and other community growth efforts.
(b) The policy of NCUA is to revolve loan funds to qualifying credit unions as often as practical in order to gain maximum economic impact on as many participating credit unions as possible.
(a)(1) The term “low-income members” shall mean those members who make less than 80 percent of the average for all wage earners as established by the Bureau of Labor Statistics or those members whose annual household income falls at or below 80% of the median household income for the nation as established by the Census Bureau or those members otherwise defined as low-income members as determined by order of the NCUA Board.
(2) In documenting its low-income membership, a credit union that serves a geographic area where a majority of residents fall at or below the annual income standard is presumed to be serving predominantly low-income members. In applying the standards, Regional Directors shall make allowances for geographical areas with higher costs of living. The following is the exclusive list of geographic areas and the differentials to be used:
(b) For purposes of this part, a
In order to meet the objectives of the Program, a credit union applicant should provide a variety of financial and related services designed to meet the particular needs of the low-income community served. These activities shall include basic member share account and member loan services.
(a) Applications to participate and qualify for a loan or technical assistance under the Program may be obtained from the National Credit Union Administration, Community Development Revolving Loan Program For Credit Unions.
(b) The application for a loan shall contain the following information:
(1) Information demonstrating a sound financial position and the credit union's ability to manage its day-to-day business affairs, including the credit union's latest financial statement. Nonfederally insured credit unions must include the following:
(i) A copy of its most recent outside audit report;
(ii) Proof of deposit and surety bond insurance which states the maximum insurance levels permitted by the policies;
(iii) A balance sheet, an income and expense statement, and a schedule of delinquent loans, for the most recent month-end and each of the twelve months preceding that month-end.
(2) Evidence that the credit union has a need for increased funds in order to improve financial services to its members.
(3) The following information concerning a state-chartered credit union's field of membership:
(i) Current field of membership as set forth in the credit union's charter;
(ii) Changes, if any, to be made to the field of membership for participation in the Program, including;
(A) Evidence of approval of change by credit union board of directors;
(B) Evidence of submission and approval of change by the state supervisor;
(iii) Current designation as a low-income credit union if the credit union is not federally insured.
(4) Along with a community needs plan, specifics of how the credit union proposes to serve the needs of its members and the community with Program funds. The applicant credit union will also construct and submit a plan for its growth and development. The plan will set forth objectives for financial growth, credit union development and capitalization, and the means for achieving these objectives.
(5) Indication of any other involvement in existing community development programs of state and federal agencies.
(c) NCUA will notify applicant credit unions as to whether or not they have qualified for a loan or technical assistance under this part. Reasons for nonqualification will be stated. Any applicant whose qualification is denied may appeal that decision to the NCUA Board.
(a) The credit union's board of directors will prepare a Community Needs Plan and submit it with its loan application. The Plan will contain a list of needed community services that the credit union will provide.
(b) The credit union's board of directors will report on the progress of providing needed community services to the credit union members once a year, either at the annual meeting or in a written report sent to all members. The credit union will also submit the written report or a summary of the report given at the annual meeting to NCUA.
(a)
(b)
(1) Generally loan monies made available must be matched by the participating credit union by increasing its share deposits in an amount equal to the loan amount. However, any loan monies matched by member share deposits will be credited as a two-for-one match. Nonmember share deposits accepted to meet the matching requirement are not subject to the 20% limitation on nonmember deposits under § 701.32. Participating credit unions must meet this matching requirement within one year of the approval of the loan application and must maintain the increase in the total amount of share deposits for the duration of the loan. Once the loan is repaid, nonmember share deposits accepted to meet the matching requirement are subject to § 701.32.
(2) Upon approval of its loan application, and before it meets its matching requirement, a participating credit union may receive the entire loan commitment in a single payment. If any funds are withheld, the remainder of the funds committed will be available to the participating credit union only after it has documented that it has met the match requirement for the total amount of the loan committed.
(3) Failure of a participating credit union to generate the required match within one year of the approval of the loan will result in the reduction of the loan proportionate to the amount of match actually generated. Payment of any additional funds initially approved will be limited as appropriate to reflect the revised amount of the loan approved. Any funds already advanced to the participating credit union in excess of the revised amount of loan approval must be repaid immediately to NCUA. Failure to repay such funds to NCUA upon demand shall result in the default of the entire loan.
(c)
(2) Semiannual interest payments (beginning six months after the initial distribution of a loan) and semiannual principal payments (beginning one year after the initial distribution of a loan) will be required.
(d)
(e)
State-chartered credit union loan applicants approved for participation by NCUA must obtain written concurrence from their respective state regulatory authority. Such applicants shall make copies of their state examination reports available to NCUA and shall agree to examination by NCUA for the limited purpose of compliance with this part.
NCUA will announce annually and publish in the
Based on available earnings, NCUA may contract with outside providers to render technical assistance to participating credit unions. Participating credit unions can be provided with technical assistance without obtaining a Program loan. NCUA technical assistance will aid participating credit unions in providing services to their members and in the efficient operation of such credit unions.
15 U.S.C. 57a(f).
52 FR 46586, Dec. 9, 1987, unless otherwise noted.
(a)
(b)
(c)
(d)
(e)
(f)
(1) Works of art;
(2) Electronic entertainment equipment (except one television and one radio);
(3) Items acquired as antiques; and
(4) Jewelry (except wedding rings).
(g)
(h)
(a) In connection with the extension of credit to consumers, it is an unfair act or practice for a Federal credit union, directly or indirectly, to take or receive from a consumer an obligation that:
(1) Constitutes or contains a cognovit or confession of judgment (for purposes other than executory process in the State of Louisiana), warrant of attorney, or other waiver of the right to notice and the opportunity to be heard in the event of suit or process thereon.
(2) Constitutes or contains an executory waiver or a limitation of exemption from attachment, execution, or other process on real or personal property held, owned by, or due to the consumer, unless the waiver applies solely to property subject to a security interest executed in connection with the obligation.
(3) Constitutes or contains an assignment of wages or other earnings unless:
(i) The assignment by its terms is revocable at the will of the debtor, or
(ii) The assignment is a payroll deduction plan or preauthorized payment plan, commencing at the time of the transaction, in which the consumer authorizes a series of wage deductions as a method of making each payment, or
(iii) The assignment applies only to wages or other earnings already earned at the time of the assignment.
(4) Constitutes or contains a nonpossessory security interest in household goods other than a purchase money security interest.
(a)
(1) A deceptive act or practice for a Federal credit union, directly or indirectly, to mispresent the nature or extent of cosigner liability to any person.
(2) An unfair act or practice for a Federal credit union, directly or indirectly, to obligate a cosigner unless the cosigner is informed prior to becoming obligated, which in the case of open-end credit means prior to the time that the agreement creating the cosigner's liability for future charges is executed, of the nature of his or her liability as cosigner.
(b)
You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn't pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.
The creditor can collect this debt from you without first trying to collect from the borrower. The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.
This notice is not the contract that makes you liable for the debt.
(2) If the notice to cosigner is a separate document, nothing other than the following items may appear with the notice. Items (i) through (v) may not be part of the narrative portion of the notice to cosigner.
(i) The name and address of the Federal credit union;
(ii) An identification of the debt to be consigned (e.g., a loan identification number);
(iii) The amount of the loan;
(iv) The date of the loan;
(v) A signature line for a cosigner to acknowledge receipt of the notice; and
(vi) To the extent permitted by state law, a cosigner notice required by state law may be included in the paragraph (b)(1) notice.
(3) To the extent the notice to cosigner specified in paragraph (b)(1) of this section refers to an action against a cosigner that is not permitted by state law, the notice to cosigner may be modified.
(a) In connection with collecting a debt arising out of an extension of credit to a consumer, it is an unfair act or practice for a Federal credit union, directly or indirectly, to levy or collect
(b) For purposes of this section, “collecting a debt” means any activity other than the use of judicial process that is intended to bring about or does bring about repayment of all or part of a consumer debt.
(a) If, upon application to the NCUA by an appropriate state agency, the NCUA determines that:
(1) There is a state requirement or prohibition in effect that applies to any transaction to which a provision of this rule applies; and
(2) The state requirement or prohibition affords a level of protection to consumers that is substantially equivalent to, or greater than, the protection afforded by this rule; then that provision of this rule will not be in effect in the state to the extent specified by the NCUA in its determination, for as long as the state administers and enforces the state requirement or prohibition effectively.
(b) States that received an exemption from the Federal Trade Commission's Credit Practices Rule prior to September 17, 1987, are not required to reapply to NCUA for an exemption under paragraph (a) of this section provided that the state forwards a copy of its exemption determination to the appropriate Regional Office. NCUA will honor the exemption for as long as the state administers and enforces the state requirement or prohibition effectively. Any state seeking a greater exemption than that granted to it by the Federal Trade Commission must apply to NCUA for the exemption.
12 U.S.C. 4311.
58 FR 50445, Sept. 27, 1993, unless otherwise noted.
(a)
(b)
(c)
(d)
For purposes of this part, the following definitions apply:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(q)
(1) A natural person member of the credit union who holds an account primarily for personal, family, or household purposes;
(2) A natural person nonmember who holds an account primarily for personal, family, or household purposes, either jointly with a natural person member or in a credit union designated as a low-income credit union, or to whom such an account is offered; and
(3) A natural person nonmember who holds a deposit account in a state-chartered credit union pursuant to state law, or to whom such deposit account is offered.
(r)
(s)
(t)
(u)
(v)
(w)
(x)
(y)
(z)
(a)
(b)
(c)
(d)
(e)
(1) For dividend-bearing accounts other than term share accounts, specify a dividend rate and annual percentage yield as of the last dividend declaration date. In the event that disclosures of a dividend rate and annual percentage yield as of the last dividend declaration date might be inaccurate because of known or contemplated dividend rate changes, the credit union may disclose the prospective dividend rate and prospective annual percentage yield. Such prospective dividend rate and prospective annual percentage yield may be disclosed either in lieu of, or in addition to, the dividend rate and annual percentage yield as of the last dividend declaration date.
(2) For interest-bearing accounts and for dividend-bearing term share accounts, specify an interest (dividend) rate and annual percentage yield that were offered within the most recent seven calendar days; state that the rate and yield are accurate as of an identified date; and provide a telephone number members may call to obtain current rate information.
(f)
(2)
(a)
(2)
(ii) In providing disclosures upon request, the credit union may:
(A) Specify rates as follows:
(
(
(B) State the maturity of a term share account as either a term or a date.
(b)
(1)
(B) For dividend-bearing accounts other than term share accounts, a credit union shall specify a dividend rate and annual percentage yield (using those terms) as of the last dividend declaration date. In the event that disclosures of a dividend rate and annual percentage yield as of the last dividend declaration date might be inaccurate because of known or contemplated dividend rate changes, the credit union may disclose the prospective dividend rate and prospective annual percentage yield. Such prospective dividend rate and prospective annual percentage yield may be disclosed either in lieu of, or in addition to, the dividend rate and annual percentage yield as of the last dividend declaration date.
(ii)
(A) The fact that the dividend rate and annual percentage yield may change;
(B) How the dividend rate is determined;
(C) The frequency with which the dividend rate may change; and
(D) Any limitation on the amount the dividend rate may change.
(2)
(ii)
(3)
(A) Open the account;
(B) Avoid the imposition of a fee; or
(C) Obtain the annual percentage yield disclosed.
(ii)
(iii)
(4)
(5)
(6)
(i)
(ii)
(iii)
(iv)
(7)
(8)
(c)
(2)
(a)
(2)
(i)
(ii)
(iii)
(b)
(1)
(2)
(i) Provide disclosures as set forth in paragraph (b)(1) of this section; or
(ii) Disclose to the member:
(A) The date the existing account matures and the new maturity date if the account is renewed;
(B) The dividend rate and the annual percentage yield for the new account if they are known (or that those rates have not yet been determined, the date when they will be determined, and a telephone number the member may call to obtain the dividend rate and the annual percentage yield that will be paid for the new account); and
(C) Any difference in the terms of the new account as compared to the terms required to be disclosed under § 707.4(b) for the existing account.
(c)
(a)
(b)
(1)
(2)
(3) Fees imposed. Fees required to be disclosed under § 707.4(b)(4) of this part and imposed on the account during the statement period. The fees shall be itemized by type and dollar amounts.
(4)
(c)
(2)
(a)
(2)
(b)
(c)
(a)
(b)
(c)
(1)
(2)
(3)
(4)
(5) A statement that fees could reduce the earnings on the account.
(6)
(i)
(ii)
(iii)
(d)
(1) The “annual percentage yield,” using that term;
(2) The time requirements to obtain the bonus;
(3) The minimum balance required to obtain the bonus;
(4) The minimum balance required to open the account, if it is greater than the minimum balance necessary to obtain the bonus; and
(5) When the bonus will be provided.
(e)
(i) Broadcast or electronic media, such as television or radio;
(ii) Outdoor media, such as billboards; or
(iii) Telephone response machines.
(2)
(ii) If a sign exempted by paragraph (e)(2) of this section states a rate of return, it shall:
(A) State the rate as an “annual percentage yield,” using that term or the term “APY.” The sign shall not state any other rate, except that the dividend rate may be stated in conjunction with the annual percentage yield to which it relates.
(B) Contain a statement advising members to contact an employee for further information about applicable fees and terms.
(3)
(ii) If a newsletter exempted by paragraph (e)(3) of this section states a rate of return, it shall:
(A) State the rate as an “annual percentage yield,” using that term or the term “APY.” The newsletter shall not state any other rate, except that the dividend rate may be stated in conjunction with the annual percentage yield to which it relates.
(B) Contain a statement advising members to contact an employee for further information about applicable fees and terms.
(a)
(b)
(c)
The annual percentage yield (APY) measures the total amount of dividends a credit union pays on an account based on the dividend rate and the frequency of compounding. The annual percentage yield is expressed as an annualized rate, based on a 365-day year.
In general, the annual percentage yield for account disclosures under §§ 707.4 and 707.5 and for advertising under § 707.8 is an annualized rate that reflects the relationship between the amount of dividends that would be earned by the member for the term of the account and the amount of principal used to calculate those dividends. The amount of dividends that would be earned may be projected based on the most recent past declared rate or an anticipated future rate, whichever the credit union judges to most reasonably approximate the dividends to be earned. Special rules apply to accounts with tiered and stepped dividend rates, and to certain term share accounts with a stated maturity greater than 1 year.
Except as provided in Part I. E. of this appendix, the annual percentage yield shall be calculated by the formula shown below. Credit unions may calculate the annual percentage yield using projected dividends based on either the rate at the last dividend declaration date or the rate anticipated at a future date. The credit union must disclose whichever option it uses to members. Credit unions shall calculate the annual percentage yield based on the actual number of days for the term of the account. For accounts without a stated maturity date (such as a typical share or share draft account), the calculation shall be based on an assumed term of 365 days. In determining the total dividends figure to be used in the formula, credit unions shall assume that all principal and dividends remain on deposit for the entire term, and that no other transactions (deposits or withdrawals) occur during the term. (This assumption shall not be used if a credit union requires, as a condition of the account, that members withdraw dividends during the term. In such a case, the dividends (and annual percentage yield calculation) shall reflect that requirement.) For term share accounts that are offered in multiples of months, credit unions may base the number of days on either the actual number of days during the applicable period, or the number of days that would occur for any actual sequence of that many calendar months. If credit unions choose to use this permissive rule, they must use the same number of days to calculate the dollar amount of dividends that will be earned on the account in the annual percentage yield formula (where “Dividends” are divided by “Principal”.)
The annual percentage yield is to be calculated by use of the following general formula ((“APY”) is used for convenience in the formulas):
“Principal” is the amount of funds assumed to have been deposited at the beginning of the account.
“Dividends” is the total dollar amount of dividends earned on the Principal for the term of the account.
“Days in term” is the actual number of days in the term of the account.
When the “days in term” is 365 (that is, where the stated maturity is 365 days or where the account does not have a stated maturity), the APY can be calculated by use of the following simple formula:
(1) If a credit union would pay $61.68 in dividends for a 365-day year on $1,000 deposited into a share draft account, the APY is 6.17%:
Or, using the simple formula above (since the term is deemed to be 365 days):
(2) If a credit union pays $30.37 in dividends on a $1,000 six-month term share certificate account (where the six-month period used by the credit union contains 182 days), using the general formula above, the APY is 6.18%:
The APY is affected by the frequency of compounding, i.e., the amount of dividends will be greater the more frequently dividends are compounded for a given nominal rate. When two credit unions are offering the same dividend rate on, for example, a share account, the APY disclosed may be different if the credit unions use a different frequency of compounding.
(1) If a credit union pays $1,268.25 in dividends for a 365-day year on $10,000 deposited
(2) However, if a credit union is compounding dividends on a quarterly basis on an account which otherwise has the same terms, the dividends will be $1,255.09 and the APY will be 12.55%.
For accounts with two or more dividend rates applied in succeeding periods (where the rates are known at the time the account is opened), a credit union shall assume each dividend rate is in effect for the length of time provided for in any share agreement.
(1) If a credit union offers a $1,000 6-month term share (certificate) account on which it pays a 5% dividend rate, compounded daily, for the first three months (which contain 91 days), and a 5.5% dividend rate, compounded daily, for the next three months (which contain 92 days), the total dividends for six months is $26.68, and, using the general formula above, the APY is 5.39%:
(2) If a credit union offers a $1,000 2-year share certificate on which it pays a 6% dividend rate, compounded daily, for the first year, and a 6.5% dividend rate, compounded daily, for the next year, the total dividends for two years is $133.13, and, using the general formula above, the APY is 6.45%:
For variable-rate accounts without an introductory premium or discounted rate, a credit union must base the calculation only on the initial dividend rate in effect when the account is opened (or advertised), and assume that this rate will not change during the year.
Variable-rate accounts with an introductory premium or discount rate must be treated like stepped-rate accounts. Thus, a credit union shall assume that: (1) The introductory simple dividend rate is in effect for the length of time provided for in the account contract; and (2) the variable dividend rate that would have been in effect when the account is opened or advertised (but for the introductory rate) is in effect for the remainder of the year. If the variable rate is tied to an index, the index-based rate in effect at the time of disclosure must be used for the remainder of the year. If the rate is not tied to an index, the rate in effect for existing members holding the same account (who are not receiving the introductory dividend rate) must be used for the remainder of the year.
For example, if a credit union offers an account on which it pays a 7% dividend rate, compounded daily, for the first three months (which, for example, contains 91 days), while the variable dividend rate that would have been in effect when the account was opened was 5%, the total dividends for a 365-day year for a $1,000 account balance is $56.52, (based on 91 days at 7% followed by 274 days at 5%). Using the simple formula, the APY is 5.65%:
For accounts in which two or more dividend rates paid on the account are applicable to specified balance levels, the credit union must calculate the annual percentage yield in accordance with the method described below that it uses to calculate dividends. In all cases, an annual percentage yield (or a range of annual percentage yields, if appropriate) must be disclosed for each balance tier.
For purposes of the examples discussed below, assume the following:
Under this method, a credit union pays on the full balance in the account the stated dividend rate that corresponds to the applicable share balance tier. For example, if a member deposits $8,000, the credit union pays the 5.50% dividend rate on the entire $8,000. This is also known as a “hybrid” or “plateau” tiered rate account.
When this method is used to determine dividends, only one annual percentage yield will apply to each tier. Within each tier, the annual percentage yield will not vary with the amount of principal assumed to have been deposited.
For the dividend rates and account balances assumed above, the credit union will state three annual percentage yields—one corresponding to each balance tier. Calculation of each annual percentage yield is similar for this type of account as for accounts with a single fixed dividend rate. Thus, the calculation is based on the total amount of dividends that would be received by the member for each tier of the account for a year and the principal assumed to have been deposited to earn that amount of dividends.
Using the simple formula:
Under this method, a credit union pays the stated dividend rate only on that portion of the balance within the specified tier. For example, if a member deposits $8,000, the credit union pays 5.25% on only $2,500 and 5.50% on $5,500 (the difference between $8,000 and the first tier cutoff of $2,500). This is also known as a “pure” tiered rate account.
The credit union that computes dividends in this manner must provide a range that shows the lowest and the highest annual percentage yields for each tier (other than for the first tier, which, like the tiers in Method A, has the same annual percentage yield throughout). The low figure for an annual percentage yield is calculated based on the total amount of dividends earned for a year assuming the
For the tiering structure assumed above, the credit union would state a total of five annual percentage yields—one figure for the first tier and two figures stated as a range for the other two tiers.
For $15,000, dividends are figured on $2,500 at 5.25% dividend rate plus dividends on $12,500 at 5.50% dividend rate. For the high end of the second tier, the annual percentage yield, using the simple formula, is 5.61%:
Thus, the annual percentage yield range that would be stated for the second tier is 5.39% to 5.61%.
Assuming the credit union does not limit the account balance, it may assume any maximum amount for the purposes of computing the annual percentage yield for the high end of the third tier. For an assumed maximum balance amount of $100,000, dividends would be figured on $2,500 at 5.25% dividend rate, plus dividends on $12,500 at 5.50% dividend rate, plus dividends on $85,000 at 5.75% dividend rate. For the high end of the third tier, therefore, the annual percentage yield, using the simple formula, is 5.87%:
Thus, the annual percentage yield that would be stated for the third tier is 5.61% to 5.87%. If the assumed maximum balance amount is $1,000,000, credit unions would use $985,000 rather than $85,000 in the last calculation. In that case for the high end of the third tier, the annual percentage yield, using the simple formula, is 5.91%:
Thus, the annual percentage yield range that would be stated for the third tier is 5.61% to 5.91%.
1. For term share accounts with a stated maturity greater than one year, that do not compound dividends on an annual or more frequent basis, and that require the member
If a credit union offers a $1,000 two-year term share account that does not compound and that pays out dividends semi-annually by check or transfer at a 6.00% dividend rate, the annual percentage yield may be disclosed as 6.00%.
2. For term share accounts covered by this paragraph that are also stepped-rate accounts, the annual percentage yield may be disclosed as equal to the composite dividend rate.
(1) If a credit union offers a $1,000 three-year term share account that does not compound and that pays out dividends annually by check or transfer at a 5.00% dividend rate for the first year, 6.00% dividend rate for the second year, and 7.00% dividend rate for the third year, the credit union may compute the composite dividend rate and APY as follows:
(a) Multiply each dividend rate by the number of days it will be in effect;
(b) Add these figures together; and
(c) Divide by the total number of days in the term.
(2) Applied to the example, the products of the dividend rates and days the rates are in effect are (5.00%×365 days) 1825, (6.00%×365 days) 2190, and (7.00%×365) 2555, respectively. The sum of these products, 6570, is divided by 1095, the total number of days in the term. The composite dividend rate and APY are both 6.00%.
The annual percentage yield earned for statements under § 707.6 is an annualized rate that reflects the relationship between the amount of dividends actually earned (accrued or paid and credited) to the member's account during the period and the average daily balance in the account for the period over which the dividends were earned.
Pursuant to § 707.6(a), when dividends are paid less frequently than statements are sent, the APY Earned may reflect the number of days over which dividends were earned rather than the number of days in the statement period, e.g., if a credit union uses the average daily balance method and calculates dividends for a period other than the statement period, the annual percentage yield earned shall reflect the relationship between the amount of dividends earned and the average daily balance in the account for the other period, such as a crediting or dividend period.
The annual percentage yield shall be calculated by using the following formulas (“APY Earned” is used for convenience in the formulas):
“Balance” is the average daily balance in the account for the period.
“Dividends earned” is the actual amount of dividends accrued or paid and credited to the account for the period.
“Days in period” is the actual number of days over which the dividends disclosed on the statement were earned.
(1) If a credit union calculates dividends for the statement period (and uses either the daily balance or the average daily balance method), and the account had a balance of $1,500 for 15 days and a balance of $500 for the remaining 15 days of a 30-day statement period, the average daily balance for the period is $1,000. Assume that $5.25 in dividends was earned during the period. The annual percentage yield earned (using the formula above) is 6.58%:
(2) Assume a credit union calculates dividends on the average daily balance for the calendar month and provides periodic statements that cover the period from the 16th of one month to the 15th of the next month. The account has a balance of $2,000 September 1 through September 15 and a balance of $1,000 for the remaining 15 days of September. The average daily balance for the month of September is $1,500, which results in $6.50 in dividends earned for the month. The annual percentage yield earned for the month of September would be shown on the periodic statement covering September 16 through October 15. The annual percentage yield earned (using the formula above) is 5.40%:
(3) Assume a credit union calculates dividends on the average daily balance for a quarter (for example, the calendar months of September through November), and provides monthly periodic statements covering calendar months. The account has a balance of $1,000 throughout the 30 days of September, a balance of $2,000 throughout the 31 days of October, and a balance of $3,000 throughout the 30 days of November. The average daily balance for the quarter is $2,000, which results in $21 in dividends earned for the quarter. The annual percentage yield earned would be shown on the periodic statement for November. The annual percentage yield earned (using the formula above) is 4.28%:
Credit unions that use the daily balance method to accrue dividends and that issue periodic statements more often than the period for which dividends are compounded shall use the following special formula:
The following definition applies for use in this formula (all other terms are defined under Part II):
“Compounding” is the number of days in each compounding period.
Assume a credit union calculates dividends for the statement period using the daily balance method, pays a 5.00% dividend rate, compounded annually, and provides periodic statements for each monthly cycle. The account has a daily balance of $1000.00 for a 30-day statement period. The dividend earned of $4.11 for the period, and the annual percentage yield earned (using the special formula above) is 5.00%:
Appendix B contains model clauses and sample forms intended for optional use by credit unions to aid in compliance with the disclosure requirements of §§ 707.4 (account disclosures), 707.5 (subsequent disclosures), 707.6 (statement disclosures), and 707.8 (advertisements). Section 269(b) of TISA provides that credit unions that use these clauses and forms will be in compliance with TISA's disclosure provisions.
As discussed in the supplementary information to § 707.3(a), this final rule provides for flexibility in designing the format of the disclosures. Credit unions can choose to prepare a single document or brochure that incorporates disclosures for all accounts offered, or to prepare different documents for each type of account. Credit unions may also use inserts to a document, or fill in blanks to show current rates, fees and other terms.
In the model clauses, words in parentheses indicate the type of disclosure a credit union should insert in the space provided (for example, a credit union might insert “July 23, 1995” in the blank for a “(date)” disclosure). Brackets and “/” indicate that a credit union must choose the alternative that best describes its practice (for example, “[daily balance/ average daily balance]”). It should be noted that only in sections B-6 through B-10 of this appendix have specific examples of disclosures been given, with dates and figures. Sections B-1 through B-5, and section B-11 provide only unspecific model clauses or blank forms. The Board felt, as did the FRB in the Appendix A to Regulation DD, that a mix of blank clauses and forms and application of the model clauses to real specific situations would benefit those who must comply with TISA.
Any references to NCUA Rules and Regulations, the
The interest rate on your deposit account is
This provision reflects an accurate statement for an interest-bearing account authorized by state law for state-chartered credit unions. While the definition of the term “interest” permits its substitution for the term “dividends,” separate disclosures should be made for interest-bearing accounts. Since account opening disclosures may be provided to potential members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current, but that the potential member or member may call the credit union to obtain up-to-date information. When opening a new account, of course, a credit union could provide the contractual rate alone, and delete the sentences in brackets. Given the definition of fixed-rate account in § 707.2(n), credit unions offering fixed-rate accounts must contract to hold rates steady for at least a 30-day period. Thus, if the 30-day option of the last sentence is not chosen, the period chosen must be longer than 30 days.
The dividend rate on your term share account is
This provision reflects an accurate statement for a fixed-rate, dividend-bearing term share account. Interest-bearing term share accounts would use the disclosure in § 1, above. Since account opening disclosures may be provided to potential members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current, but that the potential member or member may call the credit union to obtain up-to-date information. When opening a new account, of course, a credit union could provide the contractual rate alone, and delete the sentences in brackets. Given the definition of fixed-rate account in § 707.2(n), credit unions offering fixed-rate accounts must contract to hold rates steady for at least a 30-day period. Thus, if the 30-day option of the last sentence is not chosen, the period chosen must be longer than 30 days.
Credit unions may disclose the dividend rate and annual percentage yield on accounts as of the last dividend declaration date. This necessitates inclusion of a disclosure of the actual calendar date of the last
The interest rate on your deposit account is
This disclosure combines the requirements of § 707.4(b)(1)(i) with § 707.4(b)(1)(ii) for interest-bearing accounts. The variable nature of a deposit account usually is based on an external index or is set at the discretion of the board. If another means of rate setting is used, that, instead of the proposed language, must be disclosed. Since account opening disclosures may be provided to potential members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current, but that the potential member or member may call the credit union to obtain up-to-date information. When opening a new account, of course, a credit union could provide the contractual rate alone, and delete the sentences in brackets. Rarely would there be limitations on rate changes, but language is provided for this situation in the last sentence. Of course, it is only to be used if it applies to an account.
The dividend rate on your term share account is
This disclosure combines the requirements of § 707.4(b)(1)(i) with § 707.4(b)(1)(ii) for dividend-bearing, variable-rate term share accounts. The variable nature of a deposit account usually is based on an external index or is set at the discretion of the board. If another means of rate setting is used, that, instead of the model language, must be disclosed. Since account opening disclosures may be provided to potential members requesting account information before opening an account, and members opening new accounts, information is provided indicating that the rate may not be current, but that the potential member or member may call the credit union to obtain up-to-date information. When opening a new account, of course, a credit union could provide the contractual rate alone, and delete the sentences in brackets. Rarely would there be limitations on rate changes, but language is provided for this situation in the last sentence. Of course, it is only to be used if it applies to an account.
This language combines the requirements of § 707.4(b)(1)(i) with § 707.4(b)(1)(ii). Credit unions may disclose the dividend rate and annual percentage yield on accounts as of the last dividend declaration date. This necessitates inclusion of a disclosure of the
The initial interest rate on your deposit account is
The initial dividend rate on your term share account is
Stepped-rate accounts are accounts with two or more rates that take effect in succeeding periods. The applicable rates and time periods
1* If your [daily balance/average daily balance] is $
2* If your [daily balance/average daily balance] is more than $
3* If your [daily balance/average daily balance] is $
[For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.]
[
Tiering Method A pays the stated interest rate that corresponds to the applicable deposit tier on the full balance in the account. This example contemplates a two-tier system. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the currency of the rate, as is provided in the first set of brackets. A disclosure regarding the fixed-rate or variable-rate nature of the account must be added, as is provided in the last set of brackets.
1* An interest rate of
2* An interest rate of
3* If your [daily balance/average daily balance] is $
[For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.]
[
Tiering Method B pays different stated interest rates corresponding to applicable deposit tiers, on the applicable balance in each tier of the account. For example, a credit union might pay 3% interest on account funds of $500 or below, and pay 4% interest on the portion of the same account that exceeds $500. The example contemplates an account with two tiers, but additional tiers are possible. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the currency of the rate, as is provided in the first set of brackets.
Tiered-rate accounts can be either fixed-rate or variable-rate accounts. The last sentence offers an option of either fixed-rate or variable-rate disclosure. Thus, the disclosures outlined above will be made in addition to either: (i) Disclosure of the period the fixed-rates are in effect or (ii) the variable-rate disclosures. Tiered-rate accounts are also subject to the requirement for disclosure of the balance computation method,
1* If your [daily balance/average daily balance] is $
2* If your [daily balance/average daily balance] is more than $
3* If your [daily balance/average daily balance] is $
[For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.]
[
Tiering Method A pays the stated dividend rate that corresponds to the applicable account balance tier on the full balance in the account. This example contemplates a two-tier system. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the currency of the rate, as is provided in the first set of brackets. A disclosure regarding the fixed-rate or variable-rate nature of the account must be added, as is provided in the last set of brackets.
1* A dividend rate of
2* A dividend rate of
3* If your [daily balance/average daily balance] is $
[For purposes of this disclosure, this is a rate and APY that were offered within the most recent seven calendar days and were accurate as of (date). Please call (credit union telephone number) to obtain current rate information.]
[
Tiering Method B pays different stated dividend rates corresponding to applicable account balance tiers, on the applicable balance in each tier of the account. For example, a credit union might pay 3% dividend on account funds of $500 or below, and pay 4% dividend on the portion of the same account that exceeds $500. The example contemplates an account with two tiers, but additional tiers are possible. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the currentness of the rate, as is provided in the first set of brackets.
Tiered-rate accounts can be either fixed-rate or variable-rate accounts. The last sentence offers an option of either fixed-rate or variable-rate disclosure. Thus, the disclosures outlined above will be made in addition to either: (i) Disclosure of the period the fixed-rates are in effect or (ii) the variable-rate disclosures. Tiered-rate accounts are also subject to the requirement for disclosure of the balance computation method,
1* [As of [the last dividend declaration date/ (date)], if your [daily balance/average daily balance] was $
2* [As of [the last dividend declaration date/ (date)], if your [daily balance/average daily balance] was more than $
3* [As of the last dividend declaration date/ (date)], if your [daily balance/average daily balance] was $
[
Tiering Method A pays the stated dividend rate that corresponds to the applicable deposit tier on the full balance in the account. This example contemplates a two-tier system. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. For tiered-rate accounts, a disclosure may be added about the prospective rate. Note that the prospective rate disclosure options match the required tiered-rate disclosures based on the previous dividend declaration date. A disclosure regarding the fixed-rate or variable-rate nature of the account must be added, as is provided in the last set of brackets.
1* [As of [the last dividend declaration date/ (date)], a dividend rate of
2* [As of [the last dividend declaration date/ (date)], a dividend rate of
3* [As of [the last dividend declaration date/ (date)], if your [daily balance/average daily balance] was $
Tiering Method B pays different stated dividend rates corresponding to applicable account tiers, on the applicable balance in each tier of the account. For example, a credit union might pay a 3% dividend on account funds of $500 or below, and pay a 4% dividend on the portion of the same account that exceeds $500. The example contemplates an account with two tiers, but additional tiers are possible. The option (1, 2 or 3) most closely matching the terms of the account should be chosen as the appropriate disclosure. Note that the prospective rate disclosure options match the required tiered-rate disclosures based on the previous dividend declaration date.
Tiered-rate accounts can be either fixed-rate or variable-rate accounts. The last sentence offers an option of either fixed-rate or variable-rate disclosures. Thus, the disclosures outlined above must be made in addition to either: (i) Disclosure of the period the fixed-rates are in effect or (ii) the variable-rate disclosures. Tiered-rate accounts are also subject to the requirement for disclosure of the balance computation method, see paragraph (e) to this appendix.
Dividends are paid from current income and available earnings, after required transfers to reserves at the end of a dividend period.
The Board of Directors declares dividends based on current income and available earnings of the credit union after providing for the required reserves at the end of the month. The dividend rate and annual percentage yield shown may reflect either the last dividend declaration date on the account or the earnings the credit union anticipates having available for distribution. This disclosure only applies to share and share draft (as opposed to deposit) accounts and should be grouped with the Rate Information to make the disclosures more meaningful. This disclosure also does not apply to term share accounts for reasons discussed in the supplementary information regarding §§ 707.3(e) and 707.4(b)(8).
[Dividends/Interest] will be compounded (frequency) and will be credited (frequency).
If you close your [share/deposit] account before [dividends/interest] [are/is] paid, you will not receive the accrued [dividends/interest].
For this account type, the dividend period is (frequency), for example, the beginning date of the first dividend period of the calendar year is (date) and the ending date of such dividend period is (date). All other dividend periods follow this same pattern of dates. The dividend declaration date follows the ending date of a dividend period, and for the example is (date).
Where the word “(frequency)” appears, time periods must be inserted to coincide with those specified in board resolutions of each credit union's board of directors. A disclosure of dividend period was added to § 707.4(b)(2)(i) in the final rule to assist members in knowing when dividend rate and APY disclosures would be given by a credit union using the optional statement rule of § 707.6(a). The dividend declaration date is important for purposes of § 707.4(a)(2)(ii), request disclosures, § 707.4(b)(2), account opening disclosures, and § 707.8(c)(2), advertising disclosures. The Board believes that this is critical information for dividend-bearing accounts, but that provision by an example (whether of the first dividend period of the year, or of any randomly chosen dividend period) is favorable to providing a list of such dates for the entire year or for a period of years (although these methods would also be permissible). As noted in the supplementary information to § 707.2(j), dividend declaration date, the dividend period and actual dividend distribution date may vary. Thus, it is possible for crediting periods and dividend periods not to coincide, though the Board believes that credit unions should make every effort to attempt to coordinate the two periods.
(i)
The minimum balance required to open this account is $
The minimum required to open this account is the purchase of a (par value of a share) share in the credit union.
(ii)
You must maintain a minimum daily balance of $
You must maintain a minimum average daily balance of $
(iii)
You must maintain a minimum daily balance of $
or
You must maintain a minimum average daily balance of $
(iv)
No minimum balance requirements apply to this account.
(v)
The par value of a share in this credit union is $
Where the words “(time period)” appear, time periods should be inserted to coincide with those specified in board resolutions of each credit union's board of directors. As the supplementary information to § 707.4(b)(3)(i) explains, the par value of a share to establish membership is a critical disclosure to be made to potential members of credit unions. The par value disclosure is required by § 707.4(b)(3)(i) as being analogous to a minimum balance account opening requirement.
(i)
[Dividends/Interest] [are/is] calculated by the daily balance method which applies a daily periodic rate to the balance in the account each day.
(ii)
[Dividends/Interest] [are/is] calculated by the average daily balance method which applies a periodic rate to the average daily balance in the account for the period. The average daily balance is calculated by adding the balance in the account for each day of the period and dividing that figure by the number of days in the period.
Any explanation of balance computation method must contain enough information for members to grasp the means by which dividends or interest will be calculated on their accounts. Using a shorthand form, such as “day in/day out” for the daily balance method or “average balance” for the average daily balance method, without more information, is insufficient. In addition, any disclosure based on the equivalency of the two allowable methods, such as stating that the average daily balance method was the same as the daily balance method, is impermissible and misleading.
[Dividends/Interest] will begin to accrue on the business day you [place/deposit] noncash items (e.g. checks) to your account.
[Dividends/Interest] will begin to accrue no later than the business day we receive provisional credit for the [placement/deposit] of noncash items (e.g. checks) to your account.
Accrual information is not included in the explanation of balance computation method required by § 707.4(b)(4)(ii). In addition, the disclosures required by TISA do not affect the substantive requirements of the EFAA and Regulation CC.
The EFAA and Regulation CC control, and any modifications to them should occasion credit unions to revisit this disclosure with a view to revising it to reflect current law.
The following fees and charges may be assessed against your account:
Fees and charges may be disclosed in an account disclosure, or separately in a Rate and Fee Schedule (see section B-11 of this appendix). In either event, the disclosure should also specify when the fee will be assessed by using phrases such as “per item,” “per month,” or “per inquiry.”
The minimum amount you may [withdraw/write a draft for] is $
During any statement period, you may not make more than six withdrawals or transfers to another credit union account of yours or to a third party by means of a preauthorized or automatic transfer or telephonic order or instruction. No more than three of the six transfers may be made by check, draft, debit card, if applicable, or similar order to a third party. If you exceed the transfer limitations set forth above in any statement period, your account will be subject to [closure by the credit union/a fee of $
This paragraph satisfies the requirements of § 707.4(b)(6) with respect to Regulation D limitations on share accounts and money market accounts. These are some of the more common limitations applicable.
The credit union reserves the right to require a member intending to make a withdrawal from any account (except a share draft account) to give written notice of such intent not less than seven days and up to 60 days before such withdrawal.
This disclosure is limited to federal credit unions with Bylaws containing this limitation. See
(i)
Your account will mature on (date).
Your account will mature after (time period).
(ii)
We [will/may] impose a penalty if you withdraw [any/all] of the [funds/principal] in your account before the maturity date. The penalty will equal [
We [will/may] impose a penalty of $
If you withdraw some of your funds before maturity, the [dividend/interest] rate for the remaining funds in your account will be
In most cases, the dividend rate and annual percentage yield on the funds remaining in the account after early withdrawal are the same as before the withdrawal. Accordingly, the disclosure of dividend rate and annual percentage yield after withdrawal is required only if the dividend rate and APY will change.
(iii)
The annual percentage yield is based on an assumption that [dividends/interest] will remain in the account until maturity. A withdrawal will reduce earnings.
This disclosure may be used if the credit union compounds dividends/interest and allows withdrawal of accrued dividends/interest before maturity. This disclosure alerts members that the annual percentage yield is based on an assumption that the dividends/interest remain on deposit until maturity.
(iv)
Your term share account will automatically renew at maturity. You will have a grace period of
Your term share account will automatically renew at maturity. There is no grace period following the maturity of this account.
This account will not renew automatically at maturity. If you do not renew the account, your account will [continue to earn/no longer earn] [dividends/interest] after the maturity date.
These disclosures should agree with the necessary pre-maturity notices for term share accounts in B-3 of this appendix.
(v)
This account requires the distribution of dividends and does not allow dividends to remain in the account.
You will [be paid/receive] [$
You must maintain a minimum [daily balance/average daily balance] of $
To earn the bonus, [$
These disclosures follow the requirements of § 707.4(b)(7) and should be used as applicable. Further information may also be added, especially if it clarifies the conditions and timing of receiving the bonus, or better informs the member about the bonus.
On (date), the (type of fee) will increase to $
On (date), the [dividend/interest] rate on your account will decrease to
On (date), the [minimum daily balance/average daily balance] required to avoid imposition of a fee will increase to $
These examples apply to the more common changes necessitating a change in terms notice. However, any change, amendment or modification reducing the APY or adversely affecting the members holding such accounts must be disclosed. For such changes not contemplated by the model clauses, the Board recommends the use of as simple language as possible to convey the change, along with cross-referencing to the particular sections or paragraph numbers of the account opening disclosures, when to do so
Your term share account will mature on
Unless your term share account is renewed, it will not accrue further [dividends/interest] after the maturity date.
The [dividend/interest] rate and annual percentage yield that will apply to your term share account if it is renewed have not yet been determined. That information will be available on
Pre-maturity notices should follow the requirements of § 707.5(b-d) as closely as possible. Care should be taken to explain any grace periods used. See discussion of use of alternative timing in supplementary information to § 707.2(o) and § 707.5(b-d).
I hereby make application for membership in and agree to conform to the Bylaws, as amended, of
This application approved
This form is modeled on NCUA Form FCU 150, Application for Membership, as discussed in the
This is to certify that (name(s))
This form is modeled on NCUA Form FCU 107SCP, Credit Union Share Certificate, as discussed in the
1.
2.
3.
4.
5.
6.
a. Statement copies—$5.00 per statement.
b. Account inquiries—$3.00 per inquiry.
c. Dormant account fee—$10.00 per month.
d. Wire transfers—$8.00 per transfer.
e. Minimum balance service fee—$5.00 per quarter.
f. Share transfer—$1.00 per transfer.
g. Excessive share withdrawals $1.00 per item.
7.
8.
9.
10.
11.
12.
This form is modeled on the share account disclosures in the
1.
2.
3.
4.
5.
6.
a. Statement copies—$5.00 per statement.
b. Account inquiries—$3.00 per inquiry.
c. Dormant account fee—$10.00 per month.
d. Wire transfers—$8.00 per transfer.
e. Overdrafts/Returned Items—$5.00 per draft.
f. Share transfer—$1.00 per transfer.
g. Excessive share withdrawals—$1.00 per item.
h. Certified checks—$5.00 per check.
i. Stop Payment Order—$5.00 per order.
j. Check Printing Fee—$12.00 per 200 checks (varies depending on style of check ordered).
7.
8.
9.
10.
11.
12.
This form is modeled on the share account disclosures in the
1.
2.
3.
4.
5.
6.
a. Statement copies—$5.00 per statement.
b. Account inquiries—$3.00 per inquiry.
c. Dormant account fee—$10.00 per month.
d. Wire transfers—$8.00 per transfer.
e. Minimum balance service fee—$5.00 per (time period).
f. Share transfer—$1.00 per transfer.
g. Excessive share withdrawals—$1.00 per item.
h. Certified checks—$5.00 per check.
i. Stop Payment Order—$5.00 per order.
j. Check Printing Fee—$12.00 per 200 checks (varies depending on style of check ordered).
7.
8.
9.
10.
11.
12.
This form is modeled on the share account disclosures in the Accounting Manual for FCUs, § 5150.7 and on the share draft account disclosures in section B-7 of this appendix. The disclosures are for a variable-rate, tiered-rate (method A, option 1), average daily balance method dividend calculation, money market share account in a FISCU with a $500 minimum balance to open the account and to avoid service fees. For purposes of this example, the account was opened on January 29, 1995. Other terms are self-explanatory. The dividend rate paid and annual percentage yield disclosures will reflect the prospective dividend rate for a
1.
2.
3.
4.
5.
6.
a. Statement copies—$5.00 per statement.
b. Account inquiries—$3.00 per inquiry.
c. Share transfer— $1.00 per transfer.
7.
8.
9.
10.
11.
12. [Reserved]
13.
14.
15.
16.
Even though this disclosure if for an account at a FISCU, this form is modeled on the share account disclosures in the
Your account earned $6.72, with an annual percentage yield earned of 5.40%, for the statement period from May 1 through and including May 31. In addition, your account earned $15 in extraordinary dividends for this period. Any fees assessed against your account are shown in the body of the periodic statement and are identified by the code at the bottom margin of this statement.
This form is modeled on the share draft statement of account, Form FCU 107G-SD, in the
This Rate and Fee Schedule for all Accounts sets forth certain conditions, rates, fees and charges applicable to your regular share, share draft, and money market accounts at the
Dividend Rate as of Last Dividend Declaration Date
Annual Percentage Yield as of Last Dividend Declaration Date
Prospective Dividend Rate
Prospective Annual Percentage Yield
Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily].
Dividends Credited—At close of a dividend period.
Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily].
Minimum Opening Deposit $5.00 par value share.
Minimum Monthly Balance [None, $ amount].
Dividend Rate as of Last Dividend Declaration Date
Annual Percentage Yield as of Last Dividend Declaration Date
Prospective Dividend Rate
Prospective Annual Percentage Yield
Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily].
Dividends Credited—At close of a dividend period.
Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily].
Minimum Opening Deposit [None, $ amount].
Minimum Monthly Balance [None, $ amount].
Dividend Rate as of Last Dividend Declaration Date
Annual Percentage Yield as of Last Dividend Declaration Date
Prospective Dividend Rate
Prospective Annual Percentage Yield
Dividends Compounded [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily].
Dividends Credited—At close of a dividend period.
Dividend Period [Annually, Semiannually, Quarterly, Monthly, Weekly, Daily].
Minimum Opening Deposit [None, $ amount].
Minimum Monthly Balance [None, $ amount].
The following fees may be assessed in connection with your accounts:
Returned item fee—$
Account reconciliation fee—$
Statement copies fee—$
Certified draft fee—$
Wire transfer fee—$
Account inquiry fee—$
Dormant account fee—$
Minimum balance service fee—$
Share transfer fee—$
Excessive share withdrawals fee—$
Monthly service fee—$
Overdraft transfers fee—$
Drafts returned insufficient funds fee—$
Stop payment order fee—$
Draft copy fee—$
Check printing fee—$
Monthly service fee—$
Check printing fee—$
This illustration is for use of an FCU. The information provided on a Rate and Fee Schedule can be presented in any format. To ensure that it is a part of the account agreement, if used, it should be incorporated by reference into the appropriate share account disclosures. The figures used are illustrative only, except for the overdraft transfer fee of $1.00 per overdraft and the excessive share transfer fee of $1.00 per item, which are set in the
1.
1.
2.
3.
1.
2.
3.
4.
1.
i. Dividend-bearing and interest-bearing accounts.
ii. Non-dividend-bearing and non-interest-bearing accounts.
iii. Accounts opened as a condition of obtaining a credit card.
iv. Escrow accounts with a consumer purpose, such as an account established by a member to escrow rental payments, pending resolution of a dispute with the member's landlord.
v. Accounts held by a parent or custodian for a minor under a state's Uniform Gift to Minors Act (or Uniform Transfers to Minors Act).
vi. Individual retirement accounts (IRAs) and simplified employee pension (SEP) accounts.
vii. Payable-on-Death (POD) or “Totten trust” accounts.
2.
i. Mortgage escrow accounts for collecting taxes and property insurance premiums.
ii. Accounts established to make periodic disbursements on construction loans.
iii. Trust accounts opened by a trustee pursuant to a formal written trust agreement (not merely declarations of trust on a signature card such as a “Totten trust,” or an IRA or SEP account).
iv. Accounts opened by an executor in the name of decedent's estate.
v. Accounts of individuals operating businesses as sole proprietors.
vi. Certificates of indebtedness. Some credit unions borrow funds from their members through a certificate of indebtedness that sets forth the terms and conditions of the repayment of the borrowing, such as federal credit unions do through 12 CFR 701.38. Such an account does not represent an account in a credit union and is not covered by part 707.
vii. Unincorporated nonbusiness association accounts.
3.
i. Government securities.
ii. Mutual funds.
iii. Annuities.
iv. Securities or obligations of a credit union.
v. Contractual arrangements such as repurchase agreements, interest rate swaps, and bankers acceptances.
vi. Purchases of U.S. Savings Bonds through a credit union.
vii. Services offered through a group purchasing plan or a credit union service organization (CUSO).
4.
5.
i. The term “checking account” may be used to describe share draft accounts.
ii. The term “money market account” may be used to describe money market share accounts.
iii. The term “savings account” may be used to describe regular share and share accounts.
iv. The terms “share certificate,” “certificate account,” or “certificate” may be used to describe share certificates and other dividend-bearing term share accounts.
v. However, under no circumstances may a credit union describe a share account as a deposit account, or vice versa. For example, the term “certificate of deposit” or “CD” may not be used to describe share certificates and other dividend-bearing term share accounts. Similarly, the terms “time account” (used in Regulation DD, 12 CFR 230.2(u)) and “time deposit” (used in Regulation D, 12 CFR 204.2(c)) may not be used to describe term share accounts.
1.
i. Telephone solicitations.
ii. Messages on automated teller machine (ATM) screens (including any printout).
iii. Messages on a computer screen in a credit union's lobby (including any printout) other than a screen viewed solely by the credit union's employee.
iv. Messages in a newspaper, magazine, or promotional flyer or on radio or television.
v. Messages promoting an account that are provided along with information about the member's existing account at a credit union and that promote another account at the credit union (such as account promotional messages on the periodic statement).
2.
i. Rate sheets published in newspapers, periodicals, or trade journals (unless the credit union or share and deposit broker that offers accounts at the credit union pays a fee to have the information included or otherwise controls publication).
ii. Telephone conversations initiated by a member or potential member about an account.
iii. An in-person discussion with a member about the terms for a specific account.
iv. Information provided to members about their existing accounts, such as on IRA disbursements, notices for automatically renewable term share accounts sent before renewal, or current rates recorded on a voice response machine.
1.
2.
1.
1.
1.
2.
i. A credit union offers $25 to potential members for becoming a member and opening an account. The $25 could be provided by check, cash, or direct deposit.
ii. A credit union offers $25 to a member with only a regular share account to open a share draft account. The $25 could be provided by check, cash, or direct deposit.
iii. A credit union offers a portable radio with a value of $20 to members and potential members for opening a share draft account.
iv. A credit union pays the final installment deposit for a holiday club account if over $10.
3.
i. Discount coupons distributed by credit unions for use at restaurants or stores.
ii. A credit union offers $20 to any member if the member is responsible for encouraging a potential member to open an account. The $20 is not a bonus because the $20 is not paid to the individual opening the account. Any item, including cash, given or offered to a third party (that is not a joint member or joint owner in an account being opened) in exchange for a member or potential member opening (or a member renewing or adding to) an account is not a bonus.
iii. A credit union offers $25 to a member if the member can locate his name in the body of a newsletter.
iv. Life savings benefits. Many credit unions offer life savings benefits to beneficiaries of deceased members. Because the benefit accrues to a third party, such life savings plans offered are not bonuses.
v. A credit union offers to pay annual membership dues in a benevolent organization for a class of members.
4.
i. Disability insurance premiums on a share account valued at an amount of $10 or less per year.
ii. Coffee mugs, T-shirts or other merchandise with a market value of $10 or less per year.
5.
6.
i. Waiving a safe deposit box rental fee for one year for members who open a new account.
ii. Waiving fees for travelers checks for members, and waiving check and share draft printing fees.
iii. Nondiscriminatorily waiving all fees for a particular class of members, such as seniors or minors.
iv. Discounts on interest rates charged for loans at the credit union.
v. Rebates of loan interest already paid by a member.
vi. Discounts on application fees charged for loans at the credit union.
vii. Packaged, linked, or tied-account services.
7.
1.
1.
1.
2.
3.
4.
A. I,
B. Resolved, that
(1) The Board of Directors has developed a nondiscriminatory dividend policy, by establishing dividend periods, dividend credit determination dates, dividend distribution dates, any associated penalties (if applicable), and the method of dividend computation for each type of share account;
(2) The required transfers to reserves have been made; and
(3) Sufficient and available prior and/or current earnings are available at the end of this dividend period.
C. Resolved, further, that the Board of Directors now formally makes a dividend declaration in accordance with the Credit Union's dividend policy and authorizes that on
D. I further certify that the Board of Directors of this Credit Union has, and the time of adoption of this resolution had, full power and lawful authority to adopt the foregoing resolutions and that this resolution revokes any prior resolution.
In witness whereof, this is my signature and the date on which I signed this Resolution.
(ii) The following resolution may be used where the dividend rates are set before the close of a dividend period.
A. I,
B. Resolved, that the Board of Directors has adopted a nondiscriminatory dividend policy, by establishing dividend periods, dividend credit determination dates, dividend distribution dates, any associated penalties (if applicable) and the method of dividend computation for each type of share account.
C. Resolved, that it is the policy and practice of the Board of Directors to meet periodically to establish prospective dividend rates for each type of dividend-bearing share account.
D. Resolved, that if the required transfers to reserves have been made and there are sufficient and available prior and/or current
In witness whereof, this is my signature and the date on which I signed this Resolution.
5.
1.
i. “As of 3/15/95” (the date the board of directors last met and declared the last paid dividend).
ii. “As of 3/31/95” (the last day of the last dividend period upon which a dividend has been paid).
iii. “For the period 1/1/95 to 3/31/95” (the last dividend period upon which a dividend has been paid).
iv. “For the first quarter of 1995” (the last dividend period upon which a dividend has been paid).
v. “For April 1995” (the last dividend period upon which a dividend has been paid).
vi. “As of the last dividend declaration date” (the last dividend period upon which a dividend has been paid).
1.
1.
2.
1.
2.
1.
1.
1.
2.
3.
1.
i. Attorney-client trust accounts.
ii. Trust, estate and court-ordered accounts.
iii. Landlord-tenant security accounts.
2.
3.
1.
2.
i Food, refreshments, and drawings and raffles at annual meetings, member functions, and branch openings.
ii. Travel club benefits.
iii. Prizes offered at annual meetings, such as U.S. Savings Bonds, a deposit of funds into the winner's account, trips, and other gifts. Such prizes are not bonuses because they are offered as an incentive to increase attendance at the annual meeting, and not to entice members to open, maintain, or renew accounts or increase an account balance.
iv. Life savings benefits.
1.
1.
2.
i. Additional statements provided solely upon request.
ii. Information provided by computer through home electronic credit union account services.
iii. General service information such as a quarterly newsletter or other correspondence that describes available services and products.
1.
2.
3.
1.
1.
2.
1.
2.
1.
2.
3.
4.
1.
2.
i. Additional account disclosures are required (§ 707.4(b)(1)(ii));
ii. Rate decreases are exempted from change-in-terms requirements (§ 707.5(a)(2)(i)); and
iii. Advertising notice required (§ 707.8(c)(1)).
Fixed-rate accounts require a contract term obligating the credit union to a 30-day advance, written notice to members before decreasing the dividend rate on the account. Term changes adversely affecting the member and rate decreases cannot take effect until 30 days after such fixed-rate change-in-
1.
2.
i. In any order.
ii. In combination with other disclosures or account terms.
iii. In combination with disclosures for other types of accounts, as long as it is clear to members and potential members which disclosures apply to their account.
iv. On more than one page and on the front and reverse sides.
v. By using inserts to a document or filling in blanks.
vi. On more than one document, as long as the documents are provided at the same time.
3.
1.
2.
3.
1.
i. A credit union changes a term that triggers a notice under Regulation E, and the timing and disclosure rules of Regulation E for sending change-in-terms notices.
ii. A member adds an ATM access feature to an account, and the credit union provides disclosures pursuant to Regulation E, including disclosure of fees before the member receives ATM access. (See 12 CFR 205.7.)
iii. A credit union complying with the timing rules of Regulation E discloses at the same time fees for electronic services (such as balance inquiry fees imposed if the inquiry is made at an ATM) that are required to be disclosed by this regulation, but not by Regulation E.
iv. A credit union relies on Regulation E's rules regarding disclosures of limitations on the frequency and amount of electronic fund transfers, including security-related exceptions. But any limitation on the number of “intra-institutional transfers” to or from the member's other accounts at the credit union during a given time period must be disclosed, even though intra-institutional transfers are exempt from Regulation E.
1.
1.
2.
3.
1.
1.
2.
1.
i. A term share account that does not automatically rollover is renewed by a member.
ii. A member changes the term for a renewable term share account (from a one-year term share account to a six-month term share account, for instance) (see comment 5(b)-5 regarding disclosure alternatives).
iii. A credit union transfers funds from an account to open a new account not at the member's request, unless the credit union previously gave account disclosures and any change-in-terms notices for the new account (e.g., funds in a money market share account are transferred by a credit union to open a new account for the member, such as a share draft account, because the member exceeded transaction limitations on the money market share account).
iv. A credit union accepts a deposit from a member to an account that the credit union had previously deemed to be “closed,” under applicable federal or state law, for the purpose of treating accrued, but uncredited, dividends as forfeited dividends. New account numbers are not required by this requirement.
2.
3.
1.
2.
3.
1.
1.
1.
2.
3.
4.
5.
1.
i. Identify the index and specific margin, if the dividend rate is tied to an index.
ii. State that rate changes are within the credit union's discretion, if the credit union does not tie changes to an index.
1.
1.
1.
2.
1.
1.
2.
1.
1.
1.
i. Maintenance fees, such as monthly service fees.
ii. Fees related to share deposits or withdrawals.
iii. Fees for special services, such as stop payment fees, fees for balance inquiries or verification of share and deposits, fees associated with checks returned unpaid, fees for regularly sending to members share drafts that otherwise would be held by the credit union, and overdraft line of credit access fees (if charged against the share account).
iv. Fees to open or to close an account.
v. Fees imposed upon dormant or inactive accounts.
2.
i. Fees for services offered to members and nonmembers alike, such as fees for certain travelers checks, for wire transfers and automated clearinghouse (ACH) transfers, to process credit card cash advances, or to handle U.S. Savings Bond Redemption (even if different amounts are charged to members and nonmembers).
ii. Incidental fees, such as fees associated with state escheat laws, garnishment or attorneys fees, to change names on an account, to generate a midcycle periodic statement, to wrap loose coins, for photocopying, for statements returned to the credit union because of a wrong address, and locator fees.
3.
i. “$4.00 monthly service fee”.
ii. $7.00 and up” or “fee depends on style of checks ordered” for check printing fees.
4.
5.
1.
i. Limits on the number of share drafts or checks that may be written on an account for a given time period.
ii. Limits on withdrawals or share deposits during the term of a term share account.
iii. Limitations required by Regulation D, such as the number of withdrawals permitted from money market share accounts by check to third parties each month (credit unions need not disclose reservation of right to require a notice for withdrawals from accounts required by federal or state law).
1.
1.
2.
i. Monetary penalties, such a specific dollar amount (e.g., “$10.00”) or a specific days’ worth of dividends (e.g., “seven days’ dividends plus accrued but uncredited dividends, but only if the account is closed”).
ii. Adverse changes to terms such as the lowering of the dividend rate, annual percentage yield, or reducing the compounding or crediting frequency for funds remaining in shares or on deposit.
iii. Reclamation of bonuses.
3.
4.
1.
2.
1.
1.
2.
1.
2.
3.
4.
1.
2.
3.
4.
i. The termination of employment for employee-members for whom account maintenance or activity fees were waived during their employment by the credit union.
ii. The expiration of one year in a promotion described in the account opening disclosures to “waive $4.00 monthly service charges for one year”.
1.
1.
2.
i. A specific date, such as “October 28”.
ii. A date that is easily discernible, such as “the Tuesday prior to the maturity date stated on the notice” or “as of the maturity date stated on this notice”.
3.
4.
5.
i. If the change is initiated by the credit union, the disclosure requirements of this paragraph apply. (Section 707.5(a) applies if the change becomes effective prior to the maturity of the existing term share account.)
ii. If the change is initiated by the member, the account opening disclosure requirements of § 707.4(b) apply. (If the notice required by this paragraph has been provided, credit unions may give new account disclosures or disclosures that reflect the new term.)
6.
1.
1.
1.
2.
3.
i. The information is limited to information such as the account number, the type of account, balance information, accountholders’ names, and social security or tax identification number; and
ii. The credit union also provides members a periodic statement complying with this section for the account (the money market share account or regular share account, in the example).
4.
i. Dividend rates and corresponding periodic rates to the dividend rate applied to balances during the statement period.
ii. The dollar amount of dividends earned year-to-date.
iii. Bonuses paid (or any
iv. Fees for other products, such as safe deposit boxes.
v. Accounts not covered by the periodic statement disclosure requirements (passbook and term share accounts) may disclose any information on the statement related to such accounts, so long as such information is accurate and not misleading.
5.
6.
7.
8.
1.
1.
2.
3.
4.
5.
1.
2.
Examples of fees that may
i. Monthly maintenance with excess activity fees.
ii. “Transfer” fees, if different dollar amounts are imposed—such as $.50 for share deposits and $1.00 for withdrawals.
iii. Fees for electronic fund transfers with fees for other services, such as balance inquiry or maintenance fees.
3.
i. Credit unions may use a code to identify a particular fee if the code is explained on the periodic statement or in documents accompanying the statement.
ii. Credit unions using debit slips may disclose the date the fee was debited on the periodic statement and show the amount and type of fee on the dated debit slip.
4.
1.
2.
1.
i. The “rollback” method, also known as the “grace period” or “in by the 10th” method, where credit unions pay dividends on the lowest balance in the account for the period.
ii. The “increments of par value” method, where credit unions only pay dividends on full shares in an account, e.g., a credit union with $5 par value shares pays dividends on $20 of a $24 account balance.
iii. The “ending balance” method, where credit unions pay dividends on the balance in the account at the end of the period.
iv. The “investable balance” method, where credit unions pay dividends on a percentage of the balance, excluding an amount credit unions set aside for reserve requirements.
v. The “low balance” method, where credit unions pay dividends on the lowest balance in the account for any day in that period.
2.
3.
4.
5.
i. During any grace period offered by a credit union for an automatically renewable term share account, if the member decides during that period not to renew the account.
ii. Following the maturity of nonrollover term share accounts.
iii. When the maturity date falls on a holiday, and the member must wait until the next business day to obtain the funds.
6.
7.
8.
1.
2.
3.
4.
i. A credit union using the daily balance method to calculate dividends and requiring a $500 minimum daily balance could choose to pay dividends on the account (for those days the minimum balance is not met) as long as the member maintained an average daily balance throughout the month of $400.
ii. A credit union using the average daily balance method to calculate dividends and requiring a $400 minimum average daily balance could choose to pay dividends on the account as long as the member maintained a daily balance of $500 for at least half of the days in the period.
iii. A credit union using either the daily balance method or average daily balance method to calculate dividends that requires: (A) a $500 daily balance; or (B) a $400 average daily balance to pay dividends on the account.
5.
6.
i. The daily or average daily balance on which dividends will be paid.
ii. Whether any minimum balance to earn dividends is met. (See commentary to Appendix A, Part II, which prohibits credit unions from using negative balances in calculating the dividends figure for the annual percentage yield earned.)
7.
8.
1.
2.
3.
1.
2.
3.
1.
2.
i. For a tiered-rate account, it also provides the upper and lower dollar amounts of the tier corresponding to the advertised annual percentage yield.
ii. For a term share account, it also provides the term required to obtain the advertised annual percentage yield.
3.
i. Any fee imposed if a minimum balance requirement is not met, or if the member exceeds a specified number of transactions.
ii. Transaction and service fees that members reasonably expect to be imposed on an account on a regular basis (see comments 4(b)(4)-1 and 2).
iii. A flat fee, such as a monthly service fee.
iv. Fees imposed to deposit, withdraw or transfer funds, including per-check or per-transaction charges (for example, $.25 for each withdrawal, whether by check, in person).
4.
i. Fees that are not required to be disclosed under § 707.4(b)(4).
ii. Check printing fees of any type.
iii. Fees for obtaining copies of checks, whether or not the original checks have been truncated or returned to the member periodically.
iv. Balance inquiry fees.
v. Fees assessed against a dormant account.
vi. Fees for using an ATM.
vii. Fees for electronic transfer services that are not required to obtain an account, such as preauthorized transfers or home electronic credit union services.
viii. Stop payment fees and fees for share drafts or checks returned unpaid.
5.
6.
7.
8.
1.
2.
3.
i. Provide a representative example of the annual percentage yields offered, clearly described as such. For example, if a credit union offers a $25 bonus on all term share accounts and the annual percentage yield will vary depending on the term selected, the credit union may provide a disclosure of the annual percentage yield as follows: “For example, our 6-month share certificate currently pays a 3.15% annual percentage yield.”
ii. Indicate that various rates are available, such as by stating short-term and longer-term maturities along with the applicable annual percentage yields: “We offer share certificates with annual percentage yields that depend on the maturity you choose. For example, our one-month share certificate earns a 2.75% APY. Or, earn a 5.25% APY for a three-year share certificate.”
1.
i. “One, three, and five year share certificates available”.
ii. “Bonus rates available”.
iii. “1% over our current rate,” so long as the rates are not determinable from the advertisement.
1.
2.
1.
1.
1.
1.
1.
1.
1.
1.
2.
i. Mailing newsletters to existing members.
ii. Distributing newsletters at a function reasonably limited to members, such as an annual meeting or member picnic.
iii. Displaying or offering newsletters at a credit union lobby, branch, or office.
3.
1.
i. Established and maintained procedures for paying dividends and providing timely disclosures as required by the regulation, and
ii. Retained sample disclosures for each type account offered to members, such as account-opening disclosures, copies of advertisements, and change-in-term notices; and information regarding the dividend rates and annual percentage yields offered.
2.
3.
12 U.S.C. 1766, 12 U.S.C. 1785(b).
63 FR 65535, Nov. 27, 1998, unless otherwise noted.
As used in this part:
(a)
(b)
(c)
(d)
An insured credit union, with the approval of its members, may convert to a mutual savings bank or a savings association that is in mutual form without the prior approval of the NCUA, subject to applicable law governing mutual savings banks and savings associations and the other requirements of this part.
(a) The board of directors must approve a proposal to convert by majority vote and set a date for a vote on the proposal by the members of the credit union.
(b) The membership must approve the proposal to convert by the affirmative vote of a majority of those members who vote on such proposal.
(a) A member may vote on the proposal to convert in person at a special meeting held on the date set for the vote or by written ballot filed by the member.
(b) A credit union that proposes to convert must provide written notice of its intent to convert to each member who is eligible to vote on the conversion. The notice to members must be submitted 90 calendar days, 60 calendar days, and 30 calendar days before the date of the membership vote on the conversion and a ballot must be submitted not less than 30 calendar days before the date of the vote.
(c) The notice to members must adequately describe the purpose and subject matter of the vote to be taken at the special meeting or by submission of the written ballot. The notice must clearly inform the member that the member may vote at the special meeting or by submitting the written ballot. The notice must state the date, time, and place of the meeting.
(a) The credit union must provide the Regional Director for the region where the credit union is located with notice of its intent to convert during the 90 calendar day period preceding the date of the membership vote on the conversion.
(b) The credit union must give notice to the Regional Director by providing a letter describing the material features of the conversion or a copy of the filing the credit union has made with another Federal or State regulatory agency in which the credit union seeks that agency's approval of the conversion. The credit union must include with the notice to the Regional Director a copy of the notice the credit union provides to members under § 708a.4, as well as, the ballot form and all written materials the credit union has distributed or intends to distribute to the members.
(c) If it chooses, the credit union may provide the Regional Director notice of its intent to convert prior to the 90 calendar day period preceding the date of the membership vote on the conversion. In this case, the Regional Director will make a preliminary determination regarding the methods and procedures applicable to the membership vote. The Regional Director will notify the credit union within 30 calendar days of receipt of the credit union's notice of intent to convert if the Regional Director disapproves of the proposed methods and procedures applicable to the membership vote. The credit union's prior submission of the notice of intent does not relieve the credit union of its obligation to certify the results of the membership vote required by § 708a.6 or eliminate the right
The board of directors of the converting credit union must certify the results of the membership vote to the Regional Director within 10 calendar days after the vote is taken. The board of directors must also certify at this time that the notice, ballot and other written materials provided to members were identical to those submitted pursuant to § 708a.5 or provide copies of any new or revised materials and an explanation of the reasons for the changes.
(a) The Regional Director will issue a determination that the methods and procedures applicable to the membership vote are approved or disapproved within 10 calendar days of receipt from the credit union of the certification of the result of the membership vote required under § 708a.6.
(b) If the Regional Director disapproves of the methods by which the membership vote was taken or the procedures applicable to the membership vote, the Regional Director may direct that a new vote be taken.
(c) The Regional Director's review of the methods by which the membership vote was taken and the procedures applicable to the membership vote includes determining that the notice to members is accurate and not misleading, that all notices required by this section were timely, and that the membership vote was conducted in a fair and legal manner.
The Federal or State regulatory agency that will have jurisdiction over the financial institution after conversion must verify the membership vote and may direct that a new vote be taken, if it disapproves of the methods by which the membership vote was taken or the procedures applicable to the membership vote.
(a) Upon receipt of approvals under § 708a.7 and § 708a.8 of this part, the credit union may complete the conversion transaction.
(b) Upon notification by the board of directors of the mutual savings bank or mutual savings association that the conversion transaction has been completed, the NCUA will cancel the insurance certificate of the credit union and, if applicable, the charter of the federal credit union.
No director or senior management official of an insured credit union may receive any economic benefit in connection with the conversion of the credit union other than compensation and other benefits paid to directors or senior management officials of the converted institution in the ordinary course of business.
12 U.S.C. 1766, 1785, 1786, 1789.
52 FR 12374, Apr. 16, 1987. Redesignated at 59 FR 48792, Sept. 23, 1994, unless otherwise noted.
(a) Subpart A of this part prescribes the procedures for merging one or more credit unions with a continuing credit union where at least one of the credit unions is federally insured.
(b) Subpart B of this part prescribes the procedures and notice requirements for termination of Federal insurance or conversion of Federal insurance to nonfederal insurance, including termination or conversion resulting from a merger.
(c) Subpart C of this part sets forth the forms to be used for terminating Federal insurance or converting from Federal insurance to nonfederal insurance.
(d) Nothing in this part shall operate as a restriction or otherwise impair the authority of NCUA to approve a merger pursuant to section 205(h) of the Act.
(e) This part does not address procedures or requirements that may be applicable under state law for a state credit union.
(a)
(b)
(c)
(d)
(e)
(f)
(g) The terms
(h) The term
(a) In any case where a merger will result in the termination of Federal insurance or conversion to nonfederal insurance, the merging credit union must comply with the provisions of subpart B in addition to this subpart A.
(b) No federally-insured credit union shall merge with any other credit union without the prior written approval of the Board.
(c) Where the continuing credit union is a Federal credit union, there must be compliance with the chartering policies of the Board.
(d) Where the continuing or merging credit union is a state credit union, the merger must be permitted by state law or authorized by the state authority.
(a) Where the continuing credit union is federally insured, an NCUSIF deposit and a prorated insurance premium (unless waived in whole or in part for all insured credit unions during that year)
(b) Where the continuing credit union is nonfederally insured or uninsured but desires to be federally insured as of the date of the merger, an application shall be submitted to the appropriate Regional Director when the merging credit union requests approval of the merger proposal. An NCUSIF deposit and a prorated insurance premium (unless waived in whole or in part for all insured credit unions during that year) will be assessed on any additional share accounts insured as a result of the merger.
(c) Where the continuing credit union is nonfederally insured or uninsured and does not make application for insurance, but the merging credit union is federally insured, the continuing credit union is entitled to a refund of the merging credit union's NCUSIF deposit and to a refund of the unused portion of the NCUSIF share insurance premium (if any). If the continuing credit union is uninsured, the refund will be made only after expiration of the one-year period of continued insurance coverage noted in paragraph (e) of this section.
(d) Where the continuing credit union in nonfederally insured, NCUSIF insurance of the member accounts of a merging federally-insured credit union ceases as of the effective date of the merger. (Refer to subpart B, §§ 708b.203 and 708b.204 and subpart C, § 708b.302(b).)
(e) Where the continuing credit union is uninsured, NCUSIF insurance of the member accounts of the merging federally-insured credit union will continue for a period of one year, subject to the restrictions in section 206(d)(1) of the Act as noted in the Notice of Termination set forth in § 708b.301(b)(3). (Refer to subpart B, §§ 708b.201 and 708b.202, and subpart C, § 708b.301(b).)
(a) Upon the approval of a proposition for merger by the boards of directors of the credit unions, a plan for the proposed merger shall be prepared. The plan shall include:
(1) Current financial reports;
(2) Current delinquent loan schedules annotated to reflect collection problems;
(3) Combined financial report;
(4) Analyses of share values;
(5) Explanation of any proposed share adjustments;
(6) Explanation of any provisions for reserves, undivided earnings or dividends;
(7) Provisions with respect to notification and payment of creditors;
(8) Explanation of any changes relative to insurance such as life savings and loan protection insurance and insurance of member accounts;
(9) Provisions for determining that all assets and liabilities of the continuing credit union will conform with the requirements of the Act (where the continuing credit union is a Federal credit union); and
(10) Proposed charter amendments (where the continuing credit union is a Federal credit union). These amendments, if any, will usually pertain to the name of the credit union and the definition of its field of membership.
(a) Upon approval of the merger plan by the boards of directors of the credit unions, the following information will be submitted to the Regional Director:
(1) The merger plan, as described in this part;
(2) Resolutions of the boards of directors;
(3) Proposed Merger Agreement;
(4) Proposed Notice of Special Meeting of the Members (for merging Federal credit unions);
(5) Copy of the form of Ballot to be sent to the members (for merging Federal credit unions);
(6) Evidence that the state's supervisory authority is in agreement with the merger proposal (for states which require such agreement prior to NCUA approval); and
(7) Application and Agreement for Insurance of Member Accounts (for continuing state credit unions desiring to become federally insured).
(a) In any case where the continuing credit union is federally insured, and the merging credit union is nonfederally insured or uninsured, a determination shall be made by NCUA as to the potential risk to the National Credit Union Share Insurance Fund (NCUSIF).
(b) If NCUA finds that the merger proposal complies with the provisions of this part and does not present an undue risk to the NCUSIF, it may approve the proposal subject to such other specific requirements as may be prescribed to fulfill the intended purposes of the proposed merger. In the event NCUA determines that the merging credit union, if it is a Federal credit union, is in danger of insolvency, and that the proposed merger would reduce the risk or avoid a threatened loss to the National Credit Union Share Insurance Fund, NCUA may permit the merger to become effective without an affirmative vote of the membership of the merging Federal credit union, notwithstanding the provisions of § 708b.106;
(c) Any proposed charter amendments for a continuing Federal credit union will be approved contingent upon the completion of the merger.
(a) When the merging credit union is a Federal credit union, the members shall:
(1) Have the right to vote on the merger proposal in person at the annual meeting, if within 60 days after NCUA approval, or at a special meeting to be called within 60 days of such approval, or by mail ballot, received no later than the date and time announced for the annual meeting or the special meeting called for that purpose.
(2) Be given advance notice of the meeting at which the merger proposal is to be submitted, in accordance with the provisions of article V, Meetings of Members, Federal Credit Union Bylaws. The notice shall:
(i) Specify the purpose of the meeting and the time and place;
(ii) Include a summary of the merger plan, which shall contain, but not necessarily be limited to, current financial reports for each credit union, a combined financial report for the continuing credit union, analyses of share values, explanation of any proposed share adjustments, explanation of any changes relative to insurance such as life savings and loan protection insurance and insurance of member accounts (refer to subpart B, §§ 708b.202 and 708b.204);
(iii) State reasons for the proposed merger;
(iv) Provide name and location (to include branches) of the continuing credit union;
(v) Inform the members that they have the right to vote on the merger proposal in person at the meeting or by written ballot to be received no later than the date and time announced for the annual meeting or the special meeting called for that purpose; and
(vi) Be accompanied by a Ballot for Merger Proposal.
(b) The proposal to merge a Federal credit union into a federally-insured credit union must be approved by an affirmative vote of a majority of the members of the merging credit union who vote on the proposal. If the continuing credit union is uninsured, the voting requirements of § 708b.201(c) apply; if it is nonfederally insured, the voting requirements of § 708b.203(c) apply.
The board of directors of the merging Federal credit union shall certify the results of the membership vote to the Regional Director within 10 days after the vote is taken.
(a) Upon approval of the merger proposal by NCUA and by the state supervisory authority (where the continuing or merging credit union is a state credit union) and by the members of each
(b) Upon completion of the merger, the board of directors of the continuing credit union shall certify the completion of the merger to the Regional Director within 30 days after the effective date of the merger.
(c) Upon NCUA's receipt of certification that the merger has been completed, then the charter of the merging Federal credit union (if applicable) and the insurance certificate of any merging federally-insured credit union will be canceled.
(a) A state credit union may terminate Federal insurance, if permitted by state law, either on its own or by merging into an uninsured credit union.
(b) A Federal credit union may terminate Federal insurance only by merging into, or converting its charter to, an uninsured state credit union.
(c) Termination of insurance must be approved by the affirmative vote of a majority of the credit union's members. The credit union must notify the Board, through the Regional Director, in writing at least 90 days prior to termination and the membership vote must have been obtained within one year prior to giving the Board notice.
(d) No federally-insured credit union shall terminate Federal insurance without the prior written approval of the Board. The Board will approve or disapprove the termination in writing within 90 days after being notified by the credit union.
(a) When a federally-insured credit union proposes to terminate Federal insurance, including termination due to a merger or conversion of charter, it shall provide its members with written notice of the proposal to terminate and of the date set for the membership vote. The Notice of Proposal shall be as set forth in either § 708b.301 (a)(1) or (b)(1), or as provided in § 708b.301(c), as the circumstances warrant.
(b) The notice shall be delivered in person to each member, or mailed to each member at the address for such member as it appears on the records of the credit union, not more than 30 nor less than 7 days prior to the date of the vote. The membership shall be given the opportunity to vote by mail ballot. The ballot to be used shall be as set forth in either § 708b.301 (a)(2) or (b)(2), as the circumstances warrant. The notice of the proposal and the ballot may be provided to members at the same time.
(c) If the proposition for termination of insurance is approved by the membership and the Board, prompt and reasonable notice of termination shall be given to all members in the form set forth in either § 708b.301(a)(3) or (b)(3), as the circumstances warrant.
(a) A federally-insured state credit union may convert to nonfederal insurance, if permitted by state law, either on its own or by merging into a nonfederally-insured credit union.
(b) A Federal credit union may convert to nonfederal insurance only by merging into, or converting its charter to, a nonfederally-insured state credit union.
(c) Conversion of Federal to nonfederal insurance must be approved by an affirmative vote of a majority of the credit union's members who vote on the proposition, provided at least 20 percent of the total membership participates in the voting. The credit union must notify the Board, through the Regional Director, in writing at least 90 days prior to conversion. Notice to the Board may be given when membership approval is solicited or after membership approval is obtained.
(d) No federally-insured credit union shall convert to nonfederal insurance without the prior written approval of the Board. The Board will approve or disapprove the conversion in writing within 90 days after being notified by the credit union.
(a) When a federally-insured credit union proposes to convert to nonfederal insurance, including conversion due to a merger or conversion of charter, it shall provide its members with written notice of the proposal to convert and of the date set for the membership vote. Notice of the proposal shall be as set forth in either § 708b.302 (a)(1) or (b)(1), or as provided in § 708b.302(c), as the circumstances warrant.
(b) The notice shall be delivered in person to each member, or mailed to each member at the address for such member as it appears on the records of the credit union, not more than 30 nor less than 7 days prior to the date for the vote. The membership shall be given the opportunity to vote by mail ballot. The ballot to be used for the membership vote shall be as set forth in either § 708b.302 (a)(2) or (b)(2), as the circumstances warrant. The notice of the proposal and the ballot may be provided to the members at the same time.
(c) If the proposition for conversion of insurance is approved by the membership and the Board, prompt and reasonable notice shall be given to all members in the form set forth in either § 708b.302 (a)(3) or (b)(3), as the circumstances warrant.
(a) A federally-insured state credit union shall use the following language for purposes of terminating Federal insurance:
(1)
The Board of Directors of
If approved, any deposits made by you after the date of termination, either new deposits or additions to existing accounts, will not be insured by the NCUA or any other entity. In the event the credit union fails, these deposits are not insured by the federal government. No provision has been made for alternative insurance, therefore, these deposits will be uninsured.
Accounts in the Credit Union on the day of termination, up to a maximum of $100,000 for each member, will continue to be insured, as provided in the Federal Credit Union Act, for one (1) year after the close of business on the day of termination, but any withdrawals after the close of business on that date will reduce the insurance coverage by the amount of the withdrawal.
(2) The ballot for obtaining membership approval to terminate Federal insurance shall contain the following language:
This ballot must be received by the Credit Union by (date for vote).
I understand that if termination of Federal insurance is approved, any new deposits or additions to existing accounts made by me will not be insured by the National Credit Union Administration, an agency of the Federal Government. I also understand that my accounts in the Credit Union on the date of termination, up to a maximum of $100,000, will continue to be insured for one (1) year after the date of termination, but that any withdrawals after the date of termination will reduce the insurance coverage by the amount of the withdrawal.
[] Approve termination of insurance.
[] Do not approve termination of insurance.
Member's Name
(3)
1. The status of the
2. Any deposits made by you after that date, either new deposits or additions to existing accounts, will not be insured by the National Credit Union Administration.
3. Accounts in the Credit Union on the
(b) A federally-insured credit union that is merging with an uninsured credit union shall use the following language for purposes of terminating Federal insurance:
(1)
The Board of Directors of (merging) Credit Union has approved a proposition to merge the Credit Union into the (continuing) Credit Union. The merger must be approved by a majority of the members of (merging) Credit Union. The membership vote will be taken on (date). (Add directions regarding membership meeting and/or mail ballot.)
If the membership approves the merger, the share (deposit) insurance you now have (up to $100,000 provided by the National Credit Union Administration, (NCUA), an agency of the Federal Government) will be affected as follows:
Any deposits made by you after the effective date of the merger, either new deposits or additions to existing accounts, will not be insured by the NCUA or any other entity. In the event the credit union fails, these deposits are not insured by the federal government. No provision has been made for alternative insurance, therefore, these deposits will be uninsured. Accounts in the
(2) The language for the ballot set forth in paragraph (a)(2) of this section, modified by substituting “the merger and termination” in lieu of “termination” each time it appears on the ballot, shall be used for obtaining membership approval to merge and terminate Federal insurance.
(3)
1. The merger of the (merging) Credit Union into the (continuing) Credit Union has been approved, effective (date).
2. The status of the (merging) Credit Union as an insured credit union under the provisions of the Federal Credit Union Act will terminate as of the close of business on the
3. Any deposits made by you after that date, either new deposits or additions to existing accounts, will not be insured by the National Credit Union Administration.
4. Accounts in the Credit Union on the
(c) A Federal credit union that is converting its charter to that of an insured state credit union shall use the language contained in paragraph (a) of this section, but shall modify the language in paragraph (a)(1) of this section to indicate that it is converting its charter and terminating Federal insurance.
(a) A federally-insured state credit union shall use the following language for purposes of converting from Federal insurance to nonfederal insurance:
(1)
The Board of Directors of
If the membership approves the conversion, the share (deposit) insurance you now have (up to $100,000 provided by the National Credit Union Administration, an agency of the Federal Government) will terminate on the effective date of the conversion. Shares (deposit) in the
(2) The ballot to obtain membership approval of the conversion shall contain the following language:
This ballot must be received by the Credit Union by (date for vote).
I understand that, if the conversion of insurance is approved, the share (deposit) insurance that I now have (up to $100,000 provided by the National Credit Union Administration, an agency of the Federal Government) will terminate upon the effective date of the conversion and my shares will be insured up to $
[] Approve conversion of insurance.
[] Do not approve conversion of insurance.
(3)
1. The status of the
2. As of that date, your deposits will no longer be insured by the National Credit Union Share Insurance Fund.
3. Accounts in the credit union will be insured up to $
(b) A federally-insured credit union that is merging with a nonfederally-insured credit union shall use the following language for purposes of converting from Federal to nonfederal insurance:
(1)
The Board of Directors of (merging) Credit Union has approved a proposition to merge the Credit Union into (continuing) Credit Union. The merger must be approved by a majority of the members of (merging) Credit Union who vote on the proposal and at least 20% of the entire membership must participate in the vote. The membership vote will be taken on (date) (Add directions regarding membership meeting and/or mail ballot.)
If the membership approves the merger, the share (deposit) insurance you now have (up to $100,000 provided by the National Credit Union Administration, an agency of the Federal Government) will terminate on the effective date of the merger. Shares (deposit) in the (continuing) Credit Union will be insured up to $
(2) The ballot to obtain membership approval shall contain the following language:
This ballot must be received by the Credit Union by (date for vote).
I understand that if the merger of the (merging) Credit Union into the (continuing) Credit Union is approved, the share (deposit) insurance that I now have (up to $100,000 provided by the National Credit Union Administration, an agency of the Federal Government) will terminate upon the effective date of the merger and my shares in the (continuing) Credit Union will be insured up to $
[] Approve merger and conversion of insurance.
[] Do not approve merger and conversion of insurance.
(3)
1. The merger of the (merging) Credit Union into the (continuing) Credit Union has been approved, effective (date).
2. As of that date, your shares (deposit) are no longer insured by the National Credit Union Administration.
3. Accounts in the (continuing) Credit Union will be insured up to $
(c) A Federal credit union that is converting its charter to that of a nonfederally-insured credit union shall use the language contained in paragraph (a) of this section, but shall modify the language in paragraph (a)(1) of this section to indicate that it is converting its charter and converting from Federal insurance.
(a) Any modifications or additions to the notices or ballot concerning insurance coverage, and any additional communications concerning insurance coverage included with the notices or ballot, may be made with the approval of the Regional Director and, in the case of a state credit union, the appropriate state authority. Approval of such modifications, additions or additional communications will not be withheld unless it is determined that the credit union, by inclusion or omission of information, would materially mislead or misinform its membership.
(b) Federally-insured state credit unions may include additional language in the notice and ballot regarding state requirements for mergers, where appropriate.
12 U.S.C. 1766; Pub. L. 101-73, 103 Stat. 183, 530 (1989) (12 U.S.C. 1787
56 FR 56925, Nov. 7, 1991, unless otherwise noted.
The rules and procedures set forth in this part apply to charter revocations of Federal credit unions pursuant to 12 U.S.C. 1787(a)(1) (A), (B) and the involuntary liquidation and adjudication of creditor claims in all cases involving federally insured credit unions. Section 709.3 applies only to Federal credit unions. Remaining sections of this part are applicable to all federally insured credit unions. This part does not apply to share insurance claims arising out of the liquidation of a federally insured credit union. Insurance claims are decided pursuant to part 745 of this chapter.
For the purposes of this part, the following definitions apply:
(a)
(b)
(c)
(d)
(e)
(a) The Board, as liquidating agent, by operation of law and without any
(b) The Board, as liquidating agent, shall take possession of and title to books, records, and assets of every description of such credit union to which such credit union has rights of possession and title to all offices and other facilities of such credit union.
If a Federal credit union is determined to be insolvent and placed into liquidation pursuant to 12 U.S.C. 1787, the Federal credit union may, not later than 10 days after the date on which the Board closes the credit union for liquidation, apply to the United States District Court for the Judicial district in which the principal office of the credit union is located or the United States District Court for the District of Columbia for an order requiring the Board to show cause why it should not be prohibited from continuing such liquidation. Notwithstanding other provisions of this part, the board of directors of the credit union may meet following the placing of the institution into liquidation for the sole purpose of considering and authorizing the filing of this action in the name of the credit union. No such action in the name of the credit union may be instituted without the authorization of the board of directors of the institution pursuant to a valid board of directors resolution. No credit union funds shall be available to pay expenses incurred in bringing a legal action to challenge the Board's liquidation action.
(a)
(b)
(c)
(1) Exercise all rights and powers of the credit union including, but not limited to, any rights and powers under any mortgage, deed of trust, chose in action, option, collateral note, contract, judgment or decree, or instrument of any nature;
(2) Institute, prosecute, maintain, defend, intervene, and otherwise participate in any and all actions, suits, or other legal proceedings by and against the liquidating agent or the credit union or in which the liquidating agent, the credit union, or its creditors or shareholders, or any of them, shall have an interest, and in every way to represent the credit union, its shareholders and creditors, subject to the direction of General Counsel;
(3) Employ on a salary or fee basis such persons as in the judgment of the liquidating agent are necessary or desirable to carry out its responsibilities and functions, including, but not limited to, appraisers and Certified Public Accountants, and pay the costs out of the assets of the liquidated credit union;
(4) Employ or retain any attorney or attorneys designated by, or acceptable to, the General Counsel in connection with litigation or for legal advice and assistance, for the liquidation generally or in particular instances, and pay compensation and retainers of such attorney or attorneys, together with all expenses, including, but not limited to, the costs and expenses of any litigation, as approved by the General Counsel, out of the assets of the liquidated credit union;
(5) Execute, acknowledge, and deliver any and all deeds, contracts, leases, assignments, bills of sale, releases, extensions, satisfactions, and other instruments necessary or proper for any purposes, including, but not limited to, the effectuation, termination, or transfer of real, personal or mixed property, or that shall be necessary or proper to liquidate the credit union, and any deed or other instrument executed pursuant to the authority hereby given shall be as valid and effective for all purposes as if the same had been executed as the act and deed of the credit union;
(6) With concurrence of General Counsel, disaffirm or repudiate any contract or lease to which the credit union is a party, the performance of which the liquidating agent, in his sole discretion, determines to be burdensome, and which disaffirmance or repudiation in the liquidating agent's sole discretion will promote the orderly administration of the credit union's affairs;
(7) Deposit, withdraw, or transfer funds, and otherwise exercise complete control over all investment or depository accounts maintained by or for the credit union at financial dispository or similar institutions;
(8) Do such things, and have such rights, powers, privileges, immunities, and duties, whether or not otherwise granted in this part 709, as shall be authorized, directed, conferred, or imposed from time to time by the Board, or as shall be conferred by the Federal Credit Union Act;
(9) Exercise such other authority as is conferred by the Federal Credit Union Act; and
(10) Where acting as liquidating agent for a state-chartered federally insured credit union, exercise all the rights, powers, and privileges granted by state law to such a liquidating agent.
(d)
(1) Pay all costs and expenses of the liquidation as determined by the liquidating agent;
(2) Pay off and discharge taxes and liens;
(3) Pay out and expend such sums as are deemed necessary or advisable for or in connection with the preservation, maintenance, conservation, protection, remodeling, repair, rehabilitation, or improvement of any asset or property of any nature of the credit union or the liquidating agent;
(4) Pay off and discharge any assessments, liens, claims, or charges of any kind against any asset or property of any nature on which the credit union or the liquidating agent has a lien by way of mortgage, deed of trust, pledge, or otherwise, or in which the credit union or liquidating agent has any interest;
(5) Settle, compromise, or obtain the release of, for cash or other consideration, claims and demands against the credit union or the liquidating agent; and
(6) Indemnify its employees and agents from the assets of the credit union against liabilities incurred in the good faith performance of their duties.
(e)
(1) Sell for cash or on terms, exchange, assign, or otherwise dispose of, in whole or in part, any or all of the assets and property of the credit union, real, personal and mixed, tangible and intangible, of any nature, including any mortgage, deed of trust, chose in action, bond, note, contract, judgment, or decree, share or certificate of share
(2) Surrender, abandon, and release any chose in action, or other assets or property of any nature, whether the subject of pending litigation or not, and settle, compromise, modify, or release, for cash or other consideration, claims and demands in favor of the credit union or the liquidating agent.
(a) Claimants whose claims are secured shall receive their security. To the extent their respective claims exceed the value of the security for those claims, as determined to the satisfaction of the liquidating agent, they shall each have an unsecured claim against the credit union having priority as provided in paragraph (b) of this section.
(b) Unsecured claims against the liquidation estate that are proved to the satisfaction of the liquidating agent shall have priority in the following order:
(1) Administrative costs and expenses of liquidation;
(2) Claims for wages and salaries, including vacation, severance, and sick leave pay;
(3) Taxes legally due and owing to the United States or any state or subdivision thereof;
(4) Debts due and owing the United States, including the National Credit Union Administration;
(5) General creditors, and secured creditors (to the extent that their respective claims exceed the value of the security for those claims);
(6) Shareholders to the extent of their respective uninsured shares and the National Credit Union Share Insurance Fund to the extent of its payment of share insurance;
(7) In a case involving liquidation of a corporate credit union, membership capital;
(8) In a case involving liquidation of a low-income designated credit union, any outstanding secondary capital accounts issued pursuant to the authority of §§ 701.34 or 741.204(c) of this chapter; and
(9) In a case involving liquidation of a corporate credit union, paid-in capital.
(c) Priorities are to be based on the circumstances that exist on the date of liquidation.
(d) If the repudiation or disaffirmance of any contract or lease gives rise to a claim for damages, such claim shall be considered a general creditor claim under paragraph (b)(5) of this section and not a cost or expense of liquidation under paragraph (b)(1) of this section.
(e) All unsecured claims of any category or class or priority described in paragraphs (b)(1) through (b)(7) of this section shall be paid in full, or provisions made for such payment, before any claims of lesser priority are paid. If there are insufficient funds to pay all claims of a category or class, payment shall be made pro rata. Notwithstanding anything to the contrary herein, the liquidating agent may, at any time, and from time to time, prior to the payment in full of all claims of a category or class with higher priority, make such distributions to claimants in priority categories described in paragraphs (b)(1), (b)(2), (b)(3), (b)(4), and (b)(5) of this section as the liquidating agent believes are reasonably necessary to conduct the liquidation, provided that the liquidating agent determines that adequate funds exist or will be recovered during the liquidation to pay in full all claims of any higher priority. If a surplus remains after making distribution in full on all allowed claims described in paragraphs (b)(1) through (b)(9) of this section, such surplus shall be distributed pro rata to the credit union's shareholders.
(a)(1) Any party wishing to submit a claim against the liquidated credit union must submit a written proof of claim in accordance with the requirements set forth in the notice to creditors. A failure to submit a written claim within the time provided in the notice to creditors shall be deemed a
(2) Notwithstanding paragraph (a)(1) of this section, the liquidating agent may, at his discretion, consider an untimely claim provide the following two criteria are present:
(i) The claimant did not receive notice of the appointment of the liquidating agent in time to file a claim before the date provided for in the notice; and
(ii) The claim is filed in time to permit payment of the claim.
(b) The liquidating agent may require submission of supplemental evidence by the claimant and by interested parties in the event of a dispute concerning a claim against any asset of the liquidated credit union. In requiring the submission of supplemental evidence, the liquidating agent may set such limitations of time, scope, and size as the liquidating agent deems reasonable in the circumstances, and may refuse to include in the record submissions or portions of submissions not in compliance with such limitations or requirements. The liquidating agent shall compile such written record of a claim or dispute as, in its discretion, is deemed sufficient to provide a reasonable basis for allowing or disallowing a claim or resolving a dispute. This written record shall be considered the administrative record.
(c) The liquidating agent shall determine whether to allow or disallow a claim and shall notify the claimant within 180 days from the date a claim against a credit union is filed pursuant to paragraph (a)(1) of the section. This 180-day period may be extended by written agreement between the claimant and the liquidating agent. Failure by the liquidating agent to determine a claim and notify the claimant within the 180-day period or, if the period is extended, within the extended period, shall be deemed a denial of the claim.
(d) If a claim or any portion thereof is disallowed, the notice to the claimant shall contain a statement of the reasons for the disallowance and an explanation of appeal rights pursuant to § 709.7 of this part.
(e) Notice of any determination with respect to a claim shall be sufficient if mailed to the most recent address of the claimant which appears:
(1) On the credit union's books;
(2) In the claim filed by the claimant; or
(3) In the documents submitted in the proof of claim.
(f) In the event the liquidating agent disallows all or part of a claim, the liquidating agent shall file with the Board, or its designated agent, a report of its determination. This report shall become part of the record and shall include the notice to the claimant and findings on all issues raised and decided by the liquidating agent.
In order to appeal all or part of an initial decision which disallows a claim, in whole or in part, a claimant must, within 60 days of the mailing of the initial determination, file an administrative appeal pursuant to § 709.8 of this part, or file suit against the liquidated credit union in the United States District Court for the District of Columbia or in the United States district court having jurisdiction over the place where the credit union's principal place of business is located, or continue an action commenced before the appointment of the liquidating agent. If the claimant does not appeal or file or continue a suit, any disallowance shall be final and the claimant shall have no further rights or remedies with respect to such claim.
(a)
(b)
(1)
(2)
(c)
(1)
(i)
(A) A statement of the facts on which the appeal is based;
(B) A statement of the basis for the initial determination to which the claimant objects and the alleged error in such determination, including citations to applicable statutes and regulations;
(C) Any other evidence relied upon by the claimant which was not previously provided to the liquidating agent.
(ii)
(B) Within 60 days from the date of the Board's receipt of an appeal, pursuant to paragraph (c)(1) of this section, the claimant may amend or supplement the appeal in writing. In the event the claimant does amend or supplement the appeal, the provisions of paragraph (c)(1)(ii)(A) of this section, with respect to requests for additional information and responses to such requests, shall apply with equal force to any such amendment or supplement to an appeal.
(iii)
(B) The decision by the Board on appeal shall be provided to the claimant in writing, stating the reasons for the decision, and shall constitute a final agency decision regarding the claimant's claim.
(C) Failure by the Board to issue a decision on appeal of the claimant's claim within the 180-day period provided for under paragraph (c)(1)(iii)(A) of this section shall be deemed to be a denial of such appeal for the purposes of paragraph (c)(1)(iv) of this section.
(iv)
(B) A final determination by the Board is reviewable in accordance with the provisions of chapter 7, title 5, United States Code, by the United States Court of Appeals for the District of Columbia or the court of appeals for the Federal judicial circuit where the credit union's principal place of business is located. Any request for judicial review under this paragraph must be filed within 60 days of the date of the Board's final decision. If any claimant fails to file before the end of the 60-day period, the Board's decision shall be final, and the claimant shall have no further rights or remedies with respect to such claim.
(2) The following additional procedures for dispute resolution may be made available at the sole discretion of the Board: mediation; nonbinding arbitration; and neutral fact finding.
(a)
(b)
(c)
(1) A clear and concise statement of the facts and issues on which the request is based;
(2) A clear and concise statement describing the nature of any security interests in any assets of the credit union;
(3) A clear and concise statement of the probable, imminent and irreparable harm likely to occur if expedited relief is not granted;
(4) An assessment of the likelihood of success on the merits of the underlying claim, including statutory citations and relevant documentation supporting the merits of the claim;
(5) Any other relevant documentation that supports the request;
(6) Citations to applicable statutes, regulations, or other legal authority; and
(7) A signed statement certifying that a copy of the request has been mailed or hand delivered to the liquidating agent on or before the day that the request was filed with the Board.
(d)
(e)
(f)
(1)
(2)
(g)
(1) The end of the 90-day period beginning on the date of the filing of a request for expedited relief; or
(2) The date the Board denies all or part of the claim.
(h)
12 U.S.C. 1766(a), 1786, and 1787.
58 FR 35365, July 1, 1993, unless otherwise noted.
This part describes the requirements that must be followed to accomplish the voluntary liquidation of a Federal credit union. Federally insured state credit unions are only subject to the notification requirement provided in § 710.9; voluntary liquidation is to be accomplished in accordance with state law or procedures established by the state regulatory authority.
For the purpose of this part, the following definitions apply:
(a)
(b)
(c)
(a) The board of directors shall be responsible for conserving the assets, for expediting the liquidation, and for equitable distribution of the assets to the members.
(b) After voting to present the question of liquidation to the members, the board of directors may appoint a liquidating agent and delegate all or part of the board's responsibility to such agent and authorize reasonable compensation for the services provided.
(c) The board of directors shall determine that the liquidating agent and all persons who handle or have access to funds of the Federal credit union are adequately covered by surety bond and that either such coverage remains in effect, or the discovery period is extended, for at least four months after final distribution of assets.
(d) Within three days after the decision of the board of directors to submit the question of liquidation to the members, the Regional Director will be notified in writing, setting forth in detail the reasons for the proposed action. A balance sheet and income statement as of the previous month-end will be included with the notification. During the liquidation process, financial statements will be submitted to the Regional Director as requested.
(e) Promptly after the decision to present the question of liquidation to the members, the board of directors or liquidating agency shall develop a written plan for the liquidation of the assets and payment of shares (liquidation plan). The plan should provide for the liquidation of assets and payment of creditors and shareholders within one year of the liquidation date. If the liquidation period is projected to exceed one year, an explanation must be provided in the liquidation plan. A copy of the liquidation plan will be mailed to the Regional Director within 30 days of the date the board of directors votes to present the question of liquidation to the members.
(a) When the board of directors decides to present the question of liquidation to the members, it shall act promptly to obtain the members’ approval. The members shall be given advance notice of the membership meeting at which the liquidation proposal is to be submitted, in accordance with the provisions of Article V of the Federal Credit Union Bylaws. The notice shall:
(1) Inform members that they have the right to vote on the liquidation proposal in person at the membership meeting called for that purpose or by written ballot to be received no later than the time and date indicated on the notice.
(2) Include or be accompanied by a ballot for the liquidation proposal.
(b) The liquidation proposal must be approved by the affirmative vote of a majority of the Federal credit union members who vote on the proposal.
(c) If the members do not approve the liquidation, the board of directors, or if delegated the authority, the liquidating agent, must decide within seven days whether the Federal credit union should resume operations or, if good cause exists, to resubmit the question of liquidation to the members.
(d) If the members approve the liquidation, neither the members nor the board of directors may rescind the decision to liquidate unless the Regional Director concurs in the recision.
(e) The Regional Director will be notified in writing of the results of the membership vote on the voluntary liquidation proposal within three days of the date of the vote.
(a) Immediately upon decision by the board of directors to present the question of liquidation to the members, payments on shares, withdrawal of shares (except for transfer of shares to loans and interest), transfer of shares to another share account, granting of loans, and making of investments other than short-term investments shall be suspended pending action by the members on the proposal to liquidate. Collection of loans and interest, payment of necessary expenses, clearing of share drafts and credit card charges will continue.
(b) Upon approval of the members, payments on shares, withdrawal of shares (except for transfer of shares to loans and interest), transfer of shares to another share account, granting of loans, and making of investments other than short-term investments shall be discontinued permanently. Collection of loans and interest and payment of necessary expenses will continue during the period of liquidation. Members will be notified to discontinue the use of share drafts and credit cards, and items will not be cleared 15 days from the liquidation date.
(c) Approval of the Regional Director must be obtained prior to consummating any sale of assets which would not provide sufficient funds to pay shareholders at par.
(a) When approval for liquidation is obtained from the members, the board of directors or the liquidating agent shall cause notice to be given to creditors to present their claims.
(1) Federal credit unions with assets in excess of $5 million as of the month end prior to the liquidation date shall publish the notice once a week in each of three successive weeks, in a newspaper of general circulation, in each county in which the Federal credit union maintains an office or branch for the transaction of business on the liquidation date. The first notice shall be published within seven days of the liquidation date.
(2) Federal credit unions with assets in excess of $500,000 but less than $5 million as of the month end prior to the liquidation date shall publish the notice once, in a newspaper of general circulation, in each county in which the Federal credit union maintains an office or branch for the transaction of business on the liquidation date. The notice shall be published within seven days of the liquidation date.
(3) Federal credit unions with assets less than $500,000 as of the month end prior to the liquidation date shall not be required to publish the notice.
(b) Within 10 days of the liquidation date, a copy of the notice of liquidation shall be mailed to all creditors reflected on the records of the Federal credit union.
(c) Creditors shall be provided 30 days from the liquidation date to submit their claims.
(a) With the approval of the regional director, a partial pro rata distribution of the Federal credit union's assets may be made to its members from cash funds available on authorization by the board of directors or liquidating agent. Payment of a partial distribution may exclude member accounts of less than $25.00.
(b) After all assets of the Federal credit union have been converted to cash or found to be worthless and all loans and debts owing to it have been collected or found to be uncollectible and all obligations of the Federal credit union have been paid, with the exception of shares due its members, the books shall be closed and the pro rata distribution to the members shall be computed. The computation shall be based on the total amount in each share account.
(c) Promptly after the pro rata distribution to members has been computed, checks shall be drawn for the amounts to be distributed to each member. The checks shall be mailed to the members at their last known address or handed to them in person.
(d) Unclaimed share accounts, unpaid claims, and unpaid claims of members or creditors who failed to cash their final distribution checks shall be trusteed or escheated in accordance with the laws of the state in which the member or creditor resides.
(e) The Regional Director will be notified in writing within three days when the final distribution of assets to the members is started.
(a) The board of directors or liquidating agent shall appoint a custodian for the Federal credit union's records which are to be retained after the final distribution of assets.
(b) All records of the liquidated Federal credit union necessary to establish that creditors were paid and that assets were equitably distributed to the members shall be retained by the custodian for a period of five years following the date of charter cancellation.
Within 120 days after the final distribution of assets to members is started, a duly executed Certificate of Dissolution and Liquidation shall be filed with the Regional Director.
A federal insured state credit union will notify the Regional Director in writing within three days after the board of directors’ decision to liquidate is made. A balance sheet and income statement as of the previous month-end and a copy of any liquidation plan will be included with the notification to the Regional Director.
12 U.S.C. 1757 and 3201-3208.
61 FR 50702, Sept. 27, 1996, unless otherwise noted.
(a)
(b)
(c)
For purposes of this part, the following definitions apply:
(a)
(2) For purposes of section 202(3)(B) of the Interlocks Act (12 U.S.C. 3201(3)(B)), an affiliate relationship involving a depository institution based on common ownership does not exist if the appropriate federal supervisory agency determines, after giving the affected persons the opportunity to respond, that the asserted affiliation was established in order to avoid the prohibitions of the Interlocks Act and does not represent a true commonality of interest between the depository organizations. In making this determination, the appropriate Federal supervisory agency considers, among other things, whether a person, including members of his or her immediate family, whose shares are necessary to constitute the group owns a nominal percentage of the shares of one of the organizations and the percentage is substantially disproportionate to that person's ownership of shares in the other organization.
(b)
(1) The median family income for the metropolitan statistical area (MSA), if a depository organization is located in an MSA; or
(2) The statewide nonmetropolitan median family income, if a depository organization is located outside an MSA.
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(i) A director;
(ii) An advisory or honorary director of a depository institution with total assets of $100 million or more;
(iii) A senior executive officer as that term is defined in 12 CFR 701.14(b)(2), or a person holding an equivalent position regardless of title;
(iv) A branch manager;
(v) A trustee of a depository organization under the control of trustees; and
(vi) Any person who has a representative or nominee serving in any of the capacities in this paragraph (m)(1).
(2) The term
(i) A person whose management functions relate exclusively to the business of retail merchandising or manufacturing;
(ii) A person whose management functions relate principally to the business outside the United States of a foreign commercial bank; or
(iii) A person described in the provisions of section 202(4) of the Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-chartered savings bank, cooperative bank, or trust company that neither makes real estate mortgage loans nor accepts savings).
(l)
(m)
(n)
(o)
(p)
(2) The term
(i) Assets of a diversified savings and loan holding company as defined by section 10(a)(1)(F) of the Home Owners’ Loan Act (12 U.S.C. 1467a(a)(1)(F)) other than the assets of its depository institution affiliate;
(ii) Assets of a bank holding company that is exempt from the prohibitions of section 4 of the Bank Holding Company Act of 1956 pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 1843(d)) other than the assets of its depository institution affiliate; or
(iii) Assets of offices of a foreign commercial bank other than the assets of its United States branch or agency.
(q)
(a)
(b)
(c)
The prohibitions of § 711.3 do not apply in the case of any one or more of the following organizations or to a subsidiary thereof:
(a) A depository organization that has been placed formally in liquidation, or which is in the hands of a receiver, conservator, or other official exercising a similar function;
(b) A corporation operating under section 25 or section 25A of the Federal Reserve Act (12 U.S.C. 601
(c) A credit union being served by a management official of another credit union;
(d) A depository organization that does not do business within the United States except as an incident to its activities outside the United States;
(e) A State-chartered savings and loan guaranty corporation;
(f) A Federal Home Loan Bank or any other bank organized solely to serve depository institutions (a bankers’ bank) or solely for the purpose of providing securities clearing services and services related thereto for depository institutions and securities companies;
(g) A depository organization that is closed or is in danger of closing as determined by the appropriate Federal depository institutions regulatory agency and is acquired by another depository organization. This exemption lasts for five years, beginning on the date the depository organization is acquired; and
(h)(1) A diversified savings and loan holding company (as defined in section 10(a)(1)(F) of the Home Owners’ Loan Act (12 U.S.C. 1467a(a)(1)(F)) with respect to the service of a director of such company who also is a director of an unaffiliated depository organization if:
(i) Both the diversified savings and loan holding company and the unaffiliated depository organization notify their appropriate Federal depository institutions regulatory agency at least 60 days before the dual service is proposed to begin; and
(ii) The appropriate regulatory agency does not disapprove the dual service before the end of the 60-day period.
(2) The NCUA Board or its designee may disapprove a notice of proposed service if it finds that:
(i) The service cannot be structured or limited so as to preclude an anticompetitive effect in financial services in any part of the United States;
(ii) The service would lead to substantial conflicts of interest or unsafe or unsound practices; or
(iii) The notificant failed to furnish all the information required by NCUA.
(3) The NCUA Board or its designee may require that any interlock permitted under this paragraph (h) be terminated if a change in circumstances occurs with respect to one of the interlocked depository organizations that would have provided a basis for disapproval of the interlock during the notice period.
(a)
(1) The interlock is not prohibited by § 711.3(c); and
(2) The depository organizations (and their depository institution affiliates) hold, in the aggregate, no more than 20% of the deposits, in each RMSA or community in which the depository organizations (or their depository institution affiliates) are located. The amount of deposits will be determined by reference to the most recent annual Summary of Deposits published by the FDIC. This information is available on the Internet at http://www.fdic.gov.
(b)
(a)
(b)
(1) Primarily serves, low- and moderate-income areas;
(2) Is controlled or managed by persons who are members of a minority group or women;
(3) Is a depository institution that has been chartered for less than two years; or
(4) Is deemed to be in “troubled condition” as defined in § 701.14(b)(3) of this chapter.
(c)
(a)
(b)
Except as provided in this section, NCUA administers and enforces the Interlocks Act with respect to federally insured credit unions, and may
12 U.S.C. 1756, 1757(5)(D) and (7)(I), 1766, 1782, 1784, 1785, and 1786.
63 FR 10756, Mar. 5, 1998, unless otherwise noted.
This part establishes when a Federal credit union (FCU) can invest in and make loans to CUSOs. CUSOs are subject to review by NCUA. This part does not apply to corporate credit unions that have CUSOs subject to § 704.11 of this title. This part does not apply to state-chartered credit unions or the subsidiaries of state-chartered credit unions that do not have FCU investments or loans.
(a)
(b)
(c)
(d)
(e)
(a)
(b)
(c)
(d)
(1) Account for all its transactions in accordance with GAAP;
(2) Prepare quarterly financial statements and obtain an annual opinion audit, by a licensed Certified Public Accountant, on its financial statements in accordance with “generally accepted auditing standards” (GAAS); and
(3) Provide NCUA and its representatives with complete access to any books and records of the CUSO and the ability to review CUSO internal controls, as deemed necessary by NCUA in carrying out its responsibilities under the Act.
(e)
(a)
(1) Its respective business transactions, accounts, and records are not intermingled;
(2) Each observes the formalities of its separate corporate procedures;
(3) Each is adequately financed as a separate unit in the light of normal obligations reasonably foreseeable in a business of its size and character;
(4) Each is held out to the public as a separate enterprise;
(5) The FCU does not dominate the CUSO to the extent that the CUSO is treated as a department of the FCU; and
(6) Unless the FCU has guaranteed a loan obtained by the CUSO, all borrowings by the CUSO indicate that the FCU is not liable.
(b)
NCUA may at any time, based upon supervisory, legal, or safety and soundness reasons, limit any CUSO activities or services, or refuse to permit any CUSO activities or services. Otherwise, an FCU may invest in, loan to, and/or contract with only those CUSOs that are sufficiently bonded or insured for their specific operations and only provide one or more of the following activities and services related to the routine, daily operations of credit unions:
(a)
(1) Check cashing;
(2) Coin and currency services; and
(3) Money order, savings bonds, travelers checks, and purchase and sale of U.S. Mint commemorative coins services;
(b)
(1) Accounting services;
(2) Courier services;
(3) Credit analysis;
(4) Facsimile transmissions and copying services;
(5) Internal audits for credit unions;
(6) Locator services;
(7) Management and personnel training and support;
(8) Marketing services;
(9) Research services; and
(10) Supervisory committee audits;
(c)
(d)
(1) Automated teller machine (ATM) services;
(2) Credit card and debit card services;
(3) Data processing;
(4) Electronic fund transfer (EFT) services;
(5) Electronic income tax filing;
(6) Payment item processing;
(7) Wire transfer services; and
(8) Cyber financial services;
(e)
(1) Developing and administering Individual Retirement Accounts (IRA), Keogh, deferred compensation, and other personnel benefit plans;
(2) Estate planning;
(3) Financial planning and counseling;
(4) Income tax preparation;
(5) Investment counseling; and
(6) Retirement counseling;
(f)
(1) Management, development, sale, or lease of fixed assets; and
(2) Sale, lease, or servicing of computer hardware or software;
(g)
(1) Agency for sale of insurance;
(2) Provision of vehicle warranty programs; and
(3) Provision of group purchasing programs;
(h)
(1) Personal property; and
(2) Real estate leasing of excess CUSO property;
(i)
(1) Debt collection services;
(2) Loan processing, servicing, and sales; and
(3) Sale of repossessed collateral;
(j)
(1) Alarm-monitoring and other security services;
(2) Disaster recovery services;
(3) Microfilm, microfiche, optical and electronic imaging, CD-ROM data storage and retrieval services;
(4) Provision of forms and supplies; and
(5) Record retention and storage;
(k)
(l)
(m)
(n)
(o)
(1) Acting as administrator for prepaid legal service plans;
(2) Acting as trustee, guardian, conservator, estate administrator, or in any other fiduciary capacity; and
(3) Trust services.
(p)
(q)
In order for an FCU to invest in and/or loan to a CUSO that offers an
(a)
(b)
(c)
(a)
(b)
(1) The Board grants prior approval to continue the FCU's loan for a stated period; or
(2) Under the terms of its loan agreement, the FCU cannot require accelerated repayment without breaching the agreement.
12 U.S.C. 1761a, 1761b, 1766(a), 1766(h), 1789(a)(11).
64 FR 28720, May 27, 1999, unless otherwise noted.
This section provides the requirements for fidelity bonds for Federal credit union employees and officials and for other insurance coverage for losses such as theft, holdup, vandalism, etc., caused by persons outside the credit union.
The board of directors of each Federal credit union must at least annually review its fidelity and other insurance coverage to ensure that it is adequate in relation to the potential risks facing the credit union and the minimum requirements set by the Board.
At a minimum, your bond coverage must:
(a) Be purchased in an individual policy from a company holding a certificate of authority from the Secretary of the Treasury; and
(b) Include fidelity bonds that cover fraud and dishonesty by all employees, directors, officers, supervisory committee members, and credit committee members.
(a) The following basic bonds may be used without prior NCUA Board approval:
(b) To use any of the following, you need prior written approval from the Board:
(1) Any other basic bond form; or
(2) Any rider or endorsement that limits coverage of approved basic bond forms.
(a) The minimum required amount of fidelity bond coverage for any single loss is computed based on a Federal credit union's total assets.
(b) This is the minimum coverage required, but a Federal credit union's board of directors should purchase additional coverage when circumstances,
(c) While the above is the required minimum amount of bond coverage, credit unions should maintain increased coverage equal to the greater of either of the following amounts within thirty days of discovery of the need for such increase:
(1) The amount of the daily cash fund, i.e. daily cash plus anticipated daily money receipts on the credit union's premises, or
(2) The total amount of the credit union's money in transit in any one shipment.
(3) Increased coverage is not required pursuant to paragraph (c) of this section, however, when the credit union temporarily increased its cash fund because of unusual events which cannot reasonably be expected to recur.
(d) Any aggregate limit of liability provided for in a fidelity bond policy must be at least twice the single loss limit of liability. This requirement does not apply to optional insurance coverage.
(e) Any proposal to reduce your required bond coverage must be approved in writing by the NCUA Board at least twenty days in advance of the proposed effective date of the reduction.
(a)(1) The maximum amount of allowable deductible is computed based on a Federal credit union's asset size, as follows:
(2) The deductibles may apply to one or more insurance clauses in a policy. Any deductibles in excess of the above amounts must receive the prior written permission of the NCUA Board.
(b) A deductible may not exceed 10 percent of a credit union's Regular Reserve unless a separate Contingency Reserve is set up for the excess. In computing the maximum deductible, valuation accounts such as the allowance for loan losses cannot be considered.
The NCUA Board may require additional coverage when the Board determines that a credit union's current coverage is inadequate. The credit union must purchase this additional coverage within 30 days.
12 U.S.C. 1761d, 1782(a)(6).
64 FR 41035, July 29, 1999, unless otherwise noted.
This part implements section 202(a)(6)(D) of the Federal Credit Union Act, 12 U.S.C. 1782(a)(6)(D), as added by section 201(a) of the Credit Union Membership Access Act, Pub. L. No. 105-219, 112 Stat. 918 (1998). This part prescribes the responsibilities of the Supervisory
As used in this part:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(a)
(1) Meet required financial reporting objectives;
(2) And establish practices and procedures sufficient to safeguard members’ assets.
(b)
(1) Internal controls are established and effectively maintained to achieve the credit union's financial reporting objectives which must be sufficient to satisfy the requirements of the supervisory committee audit, verification of members’ accounts and its additional responsibilities;
(2) The credit union's accounting records and financial reports are promptly prepared and accurately reflect operations and results;
(3) The relevant plans, policies, and control procedures established by the board of directors are properly administered; and
(4) Policies and control procedures are sufficient to safeguard against error, conflict of interest, self-dealing and fraud.
(c)
(1) Ensure that the credit union adheres to the measurement and filing requirements for reports filed with the NCUA Board under § 741.6 of this chapter;
(2) Perform or obtain a supervisory committee audit, as prescribed in § 715.4 of this part;
(3) Verify or cause the verification of members’ passbooks and accounts against the records of the credit union, as prescribed in § 715.8 of this part;
(4) Act to avoid imposition of sanctions for failure to comply with the requirements of this part, as prescribed in §§ 715.11 and 715.12 of this part.
(a)
(b)
(c)
(a)
(b)
(c)
(d)
(a)
(b)
(c)
A credit union which is not required to obtain a financial statement audit may fulfill its supervisory committee responsibility by any one of the following engagements:
(a)
(b)
(c)
(a)
(b)
(1)
(2)
(i) Random selection:
(ii) A sample which is representative of the population from which it was selected;
(iii) An equal chance of selecting each dollar in the population;
(iv) Sufficient accounts in both number and scope on which to base conclusions concerning management's financial reporting objectives; and
(v) Additional procedures to be performed if evidence provided by confirmations alone is not sufficient.
(3)
(i) Sufficient accounts in both number and scope on which to base conclusions concerning management's financial reporting objectives to provide assurance that the General Ledger accounts are fairly stated in relation to the financial statements taken as a whole;
(ii) Additional procedures to be performed by the auditor if evidence provided by confirmations alone is not sufficient; and
(iii) Documentation of the sampling procedures used and of their consistency with GAAS (to be provided to the NCUA Board upon request).
(c)
(a)
(b)
(c)
(1) Specify the terms, conditions, and objectives of the engagement;
(2) Identify the basis of accounting to be used;
(3) If a Supervisory Committee Guide audit, include an appendix setting forth the procedures to be performed;
(4) Specify the rate of, or total, compensation to be paid for the audit;
(5) Provide that the auditor shall, upon completion of the engagement, deliver to the Supervisory Committee a written report of the audit and notice in writing, either within the report or communicated separately, of any internal control reportable conditions and/or irregularities or illegal acts, if any, which come to the auditor's attention during the normal course of the audit (i.e., no notice required if none noted);
(6) Specify a target date of delivery of the written reports, such target date not to exceed 120 days from date of calendar or fiscal year-end under audit (period covered), unless the supervisory committee obtains a waiver from the supervising NCUA Regional Director;
(7) Certify that NCUA staff and/or the State credit union supervisor, or designated representatives of each, will be provided unconditional access to the complete set of original working papers, either at the offices of the credit
(8) Acknowledge that working papers shall be retained for a minimum of three years from the date of the written audit report.
(d)
(e)
(1) Identify the excluded items;
(2) State that, because of the exclusion(s), the resulting audit will not, by itself, fulfill the scope of a supervisory committee audit; and
(3) Caution that the supervisory committee will remain responsible for fulfilling the scope of a supervisory committee audit with respect to the excluded items.
(a)
(b)
(a)
(1) The regional director to reject the supervisory committee audit and provide a reasonable opportunity to correct deficiencies;
(2) The regional director to impose the remedies available in § 715.12, provided any of the conditions specified therein is present; and
(3) The NCUA Board to seek formal administrative sanctions against the supervisory committee and/or its independent, compensated auditor pursuant to section 206(r) of the Federal Credit Union Act, 12 U.S.C. 1786(r).
(b)
(a)
(1) The Supervisory Committee has not obtained an annual financial statement audit or performed a supervisory committee audit; or
(2) The Supervisory Committee has obtained a financial statement audit or performed a supervisory committee audit which does not meet the requirements of part 715 including those in § 715.8.
(3) The credit union has experienced serious and persistent recordkeeping deficiencies as defined in paragraph (c) of this section.
(b)
(c) “
12 U.S.C. 1757(16), 1766 and 1789.
A Federal credit union may make insurance and group purchasing plans involving outside vendors available to the membership (including endorsement), and may perform administrative functions on behalf of the vendors.
(a) For purposes of paragraph (b) of this section, the following definitions shall apply:
(1)
(2)
(b) A Federal credit union may be reimbursed or compensated by a vendor for activities performed under § 721.1 as follows:
(1) Except as otherwise provided by applicable state insurance law, reimbursement or compensation is not limited with respect to insurance sales by the credit union or its employees which are directly related to an extension of credit by the credit union or directly related to the opening or maintenance of a share, share draft or share certificate account at the credit union;
(2) For insurance sales other than those described in paragraph (b)(1), a Federal credit union may receive an amount not exceeding the greater of the dollar amount or the cost amount;
(3) For group purchasing plans other than insurance, a Federal credit union may receive an amount not exceeding the cost amount.
(c) No director, committee member, or senior management employee of a Federal credit union or any immediate family member of any such individual may receive any compensation or benefit, directly or indirectly, in conjunction with any activity under this part. For purposes of this section,
(d) The prohibition contained in paragraph (c) of this section also applies to any employee not otherwise covered if the employee is directly involved in insurance or group purchasing activities unless the board of directors determines that the employee's involvement does not present a conflict of interest.
(e) All transactions with business associates or family members not specifically prohibited by paragraph (c) of this section must be conducted at arm's length and in the interest of the credit union.
12 U.S.C. 1766, 1789 and 3339.
55 FR 30207, July 25, 1990, unless otherwise noted.
(a)
(b)
(2) This part: (i) Identifies which real estate-related financial transactions require the services of an appraiser;
(ii) Prescribes which categories of federally related transactions shall be appraised by a state-certified appraiser and which by a state-licensed appraiser; and
(iii) Prescribes minimum standards for the performance of real estate appraisals in connection with federally related transactions under the jurisdiction of the National Credit Union Administration.
(a)
(b)
(c)
(d)
(e)
(1) The National Credit Union Administration, or any federally insured credit union, engages in or contracts for; and
(2) Requires the services of an appraiser.
(f)
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised; and acting in what they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open market;
(4) Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and
(5) The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
(g)
(h)
(1) The sale, lease, purchase, investment in or exchange of real property, including interests in property, or the financing thereof; or
(2) The refinancing of real property or interests in real property; or
(3) The use of real property or interests in property as security for a loan or investment, including mortgage-backed securities.
(i)
(j)
(k)
(l)
(2) For sales, leases, purchases, and investments in or exchanges of real property, the market value of the real property interest involved; and
(3) For the pooling of loans or interests in real property for resale or purchase, the amount of the loan or market value of the real property calculated with respect to each such loan or interest in real property.
(a)
(1) The transaction value is $100,000 or less except if it is a business loan
(2) A lien on real property has been taken as collateral through an abundance of caution and where the terms of the transaction as a consequence have not been made more favorable than they would have been in the absence of a lien;
(3) A lien on real estate has been taken for purposes other than the real estate's value;
(4) A lease of real estate is entered into, unless the lease is the economic equivalent of a purchase or sale of the leased real estate;
(5) The transaction involves an existing extension of credit at the credit union, provided that:
(i) There is no advancement of new monies, other than funds necessary to cover reasonable closing costs; and
(ii) There has been no obvious and material change in market conditions or physical aspects of the property that threatens the adequacy of the credit union's real estate collateral protection after the transaction;
(6) The transaction involves the purchase, sale, investment in, exchange of, or extension of credit secured by, a loan or interest in a loan, pooled loans, or interests in real property, including mortgage-backed securities, and each loan or interest in a loan, pooled loan, or real property interest met the requirements of this regulation, if applicable, at the time of origination;
(7) The transaction is wholly or partially insured or guaranteed by a United States government agency or United States government sponsored agency;
(8) The transaction either:
(i) Qualifies for sale to a United States government agency or United States government sponsored agency; or
(ii) Involves a residential real estate transaction in which the appraisal conforms to the Federal National Mortgage Association or Federal Home Loan Mortgage Corporation appraisal standards applicable to that category of real estate; or
(9) The regional director has granted a waiver from the appraisal requirement for a category of loans meeting the definition of a member business loan.
(b)
(2) (Nonresidential transactions) All federally related transactions having a transaction value of more than $50,000, other than those involving appraisals of 1- to 4-family residential properties, shall require an appraisal prepared by a state-certified appraiser.
(3) (Complex residential transactions of $250,000 or more) All complex 1- to 4-family residential property appraisals rendered in connection with federally related transactions shall require a state-certified appraiser if the transaction value is $250,000 or more. A regulated institution may presume that appraisals of 1- to 4-family residential properties are not complex unless the institution has readily available information that a given appraisal will be complex. The regulated institution shall be responsible for making the final determination of whether the appraisal is complex. If, during the course of the appraisal, a licensed appraiser identifies factors that would result in the property, form of ownership, or market conditions being considered atypical, then either:
(i) The regulated institution may ask the licensed appraiser to complete the appraisal and have a certified appraiser approve and cosign the appraisal; or
(ii) The institution may engage a certified appraiser to complete the appraisal.
(c)
(d)
(e)
For federally related transactions, all appraisals shall, at a minimum:
(a) Conform to generally accepted appraisal standards as evidenced by the Uniform Standards of Professional Appraisal Practice (USPAP) promulgated by the Appraisal Standards Board of the Appraisal Foundation, 1029 Vermont Ave., NW., Washington, DC 20005;
(b) Be written and contain sufficient information and analysis to support the institution's decision to engage in the transaction;
(c) Analyze and report appropriate deductions and discounts for proposed construction or renovation, partially leased buildings, non-market lease terms, and tract developments with unsold units;
(d) Be based upon the definition of market value as set forth in § 722.2(f); and
(e) Be performed by State licensed or certified appraisers in accordance with requirements set forth in this subpart.
(a)
(b)
(2) A credit union also may accept an appraisal that was prepared by an appraiser engaged directly by another financial services institution; if:
(i) The appraiser has no direct or indirect interest, financial or otherwise, in the property or transaction; and
(ii) The credit union determines that the appraisal conforms to the requirement of this regulation and is otherwise acceptable.
(a)
(b)
Credit unions and institution-affiliated parties, including staff appraisers and fee appraisers, may be subject to
12 U.S.C. 1756, 1757, 1757A, 1766, 1785, 1789.
64 FR 28729, May 27, 1999, unless otherwise noted.
(a)
(1) Commercial;
(2) Corporate;
(3) Other business investment property or venture; or
(4) Agricultural.
(b)
(1) A loan fully secured by a lien on a 1 to 4 family dwelling that is the member's primary residence;
(2) A loan fully secured by shares in the credit union making the extension of credit or deposits in other financial institutions;
(3) Loan(s) to a member or an associated member which, when added together, are equal to less than $50,000;
(4) A loan where a federal or state agency (or its political subdivision) fully insures repayment, or fully guarantees repayment, or provides an advance commitment to purchase in full; or
(5) A loan granted by a corporate credit union to another credit union.
(a)
(1) Your chief executive officer (typically this individual holds the title of President or Treasurer/Manager);
(2) Any assistant chief executive officers (e.g., Assistant President, Vice President, or Assistant Treasurer/Manager);
(3) Your chief financial officer (Comptroller); or
(4) Any associated member or immediate family member of anyone listed in paragraphs (a) (1) through (3) of this section.
(b)
(c)
Unless the Regional Director grants a waiver, loans granted for the construction or development of commercial or residential property are subject to the following additional requirements.
(a) The aggregate of all construction and development loans must not exceed 15% of net worth. To determine the aggregate, you may exclude any portion of a loan:
(1) Secured by shares in the credit union;
(2) Secured by deposits in another financial institution;
(3) Fully or partially insured or guaranteed by any agency of the federal government, state, or its political subdivisions; or
(4) Subject to an advance commitment to purchase by any agency of the federal government, state, or its political subdivisions;
(b) The borrower must have a minimum of 35% equity interest in the project being financed; and
(c) The funds may be released only after on-site, written inspections by qualified personnel and according to a preapproved draw schedule and any other conditions as set forth in the loan documentation.
The provisions of § 701.21(a) through (g) of this chapter apply to member business loans granted by federal credit unions to the extent they are consistent with this part. Except as required by part 741 of NCUA's regulations, federally insured credit unions are not required to comply with the provisions of § 701.21(a) through (g).
The board of directors must adopt specific business loan policies and review them at least annually. The board must also utilize the services of an individual with at least two years direct experience with the type of lending the credit union will be engaging in. Credit unions do not have to hire staff to meet the requirements of this section; however, credit unions must ensure that the expertise is available. A credit union can meet the experience requirement through various approaches. For example, a credit union can use the services of a credit union service organization, an employee of another credit union, an independent contractor, or other third parties. However, the actual decision to grant a loan must reside with the credit union.
At a minimum, your policy must address the following:
(a) The types of business loans you will make;
(b) Your trade area;
(c) The maximum amount of your assets, in relation to net worth, that you will invest in business loans;
(d) The maximum amount of your assets, in relation to net worth, that you will invest in a given category or type of business loan;
(e) The maximum amount of your assets, in relation to net worth, that you will loan to any one member or group of associated members, subject to § 723.8;
(f) The qualifications and experience of personnel (minimum of 2 years) involved in making and administering business loans;
(g) A requirement to analyze and document the ability of the borrower to repay the loan;
(h) Receipt and periodic updating of financial statements and other documentation, including tax returns;
(i) A requirement for sufficient documentation supporting each request to extend credit, or increase an existing loan or line of credit (except where the board of directors finds that the documentation requirements are not generally available for a particular type of business loan and states the reasons for those findings in the credit union's written policies). At a minimum, your documentation must include the following:
(1) Balance sheet;
(2) Cash flow analysis;
(3) Income statement;
(4) Tax data;
(5) Analysis of leveraging; and
(6) Comparison with industry average or similar analysis;
(j) The collateral requirements must include:
(1) Loan-to-value ratios;
(2) Determination of value;
(3) Determination of ownership;
(4) Steps to secure various types of collateral; and
(5) How often the credit union will reevaluate the value and marketability of collateral;
(k) The interest rates and maturities of business loans;
(l) General loan procedures which include:
(1) Loan monitoring;
(2) Servicing and follow-up; and
(3) Collection;
(m) Identification of those individuals prohibited from receiving member business loans.
(a) Unless your Regional Director grants a waiver, all member business loans must be secured by collateral as follows:
(b) Principals, other than a not for profit organization as defined by the Internal Revenue Service Code (26 U.S.C. 501) or those where the Regional Director grants a waiver, must provide their personal liability and guarantee.
(c) Federally insured credit unions are exempt from the provisions of paragraphs (a) and (b) of this section with respect to credit card line of credit programs offered to nonnatural person members that are limited to routine purposes normally made available under those programs.
Unless your Regional Director grants a waiver for a higher amount the aggregate amount of outstanding member business loans (including any unfunded commitments) to any one member or group of associated members must not exceed the greater of:
(a) 15% of the credit union's net worth; or
(b) $100,000.
(a)
(1) Secured by shares in the credit union;
(2) Secured by deposits in another financial institution;
(3) Fully or partially insured or guaranteed by any agency of the Federal government, state, or its political subdivisions;
(4) Subject to an advance commitment to purchase by any agency of the Federal government, state, or its political subdivisions.
(b)
You may seek a waiver for a category of loans in the following areas:
(a) Loan-to-value ratios under § 723.7;
(b) Maximum loan amount to one borrower or associated group of borrowers under § 723.8;
(c) Construction and development loan limits under § 723.3;
(d) Requirement for personal liability and guarantee under § 723.7; and
(e) Appraisal requirements under § 722.3.
To obtain a waiver, a federal credit union must submit a request to the Regional Director (a corporate federal credit union submits the waiver request to the Director of the Office of Corporate Credit Unions). A state chartered federally insured credit union must submit the request to its state supervisory authority. If the state supervisory authority approves the request, the state regulator will forward the request to the Regional Director (or if appropriate the Director of the Office of Corporate Credit Unions). A waiver is not effective until it is approved by the Regional Director (or in the case of a corporate federal credit union the Director of the Office of Corporate Credit Unions). The waiver request must contain the following:
(a) A copy of your business lending policy;
(b) The higher limit sought (if applicable);
(c) An explanation of the need to raise the limit (if applicable);
(d) Documentation supporting your ability to manage this activity; and
(e) An analysis of the credit union's prior experience making member business loans, including as a minimum:
(1) The history of loan losses and loan delinquency;
(2) Volume and cyclical or seasonal patterns;
(3) Diversification;
(4) Concentrations of credit to one borrower or group of associated borrowers in excess of 15% of net worth;
(5) Underwriting standards and practices;
(6) Types of loans grouped by purpose and collateral; and
(7) The qualifications of personnel responsible for underwriting and administering member business loans.
Your Regional Director (or the Director of the Office of Corporate Credit Unions) will:
(a) Review the information you provided in your request;
(b) Evaluate the level of risk to your credit union;
(c) Consider your credit union's historical CAMEL composite and component ratings when evaluating your request; and
(d) Notify you whenever your waiver request is deemed complete. Notify you of the action taken within 45 calendar days of receiving a complete request from the federal credit union or the state supervisory authority. If you do not receive notification within 45 calendar days of the date the complete request was received by the regional office, the credit union may assume approval of the waiver request.
You may appeal the Regional Director's (or the Director of the Office of Corporate Credit Unions) decision in writing to the NCUA Board. Your appeal must include all information requested in § 723.11 and why you disagree with your Regional Director's (or the Office of Corporate Credit Union Director's) decision.
Non-delinquent member business loans may be classified based on factors such as the adequacy of analysis and supporting documentation. You must classify potential loss loans as either substandard, doubtful, or loss. The criteria for determining the classification of loans are:
(a)
(b)
(c)
The following schedule sets the minimum amount you must reserve for classified loans:
The aggregate limit on a credit union's outstanding member business loans (including any unfunded commitments) is the lesser of 1.75 times the credit union's net worth or 12.25% of the credit union's total assets. Net worth is all of the credit union's retained earnings. Retained earnings normally includes undivided earnings, regular reserves and any other appropriations designated by management or regulatory authorities. Loans that are exempt from the definition of member business loans are not counted for the purpose of the aggregate loan limit.
There are three circumstances where a credit union qualifies for an exception from the aggregate limit. Loans that are excepted from the definition of member business loans are not counted for the purpose of the exceptions. The three exceptions are:
(a) Credit unions that have a low-income designation or participate in the Community Development Financial Institutions program;
(b) Credit unions that were chartered for the purpose of making member business loans and can provide documentary evidence (such evidence includes but is not limited to the original charter, original bylaws, original business plan, original field of membership, board minutes and loan portfolio);
(c) Credit unions that have a history of primarily making member business loans, meaning that either member business loans comprise at least 25% of the credit union's outstanding loans (as evidenced in any call report filed between January 1995 and September 1998 or any equivalent documentation including financial statements) or member business loans comprise the largest portion of the credit union's loan portfolio (as evidenced in any call report filed between January 1995 and September 1998 or any equivalent documentation including financial statements). For example, if a credit union makes 23% member business loans, 22% first mortgage loans, 22% new automobile loans, 20% credit card loans,
To obtain the exception, a federal credit union must submit documentation to the Regional Director, demonstrating that it meets the criteria of one of the exceptions. A state chartered federally insured credit union must submit documentation to its state supervisory authority. The state supervisory authority will forward its decision to NCUA. The exception does not expire unless revoked by the state supervisory authority for a state chartered federally insured credit union or the Regional Director for a federal credit union. If an exception request is denied for a federal credit union, it may be appealed to the NCUA Board within 60 days of the denial by the Regional Director. Until the NCUA Board acts on the appeal, the credit union can continue to make new member business loans.
You must separately identify member business loans in your records and in the aggregate on your financial reports.
(a) The NCUA Board may exempt federally insured state chartered credit unions in a given state from NCUA's member business loan rule if NCUA approves the state's rule for use for state chartered federally insured credit unions. In making this determination, the Board is guided by safety and soundness considerations and reviews whether the state regulation minimizes the risk and accomplishes the overall objectives of NCUA's member business loan rule in this part. Specifically, the Board will focus its review on:
(1) The definition of a member business loan;
(2) Loan to one borrower limits;
(3) Written loan policies;
(4) Collateral and security requirements;
(5) Construction and development lending; and
(6) Loans to senior management.
(b) To receive NCUA's approval of a state's members business loan rule, the state supervisory authority must submit its rule to the NCUA regional office. After reviewing the rule, the region will forward the request to the NCUA Board for a final determination.
For purposes of this part, the following definitions apply:
12 U.S.C. 1757, 1765, 1766 and 1787.
55 FR 30211, July 25, 1990, unless otherwise noted.
A Federal credit union is authorized to act as trustee or custodian, and may receive reasonable compensation for so acting, under any written trust instrument or custodial agreement created or organized in the United States and forming part of a pension or retirement plan which qualifies or qualified for specific tax treatment under sections 401(d), 408, 408A and 530 of the Internal Revenue Code (26 U.S.C. 401(d), 408, 408A and 530), for its members or groups of its members, provided the funds of such plans are invested in share accounts or share certificate accounts of the Federal credit union. All funds held in a trustee or custodial capacity must be maintained in accordance with applicable laws and rules and regulations as may be promulgated by the Secretary of Labor, the Secretary of the Treasury, or any other authority exercising jurisdiction over such trust or custodial accounts. The federal credit union shall maintain individual records for each participant which show in detail all transactions relating to the funds of each participant or beneficiary.
A Federal credit union may act as trustee or custodian of individual retirement plans of its members established pursuant to section 401(d) or 408 of the Internal Revenue Code, and may facilitate transfers of plan funds to assets other than share and share certificates of the credit union, provided the conditions of § 724.1 and the following additional conditions are met:
(a) All contributions of funds are initially made to a share or share certificate account in the Federal credit union;
(b) Any subsequent transfer of funds to other assets is solely at the direction of the member and the Federal credit union exercises no investment discretion and provides no investment advice with respect to plan assets (i.e., the credit union performs only custodial duties); and
(c) The member is clearly notified of the fact that National Credit Union Share Insurance Fund coverage is limited to funds held in share or share certificate accounts of NCUSIF-insured credit unions.
Any plan operated pursuant to this part shall provide for the appointment of a successor trustee or custodian by a person, committee, corporation or organization other than the Federal credit union or any person acting in his capacity as a director, employee or agent of the Federal credit union upon notice from the Federal credit union or the Board that the Federal credit union is unwilling or unable to continue to act as trustee or custodian.
Secs. 301-307 Federal Credit Union Act, 92 Stat. 3719-3722 (12 U.S.C. 1795-1795f).
44 FR 49437, Aug. 23, 1979, unless otherwise noted.
This part contains the regulations implementing the National Credit Union Central Liquidity Facility Act, subchapter III of the Federal Credit Union Act. The National Credit Union Administration Central Liquidity Facility is a mixed-ownership Government corporation within the National
As used in this part:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(1) Cash on hand;
(2) Share or deposit accounts with remaining maturities of one year or less maintained in central credit unions or institutions insured by the Federal Deposit Insurance Corporation or Federal Savings and Loan Insurance Corporation;
(3) Investments in obligations of the United States or any agency thereof, or securities fully guaranteed as to principal and interest thereby, which are authorized under 12 U.S.C. 1757(7) and which have a remaining maturity of one year or less;
(4) Common trust investments and similar investments in funds or securities authorized for Federal credit unions, the objectives of which are to provide daily liquidity for participating credit unions;
(5) Shares in the National Credit Union Administration Central Liquidity Facility or in special share accounts authorized by § 725.7 of this part;
(6) In the case of a federally-insured state-chartered credit union, any asset held in satisfaction of liquidity requirements imposed by applicable state law or regulation; and
(7) Balances maintained by federally-insured credit unions in a Federal Reserve bank, or in a pass-through account to a Federal Reserve bank, pursuant to the requirements of section 19(b) of the Federal Reserve Act (12 U.S.C. 461(b)).
(i)
(1) Short-term adjustment credit available to assist in meeting temporary requirements for funds or to cushion more persistent outflows of funds pending an orderly adjustment of credit union assets and liabilities;
(2) Seasonal credit available for longer periods to assist in meeting seasonal needs for funds arising from a combination of expected patterns of movement in share and deposit accounts and loans; and
(3) Protracted adjustment credit available in the event of unusual or emergency circumstances of a longer term nature resulting from national, regional or local difficulties.
(j)
(k)
(l)
(m)
(n)
(o)
(p)
(1) For initial qualification, any 7 months out of the 12 months immediately preceding the month in which application is made to become a member of the Facility; and
(2) For qualification during each subsequent calendar year, any 7 months out of the previous calendar year.
(q)
(a) A natural person credit union may become a Regular member of the Facility by:
(1) Making application on a form approved by the Facility;
(2) Subscribing to capital stock of the Facility in an amount equal to one-half of 1 percent of the credit union's paid-in and unimpaired capital and surplus, as determined in accordance with § 725.5(b) of this part, and forwarding with its completed application funds equal to one-half of this stock subscription;
(3) Furnishing the following reports and documents with the completed membership application:
(i) A copy of the credit union's financial and statistical report for the most recent calendar month; and
(ii) Copies of the credit union's charter and bylaws, unless the credit union is federally chartered.
(b) A credit union which becomes a Regular member of the Facility after February 23, 1980, may not receive Facility advances without approval of the NCUA Board for a period of six months after becoming a member. This subsection shall not apply to any credit union which becomes a Regular member of the Facility within six months after such credit union is chartered, or which has had access to Facility funds through an Agent member of the Facility at any time within six months prior to becoming a Regular member of the Facility.
(a) A central credit union or a group of central credit unions may become an Agent member of the Facility by (in the case of a group of central credit unions, each central credit union in the group must do each of the following except for paragraph (a)(2) of this section, which shall be done by the Agent group representative):
(1) Making application on a form approved by the Facility;
(2) Subscribing to the capital stock of the Facility in an amount equal to one-half of 1 percent of the paid-in and unimpaired capital and surplus (as determined in accordance with § 725.5(b) of this part) of all the central credit union's or central credit union group's member natural person credit unions, except those which are Regular members of the Facility or which have access to the Facility through, and are included in the stock subscription of, another Agent.
(3) Furnishing the following reports and documents with the completed membership application:
(i) A copy of the central credit union's financial and statistical report for the most recent calendar month;
(ii) Copies of the central credit union's charter and bylaws, unless such credit union is federally chartered; and
(iii) A list of all the central credit union's member natural person credit unions.
(4) Agreeing to submit to the supervision of the NCUA Board and to comply with all regulations and reporting requirements which the NCUA Board shall prescribe for Agent members;
(5) Agreeing to submit to periodic unrestricted examinations by the NCUA Board or its designee; and
(6) Obtaining the written approval of the NCUA Board.
(b) The NCUA Board may approve a central credit union or group of central credit unions as an Agent member of the Facility, provided the NCUA Board is satisfied that such credit union or credit union group meets certain criteria, including but not limited to the following (in the case of a group of central credit unions, each central credit union in the group must meet these criteria):
(1) The management policies are in writing, approved by the central credit union's board of directors, and reviewed annually by such board;
(2) Adequate internal controls are in place to assure accurate and timely reporting of transactions and the safeguarding of assets;
(3) The financial condition of the central credit union is sound with adequate reserves for losses;
(4) Surety bond coverage provides protection for the central credit union while the central credit union is performing the duties of an Agent member of Facility;
(5) Management has demonstrated its ability to use such techniques as cash flow analysis, budgeting, and projections of sources and uses of funds to manage the affairs of the central credit union efficiently and in conformity with sound business practices; and
(6) There are no practices, procedures, policies, or other factors that would result in discrimination by the central credit union among natural person credit unions or inhibit its ability to act independently in its role as an Agent member of the Facility.
(c) Each Agent, or in the case of an Agent group, each central credit union in the group, must:
(1) Maintain records related to Facility activity in conformity with requirements prescribed by the NCUA Board from time to time; and
(2) Submit such reports as may be required by the Facility to determine financial soundness, quality and level of service, and conformity with established guidelines and procedures.
(d) Each Agent, or in the case of an Agent group, each central credit union in the group, must have on an annual basis a third party independent audit of its books and records and provide the Facility with copies of the report of such audit. The auditor selected must be recognized by a State or territorial licensing authority as possessing the requisite knowledge and experience to perform audits.
(e) Within 30 days after a natural person credit union becomes a member of a central credit union which is an Agent or a member of an Agent group,
(f) A central credit union or group of central credit unions which becomes an Agent member of the Facility after February 23, 1980, may not receive a Facility advance without approval of the NCUA Board for a period of six months after becoming a member. This subsection shall not apply to any credit union which becomes an Agent member or a member of an Agent group within six months after such credit union is chartered within six months after such credit union has been an Agent or a member of another Agent group.
(g) Agent members will be compensated for the services they perform for the Facility in a manner to be specified by the NCUA Board.
(a) The capital stock of the Facility is divided into nonvoting shares having a par value of $50 each. The Facility issues whole and fractional shares. Shares are issued in book entry form upon receipt of payment for such shares, and cannot be transferred or hypothecated except to the Facility.
(b) The capital stock subscriptions provided for in §§ 725.3 and 725.4 shall be:
(1) Based on an arithmetic average of paid-in and unimpaired capital and surplus over the six months preceding application for membership, and
(2) Adjusted at the close of each calendar year in accordance with an arithmetic average of paid-in and unimpaired capital and surplus over the twelve months in such calendar year. Payments for adjustments to the capital stock subscription must be received by the Facility no later than March 31 of the following year.
(c) That part of a member's stock subscription which is not paid-in shall be held by the member on call of the NCUA Board and shall be invested in liquid assets.
(d) Any member may at any time purchase additional shares of capital stock in the Facility. Any shares in excess of the member's required paid-in portion of its stock subscription can be redeemed by the member as long as the member maintains investments in other assets sufficient to meet the requirement of paragraph (c) of this section. The member's required paid-in portion of its stock subscription includes one-half of its stock subscription plus any “calls” that may have been issued by the NCUA Board against the “on-call” portion of such stock subscription.
(e) Dividends will be paid on capital stock at such times and rates as are determined by the NCUA Board. The NCUA Board shall declare such dividends no less frequently than annually. All issued (paid for) capital stock shall share in dividend distributions without preference. Payment of dividends will be made by the issuance of capital stock to the member in the amount of the dividend.
(a) A member of the Facility whose stock subscription constitutes less than 5 percent of total subscribed Facility stock may withdraw from membership in the Facility six months after notifying the NCUA Board in writing of its intention to do so.
(b) A member of the Facility whose stock subscription constitutes 5 percent or more of total subscribed Facility stock may withdraw from membership in the Facility twenty-four months after notifying the NCUA Board in writing of its intention to do so.
(c) The NCUA Board may terminate membership in the Facility if, after the opportunity for a hearing, the NCUA Board determines the member has failed to comply with any provision of the National Credit Union Central Liquidity Facility Act or any regulation
(d)(1) If membership is terminated under any provision of this section, the terminated member's stock shall be redeemed upon termination. In such event, the Facility may retain any amount owed to the Facility by the member.
(2) When a member natural person credit union withdraws from membership in a central credit union which is an Agent or a member of an Agent group, the stock subscription of the Agent, or in the case of an Agent group, the stock subscription of the Agent group representative, will be adjusted after the waiting period which would apply under paragraph (a) or (b) of this section if the withdrawing credit union were a member of the Facility.
(a) A federally chartered Agent member of the Facility may require its member natural person credit unions to establish and maintain special share accounts in the Agent member to reimburse it for the portion of the Agent's Facility stock subscription which is attributable to the paid-in and unimpaired capital and surplus of each such natural person credit union.
(b) The amount which the Agent member requires each member natural person credit union to maintain in such special share accounts shall be based on a uniform percentage of the paid-in and unimpaired capital and surplus of such credit unions, and shall not exceed the amount of the Agent's stock subscription which is attributable to the capital and surplus of each such credit union. An Agent shall not permit a member to maintain in a special share account any amounts in excess of the required amount.
(c) A natural person credit union that withdraws from membership in an Agent member or that becomes a Regular member of the Facility, shall be entitled to the return of all amounts in its special share account upon withdrawal from membership in the Agent or upon becoming a Regular member, as applicable.
(a) A Regular member may apply for a Facility advance to meet its liquidity needs by filing an application on a Facility-approved form, or by any other method approved by the Facility.
(b)(1) An Agent member may apply for a Facility advance by filing an application on a Facility-approved form, or by any other method approved by the Facility.
(2) The Agent's application shall be based on the following:
(i) Approved applications to the Agent by its member natural person credit unions for pending loans to meet liquidity needs; or
(ii) Outstanding loans previously made by the Agent to meet liquidity needs of its member natural person credit unions; or
(iii) Such other demonstrable liquidity needs as the NCUA Board may specify.
(3) An Agent shall not submit an application to the Facility based on the liquidity needs of any member natural person credit union which has not agreed to the repayment, security and credit reporting terms prescribed by the Facility for Agent loans;
(4) Any loan to meet liquidity needs which have been or will be the basis for an application by the Agent for a Facility advance must be applied for on an application form approved by the Facility.
(5) Unless approved by the Facility, an Agent shall not submit an application to the Facility based on the liquidity needs of any credit union which became a member natural person credit union of the Agent after February 2, 1980, unless such credit union has been
(c) In emergency circumstances, the applications for extensions of credit required under paragraph (a) and paragraphs (b)(1) and (b)(4) of this section may be verbal, but must be confirmed within five working days by an application as required by such subsection or paragraphs.
(d) Applications of Regular and Agent members shall be filed with a Facility lending officer. Each application for credit which is completed and properly filed will be approved or denied within five working days after the day of receipt.
(a) Prior to Facility approval of each application of a Regular member for a Facility advance, the Facility shall consider the creditworthiness of such member.
(b) Prior to an Agent's approval of each application of a member natural person credit union for an extension of credit on which an application by the Agent to the Facility will be based, an Agent shall consider the creditworthiness of such member natural person credit union.
(c) Specific characteristics of an uncreditworthy credit union include, but are not limited to, insolvency as defined by § 700.1(k) of this chapter, unsatisfactory practices in extending credit, lower than desirable reserve levels, high expense ratio, failure to repay previous Facility advances as agreed, excessive dependence on borrowed funds, inadequate cash management policies and planning, or any other relevant characteristics creating a less than satisfactory condition. The presence of one or more of these characteristics will not necessarily mean that a credit union will be considered uncreditworthy.
(d) A natural person credit union (whether a Regular member of the Facility or a member natural person credit union) which does not meet the Facility's creditworthiness standards may be limited in or denied the use of advances for its liquidity needs.
(a) Each Facility advance and each Agent loan shall be secured by a first priority security interest in collateral of the credit union with a net book value at least equal to 110% of all amounts due under the applicable Facility advance or Agent loan, or by guarantee of the National Credit Union Share Insurance Fund.
(b) The Facility may accept as collateral for each Facility advance to a Regular member, a security interest in all assets of the Regular member; provided however, that the value of any assets in which any third party has a perfected security interest that is superior to the security interest of the Facility shall be excluded for purposes of complying with the requirements of paragraph (a) of this section.
(c) The Facility may accept as collateral for each Facility advance to an Agent member, a security interest in the Agent loans for which the Facility advance was made; provided however, that the collateral for such Agent loan meets the requirements of paragraph (a) of this section.
(a) Regular and Agent members, or in the case of an Agent group, the Agent group representative, shall sign the repayment, security and credit reporting agreements prescribed by the Facility, and all Facility advances to Regular and Agent members shall be governed by the terms and conditions of such agreements.
(b) All Agent loans shall be made subject to the repayment, security and credit reporting terms prescribed by the Facility for Agent loans.
(c) Other terms and conditions applicable to Facility advances and Agent loans will be specified in confirmations of credit provided in connection with
The repayment, security, and credit reporting terms under which Facility advances and Agent loans will be made, as provided in § 725.20 of this part, shall be subject to modification from time to time as the NCUA Board may determine. Any change in such terms shall be published in the
(a) In accordance with policies established by the NCUA Board, the Facility may advance funds to a State credit union share or deposit insurance corporation, guaranty credit union, guaranty association, or similar organization. Requests for such advances shall be supported by an application which sets forth and supports the need for the advance.
(b) Advances under paragraph (a) shall be subject to the approval of the NCUA Board and shall be made subject to the following terms:
(1) The advance shall be fully secured,
(2) The maturity of the advance shall not exceed 12 months,
(3) The advance shall not be renewable at maturity, and
(4) The funds advanced shall not be relent at an interest rate exceeding that imposed by the Facility.
(a) The NCUA Board may authorize extensions of credit to members of the Facility for purposes other than liquidity needs if the NCUA Board, the Board of Governors of the Federal Reserve System, and the Secretary of the Treasury concur in a determination that such extensions of credit are in the national economic interest.
(b) Extensions of credit approved under the conditions of paragraph (a) of this section shall be subject to such terms and conditions as shall be established by the NCUA Board.
12 U.S.C. 1766, 1781, 1789 and 4311.
51 FR 37556, Oct. 23, 1986, unless otherwise noted.
This part applies to all federally-insured credit unions. It prescribes the requirements with regard to the official sign insured credit unions must display and the requirements with regard to the official advertising statement insured credit unions must include in their advertisements. It also prescribes a general requirement that all other kinds of advertisements must be accurate.
(a)
(b)
No insured credit union shall use any advertising (which includes print or broadcast media, displays and signs, stationery, and all other promotional material) or make any representation which is inaccurate or deceptive in any
(a) Each insured credit union shall continuously display the official sign described in paragraph (b) of this section at each station or window where insured account funds or deposits are usually and normally received in its principal place of business and in all its branches 30 days after its first day of operation as an insured credit union.
(b) The official sign shall be as depicted below, having a blue background with white lettering:
(1) All insured credit unions will automatically be furnished an initial supply of official signs, at no cost, from the Administration for compliance with paragraph (a) of this section. If the initial supply is not adequate, an immediate request for additional signs must be made. Any credit union that does not have an adequate supply but requests additional signs from NCUA shall not be deemed to have violated paragraph (a) of this section unless the credit union shall omit to display the signs after receipt thereof.
(2) Additional signs reflecting variations in color, materials and size, for use other than as prescribed in paragraph (a) of this section may be procured by insured credit unions from commercial suppliers.
(c) An insured credit union shall not receive account funds at any teller's station or window where any noninsured credit union or institution receives deposits. Excepted from this prohibition are credit union centers, service centers, or branches servicing more than one credit union where only some of the credit unions are insured by the NCUA. In such instances there must be placed immediately above or beside each official sign another sign stating “Only the following credit unions serviced by this facility are federally insured by the NCUA
(d) The Board may require any insured credit union, upon at least 30 days’ written notice, to change the wording of its official signs in a manner deemed necessary for the protection of shareholders or others.
(e) For purposes of this section, the terms “branch,” “station,” “teller station,” and “window” do not include automated teller machines or point of sale terminals.
(a) Each insured credit union shall include the official advertising statement, prescribed in paragraph (b) of this section, in all of its advertisements except as provided in paragraph (c) of this section.
(1) An insured credit union must include the official advertising statement in its advertisements thirty (30) days after its first day of operations as an insured credit union unless it has been granted an extension by the Regional Director.
(2) In cases where advertising copy not including the official advertising statement is on hand on the date the requirements of this section become operative, the insured credit union may cause the official advertising statement to be included by use of an overstamp or by other means until the supplies are exhausted.
(b) The official advertising statement shall be in substance as follows:
This credit union is federally insured by the National Credit Union Administration.
(c) The following advertisements need not include the official advertising statement:
(1) Statements of condition and reports of condition of an insured credit union which are required to be published by State and 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, etc;
(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 which do not exceed thirty (30) seconds in time;
(9) Advertisements by television, other than display advertisement, which do not exceed thirty (30) seconds in time;
(10) Advertisements which are of the type or character making it impractical to include thereon the official advertising statement, including but not limited to, promotional items such as calendars, matchbooks, pens, pencils, and key chains;
(11) Advertisements which 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 of $100,000 for each member or shareholder;
(12) Advertisements which do not relate to member accounts, including but not limited to:
(i) Advertisements relating specifically and only to the making of loans by the credit union or loan services;
(ii) Advertisements relating specifically and only to safekeeping box business or services;
(iii) Advertisements relating specifically and only to traveler's checks on which the credit union issuing or causing to be issued the advertisement is not primarily liable; and
(iv) Advertisements relating specifically and only to loan life insurance.
(d) The non-English equivalent of the official advertising statement may be used in any advertisement:
12 U.S.C. 1757, 1766, and 1781-1790.
Section 741.4 is also authorized by 31 U.S.C. 3717.
60 FR 58504, Nov. 28, 1995, unless otherwise noted.
The provisions of this part apply to federal credit unions, federally insured state-chartered credit unions, and credit unions making application for insurance of accounts pursuant to Title II of the Act, unless the context of a provision indicates its application is otherwise limited. This part prescribes various requirements for obtaining and maintaining federal insurance and the payment of insurance premiums and capitalization deposit. Subpart A of this part contains substantive requirements that are not codified elsewhere in this chapter. Subpart B of this part lists additional regulations, set forth elsewhere in this chapter as applying to federal credit unions, that also apply to federally insured state-chartered credit unions. As used in this part, “insured credit union” means a credit union whose accounts are insured by the National Credit Union Share Insurance Fund (NCUSIF).
As provided in Sections 201 and 204 of the Act (12 U.S.C. 1781 and 1784), the NCUA Board is authorized to examine any insured credit union or any credit union making application for insurance of its accounts. Such examination may require access to all records, reports, contracts to which the credit union is a party, and information concerning the affairs of the credit union. Upon request, such documentation must be provided to the NCUA Board or its representative. Any credit union which makes application for insurance will be
Any credit union which makes application for insurance of its accounts pursuant to Title II of the Act, or any insured credit union, must not borrow, from any source, an aggregate amount in excess of 50 per centum of its paid-in and unimpaired capital and surplus (shares and undivided earnings, plus net income or minus net loss).
In determining the insurability of a credit union which makes application for insurance and in continuing the insurability of its accounts pursuant to Title II of the Act, the following criteria shall be applied:
(a)
(2)
(3)
(b)
(1) The existence of unfavorable trends which may include excessive losses on loans (i.e., losses which exceed the regular reserve or its equivalent [in the case of state-chartered credit unions] plus other irrevocable reserves established as a contingency against losses on loans), the presence of special reserve accounts used specifically for charging off loan balances of deceased borrowers, and an expense ratio so high that the required transfers to reserves create a net operating loss for the period or that the net gain after these transfers is not sufficient to permit the payment of a nominal dividend;
(2) The existence of written lending policies, including adequate documentation of secured loans and the protection of security interests by recording, bond, insurance, or other adequate means, adequate determination of the financial capacity of borrowers and co-makers for repayment of the loan, and adequate determination of value of security on loans to ascertain that said security is adequate to repay the loan in the event of default;
(3) Investment policies which are within the provisions of applicable law and regulations, i.e., the Act and part 703 of this chapter for federal credit unions and the laws of the state in which the credit union operates for state-chartered credit unions, except state-chartered corporate credit unions. State-chartered corporate credit unions are permitted to make only those investments that are in conformance with part 704 of this chapter and applicable state laws and regulations;
(4) The presence of any account or security, the form of which has not been approved by the Board, except for accounts authorized by state law for state-chartered credit unions.
(c)
(d)
(e)
(f)
(g) Nothing in this section shall preclude the NCUA Board from imposing additional terms or conditions pursuant to the insurance agreement.
(a)
(b)
(1)
(i) The amount determined by subtracting all liabilities of the NCUSIF, including contingent liabilities for which no provision for losses has been made, from the sum of cash and the market value of unencumbered investments authorized under 12 U.S.C. 1783(c), to:
(ii) The aggregate amount of the insured shares in all insured credit unions.
(iii) Shown as an abbreviated mathematical formula, the available assets ratio is:
(2)
(i) The amount of NCUSIF's capitalization, meaning insured credit unions’ one percent capitalization deposits plus the retained earnings balance of the NCUSIF (less contingent liabilities for which no provision for losses has been made) to:
(ii) The aggregate amount of the insured shares in all insured credit unions.
(iii) Shown as an abbreviated mathematical formula, the equity ratio is:
(3)
(4)
(5)
(c)
(d)
(2)
(ii) If the equity ratio of NCUSIF falls below 1.2 percent, the NCUA Board is required to assess a premium in an amount it determines is necessary to restore the equity ratio to, and maintain that ratio at, 1.2 percent.
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(1) The administrative fee for a delinquent payment shall be an amount as fixed from time to time by the NCUA Board based upon the administrative costs of such delinquent payments to the NCUA in the preceding year.
(2) The costs of collection shall be calculated as the actual hours expended by NCUA personnel multiplied by the average hourly cost of the salaries and benefits of such personnel.
(3) The interest rate charged on any delinquent payment shall be the U.S. Department of the Treasury Tax and Loan Rate in effect on the date when
In the event of a credit union's termination of share insurance coverage other than that provided by the NCUSIF, the credit union must notify all members in writing of such termination at least thirty days prior to the effective date of termination.
(a) Each operating insured credit union with assets in excess of $50,000,000 shall file with the NCUA a quarterly Financial and Statistical Report on Form NCUA 5300, on or before January 22 (as of the previous December 31), April 22 (as of the previous March 31), July 22 (as of the previous June 30) and October 22 (as of the previous September 30) of each year. All other operating insured credit unions shall file with the NCUA on or before January 22 and on or before July 22 of each year a semiannual Financial and Statistical Report on Form NCUA 5300, as of the previous December 31 (in the case of the January filing) or June 30 (in the case of the July filing).
(b)
(c)
(d) Insured credit unions shall, upon written notice from the NCUA Board or Regional Director, file such financial or other reports in accordance with instructions contained in such notice.
Any federal credit union that petitions to convert to a state-chartered federally insured credit union is required to apply to the Regional Director for continued insurance of its accounts and meet the requirements as stated in the Act and this part. If the application for continued insurance is not approved, such insurance will terminate subject to the conditions set forth in section 206(d) of the Act.
(a) Any credit union insured pursuant to Title II of the Act must apply for and receive approval from the NCUA Board before either purchasing or acquiring loans or assuming or receiving an assignment of deposits, shares, or liabilities from:
(1) Any credit union that is not insured pursuant to Title II of the Act;
(2) Any other financial-type institution (including depository institutions, mortgage banks, consumer finance companies, insurance companies, loan brokers, and other loan sellers or liability traders); or
(3) Any successor in interest to any institution identified in paragraph (a)(1) or (a)(2) of this section.
(b) Approval is not required for:
(1) Purchases of student loans or real estate secured loans to facilitate the packaging of a pool of loans to be sold or pledged on the secondary market under § 701.23(b)(1) (iii) or (iv) of this chapter or comparable state law for state-chartered credit unions, or purchases of member loans under
(2) Assumptions or receipt of deposits, shares or liabilities as rollovers or transfers of member retirement accounts or in which an NCUSIF-insured credit union perfects a security interest in connection with an extension of credit to any member.
Any credit union that is insured pursuant to Title II of the Act may not offer membership shares that, due to the terms and conditions of the account, are not eligible for insurance coverage. This prohibition does not apply to shares that are uninsured solely because the amount is in excess of the maximum insurance coverage provided pursuant to part 745 of this chapter.
Any credit union which is insured pursuant to Title II of the Act and is permitted by state law to accept nonmember shares or deposits from sources other than other credit unions and public units (or, for low-income designated credit unions, any nonmembers), shall identify such nonmember accounts as nonmember shares or deposits on any statement or report required by the NCUA Board for insurance purposes. Immediately after a state-chartered credit union receives notice from NCUA that its member accounts are federally insured, the credit union shall advise any present nonmember share and deposit holders by letter that their accounts are not insured by the NCUSIF. Also, future nonmember share and deposit fund holders will be so advised by letter as they open accounts.
(a) Any credit union which makes application for insurance of its accounts pursuant to Title II of the Act must possess the minimum fidelity bond coverage stated in part 713 of this chapter in order for its application for such insurance to be approved and for such insurance coverage to continue. A federally insured credit union whose fidelity bond coverage is terminated shall mail notice of such termination to the Regional Director not less than 35 days prior to the effective date of such termination.
(b) Corporate credit unions must comply with § 704.17 of this chapter in lieu of part 713 of this chapter.
(a) The supervisory committee of each credit union insured pursuant to Title II of the Act shall make or cause to be made an audit of the credit union at least once every calendar year covering the period elapsed since the last audit. The audit must fully meet the applicable requirements set forth in part 715 of this chapter or applicable state law, whichever requirement is more stringent.
(b) Each credit union which is insured pursuant to Title II of the Act shall verify or cause to be verified, under controlled conditions, all passbooks and accounts with the records of the financial officer not less frequently than once every 2 years. The
Any credit union which is insured pursuant to Title II of the Act must:
(a) Adhere to the requirements stated in part 723 of this chapter concerning member business loans, § 701.21(c)(8) of this chapter concerning prohibited fees, and § 701.21(d)(5) of this chapter concerning nonpreferential loans. State-chartered, NCUSIF-insured credit unions in a given state are exempt from these requirements if the state supervisory authority for that state adopts substantially equivalent regulations as determined by the NCUA Board or, in the case of the member business loan requirements, if the state supervisory authority adopts member business loan regulations that are approved by the NCUA Board pursuant to § 723.20. In nonexempt states, all required NCUA reviews and approvals will be handled in coordination with the state credit union supervisory authority; and
(b) Adhere to the requirements stated in part 722 of this chapter concerning appraisals.
Any credit union that is insured, or that makes application for insurance, pursuant to Title II of the Act must:
(a) Adhere to the requirements of § 701.32 of this chapter regarding public unit and nonmember accounts, provided it has the authority to accept such accounts. Requests by federally insured state-chartered credit unions for an exemption from the limitation of § 701.32 of this chapter will be made and reviewed on the same basis as that provided in § 701.32 of this chapter for federal credit unions, provided, however that NCUA will not grant an exemption without the concurrence of the appropriate state regulator.
(b) Obtain a low-income designation in order to accept nonmember accounts, other than from public units or other credit unions, provided it has the authority to accept such accounts under state law. The state regulator shall make the low-income designation with the concurrence of the appropriate regional director. The designation will be made and reviewed by the state regulator on the same basis as that provided in § 701.34(a) of this chapter for federal credit unions. Removal of the designation by the state regulator for such credit unions shall be with the concurrence of NCUA.
(c) Receive secondary capital accounts only if the credit has a low-income designation pursuant to paragraph (b) of this section, and then only in accordance with the terms and conditions authorized for Federal credit unions pursuant to § 701.34 of this chapter and to the extent not inconsistent with applicable state law and regulation. State chartered federally insured credit unions offering secondary capital accounts must submit the plan required by § 701.34 to both the state supervisory authority and the NCUA Regional Director.
Any federally insured credit union chartered for less than 2 years or any credit union defined to be in troubled condition as set forth in § 701.14(b)(3) of this chapter must adhere to the requirements stated in § 701.14(c) of this chapter concerning the prior notice and NCUA review. Federally insured state-chartered credit unions must submit required information to both the appropriate NCUA Regional Director and their state supervisor. NCUA will consult with the state supervisor before making its determination pursuant to § 701.14 (d)(2) and (f) of this chapter. NCUA will notify the state supervisor of its approval/disapproval no later than the time that it notifies the affected individual pursuant to § 701.14(d)(1) of this chapter.
Any corporate credit union insured pursuant to Title II of the Act shall adhere to the requirements of part 704 of this chapter.
Any credit union which is insured pursuant to Title II of the Act and is a “participating credit union,” as defined in § 705.3 of this chapter, shall adhere to the requirements stated in part 705 of this chapter.
Any credit union which is insured pursuant to Title II of the Act and which merges with another credit union or non-credit union institution, and any state-chartered credit union which voluntarily terminates its status as a federally-insured credit union, or converts from federal insurance to other insurance from a government or private source authorized to insure member accounts, shall adhere to the applicable requirements stated in section 206 of the Act and parts 708a and 708b of this chapter concerning mergers and voluntary termination or conversion of insured status.
Any credit union which is insured pursuant to Title II of the Act shall adhere to the requirements stated in part 711 of this chapter concerning management official interlocks, issued under the provisions of the Depository Institution Management Interlocks Act (12 U.S.C. 3201 et seq.).
Any credit union which is insured pursuant to Title II of the Act and is a member of the Central Liquidity Facility, shall adhere to the requirements stated in part 725 of this chapter.
Any credit union which is insured pursuant to Title II of the Act shall adhere to the requirements prescribed by part 740 of this chapter.
(a) Member share accounts received by any credit union which is insured pursuant to Title II of the Act in its usual course of business, including regular shares, share certificates, and share draft accounts, are insured subject to the limitations and rules in subpart A of part 745 of this chapter.
(b) The payment of share insurance and the appeal process applicable to any credit union which is insured pursuant to Title II of the Act are addressed in subpart B of part 745 of this chapter.
Any credit union which is insured pursuant to Title II of the Act shall adhere to the applicable rules of practice and procedures for administrative actions and adjudicative hearings prescribed by part 747 of this chapter. Subpart E of part 747 of this chapter applies only to federal credit unions.
Any credit union which is insured pursuant to Title II of the Act shall adhere to the requirements stated in part 748 of this chapter.
Any credit union which is insured pursuant to Title II of the Act shall maintain a records preservation program as prescribed by part 749 of this chapter.
Any credit union which is insured pursuant to Title II of the Act shall adhere to the requirements stated in part 760 of this chapter.
Any credit union which is insured pursuant to Title II of the Act shall adhere to the requirements stated in part 707 of this chapter.
Any credit union which is insured pursuant to Title II of the Act shall adhere to the applicable provisions in part 709 of this chapter. Section 709.3 of this chapter applies only to federal credit unions.
Any credit union which is insured pursuant to Title II of the Act must adhere to the requirements stated in part 703 of this chapter concerning transacting business with corporate credit unions.
12 U.S.C 1752(5), 1757, 1765, 1766, 1781, 1782, 1787, 1789.
51 FR 37560, Oct. 23, 1986, unless otherwise noted.
The regulation and appendix contained in this part describe the insurance coverage of various types of member accounts. In general, all types of member share accounts received by the credit union in its usual course of business, including regular shares, share certificates, and share draft accounts, represent equity and are insured. For the purposes of applying the rules in this part, it is presumed that the owner of funds in an account is an insured credit union member or otherwise eligible to maintain an insured account in a credit union. These rules do not extend insurance coverage to persons not entitled to maintain an insured account or to account relationships that have not been approved by the Board as an insured account. Where there are multiple owners of a single account, generally only that part which is allocable to the member(s) is insured.
(a) The terms
(b) The terms
(c) The term
(d) The term
(a)
(b) The regulations in this part in no way are to be interpreted to authorize any type of account that is not authorized by Federal law or regulation or State law or regulation or by the bylaws of a particular credit union. The purpose is to be as inclusive as possible of all situations.
(c)
(2) If the account records of an insured credit union disclose the existence of a relationship which may provide a basis for additional insurance, the details of the relationship and the interest of other parties in the account must be ascertainable either from the records of the credit union or the records of the member maintained in good faith and in the regular course of business.
(3) The account records of an insured credit union in connection with a trust account shall disclose the name of both the settlor (grantor) and the trustee of the trust and shall contain an account signature card executed by the trustee.
(4) The interests of the co-owners of a joint account shall be deemed equal, unless otherwise stated on the insured credit union's records in the case of a tenancy in common.
(d)
(2) In connection with any trust in which certain trust interests are not capable of evaluation in accordance with the foregoing rule, payment by the Board to the trustee with respect to all such trust interests shall not exceed the basic insured amount of $100,000.
(3) Each trust interest in any trust established by two or more settlors shall be deemed to be derived from
(4) The term “trust interest” means the interest of a beneficiary in an irrevocable express trust, whether created by trust instrument or statute, but does not include any interest retained by the settlor.
(a) Funds owned by an individual and deposited in the manner set forth below shall be added together and insured up to $100,000 in the aggregate.
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(2)
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(b) Funds held by a guardian, custodian, or conservator for the benefit of his ward or for the benefit of a minor under a Uniform Gifts to Minors Act and deposited in one or more accounts in the name of the guardian, custodian, or conservator are insured up to $100,000 in the aggregate, separately from any other accounts of the guardian, custodian, conservator, ward, or minor.
(a) For purposes of this part, the term “revocable trust account” includes a testamentary account, tentative or “Totten” trust account, “payable-on-death” account, or any similar account which evidences an intention that the funds shall pass on the death of the owner of the funds to a named beneficiary.
(b) If the named beneficiary of a revocable trust account is a spouse, child, grandchild, parent, brother or sister of the account owner, the account shall be insured up to $100,000 in the aggregate as to each such beneficiary, separately from any other accounts of the owner or beneficiary, regardless of the membership status of the beneficiary.
(c) If the named beneficiary of a revocable trust account is other than the spouse, child, grandchild, parent, brother or sister of the account owner, the funds in such account shall be added to any individual accounts of the owner and insured up to $100,000 in the aggregate.
(d) For purposes of this section, the term “child” includes the biological, adopted or step-child of the owner; the term “grandchild” includes the biological, adopted or step-child of any of the owner's children; the term “parent” includes the biological, adoptive or step-parent of the owner; the term “brother” includes a full brother, half brother, brother through adoption or step-brother; and the term “sister” includes a full sister, half sister, sister through adoption or step-sister.
Funds of a decedent held in the name of the decedent or in the name of the executor or administrator of the decedent's estate and deposited in one or more accounts shall be insured up to $100,000 in the aggregate for all such accounts, separately from the individual accounts of the beneficiaries of the estate or of the executor or administrator.
Accounts of a corporation, partnership, or unincorporated association engaged in any independent activity shall be insured up to $100,000 in the aggregate. The account of a corporation, partnership, or unincorporated association not engaged in an independent activity shall be deemed to be owned by
(a)
(b)
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(a) For purposes of this section, “trust” refers to an irrevocable trust.
(b) All trust interests (as defined in § 745.2(d)(4)), for the same beneficiary, deposited in an account and established pursuant to valid trust agreements created by the same settlor (grantor) shall be added together and insured up to $100,000 in the aggregate, separately from other accounts of the trustee of such trust funds or the settlor or beneficiary of such trust arrangements.
(a) The present vested ascertainable interest of a participant or designated beneficiary in a trust or custodial account maintained pursuant to a pension or profit-sharing plan described under section 401(d) (Keogh account) or section 408(a) (IRA) of the Internal Revenue Code shall each be insured up to $100,000 separately from other accounts of the participant or designated beneficiary. An IRA account shall be separately insured from a Keogh account.
(b) Upon liquidation of the credit union, any share insurance payment shall be made by the NCUA Board to the trustee or custodian, or the successor trustee or custodian, unless otherwise directed in writing by the plan participant or beneficiary.
Funds deposited by an employer pursuant to a deferred compensation plan (including section 401(K) of the Internal Revenue Code) shall be insured up to $100,000 as to the interest of each plan participant who is a member, separately from other accounts of the participant or employer.
(a) Public funds invested in Federal credit unions and federally-insured
(1) Each official custodian of funds of the United States lawfully investing the same in a federally-insured credit union shall be separately insured up to $100,000;
(2) Each official custodian of funds of any state of the United States or any county, municipality, or political subdivision thereof lawfully investing the same in a federally-insured credit union in the same state shall be separately insured up to $100,000;
(3) Each official custodian of funds of the District of Columbia lawfully investing the same in a federally-insured credit union in the District of Columbia shall be separately insured up to $100,000;
(4) Each official custodian of funds of the Commonwealth of Puerto Rico, the Panama Canal Zone, or any territory or possession of the United States, or any county, municipality, or political subdivision thereof lawfully investing the same in a federally-insured credit union in Puerto Rico, the Panama Canal Zone, or any such territory or possession, respectively, shall be separately insured up to $100,000;
(5) Each official custodian of tribal funds of any Indian tribe (as defined in section 3(c) of the Indian Financing Act of 1974) or agency thereof lawfully investing the same in a federally-insured credit union shall be separately insured up to $100,000.
(b) Each official custodian referred to in paragraphs (a) (2), (3), and (4) of this section lawfully investing such funds in a federally-insured credit union outside their respective jurisdictions shall be separately insured up to $100,000; and
(c) For purposes of this section, if the same person is an official custodian of more than one public unit, he shall be separately insured with respect to the public funds held by him for each such unit, but he shall not be separately insured with respect to all public funds of the same public unit by virtue of holding different offices in such unit or by holding such funds for different purposes.
(d) For purposes of this section, “lawfully investing” means pursuant to the statutory or regulatory authority of the custodian or public unit.
If any insured account obligation of a credit union is evidenced by a negotiable certificate account, negotiable draft, negotiable cashier's or officer's check, negotiable certified check, or negotiable traveler's check or letter of credit, the owner of such account obligation will be recognized for all purposes of a claim for insured accounts to the same extent as if his name and interest were disclosed on the records of the credit union provided the instrument was in fact negotiated to such owner prior to the date of the closing of the credit union. Affirmative proof of such negotiation must be offered in all cases to substantiate the claim.
Where a closed credit union has become obligated for the payment of items forwarded for collection by a depository institution acting solely as agent, the owner of such items will be recognized for all purposes of a claim for insured accounts to the same extent as if his name and interest were disclosed on the records of the credit union when such claim for insured accounts, if otherwise payable, has been established by the execution and delivery of prescribed forms. Such depository institution forwarding such items for the owners thereof will be recognized as agent for such owners for the purpose of making an assignment of the rights of such owners against the closed insured credit union to the Board and for the purpose of receiving payment on behalf of such owners.
Each insured credit union shall provide notice to its members concerning NCUA insurance coverage of member accounts. This may be accomplished by placing either a copy of part 745 of these rules, the appendix, or one or more copies of the NCUA brochure “Your Insured Funds” in each branch
55 FR 5586, Feb. 16, 1990, unless otherwise noted.
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(b)
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(1) A statement of the facts on which the claim for insurance is based;
(2) A statement of the basis for the initial determination or determination on the request for reconsideration to which the accountholder objects and the alleged error in such determination, including citations to applicable statutes and regulations;
(3) Any other evidence relied upon by the accountholder which was not previously provided to the Liquidating Agent.
(c)
(2) Within 60 days from the date of the Board's receipt of an appeal, the accountholder may amend or supplement the request in writing. In the event that the accountholder does amend or supplement the request, the provisons of paragraph (c)(1) of this section with respect to requests for additional information and responses to such requests shall apply with equal force to any such amendment or supplement to a request.
(d)
(2) The determination by the Board on appeal shall be provided to the accountholder in writing, stating the reason(s) for the determination, and shall constitute a final Agency order regarding the accountholder's claim for insurance.
(3) If the Board determines that the accountholder is entitled to the amount of insurance claimed or a portion thereof, upon payment of such insurance the accountholder shall promptly surrender to the Board the certificate of claim in liquidation provided in connection with the initial determination. In the event that the Board determines that the accountholder is only entitled to a portion of the amount of insurance claimed, upon the accountholder's surrender of such certificate a new certificate of claim in liquidation will be provided which reflects the revised amount of the uninsured account.
(4) Failure by the Board to issue a determination on appeal of the accountholder's claim for insurance
(a) For purposes of seeking judicial review of actions taken pursuant to this subpart, only a determination on appeal issued by the Board pursuant to § 745.202 of this subpart shall constitute a final determination regarding an accountholder's claim for insurance.
(b) Failure to file an appeal with regard to an initial determination, or a decision rendered on a request for reconsideration with the applicable time periods shall constitute a failure by the accountholder to exhaust available administrative remedies and, due to such failure, any objections to the initial determination or request for reconsideration shall be deemed to be waived and such determination shall be deemed to have been accepted by, and binding upon, the accountholder.
(c) Final determination by the Board is reviewable in accordance with the provisions of chapter 7, title 5, United States Code, by the United States Court of Appeals for the District of Columbia or the court of appeals for the Federal judicial circuit where the credit union's principal place of business is located. Such action must be filed not later than 60 days after such final determination is ordered.
The following examples illustrate insurance coverage on accounts maintained in the same federally-insured credit union. They are intended to cover various types of ownership interests and combinations of accounts which may occur in connection with funds invested in insured credit unions. These examples interpret the rules for insurance of accounts contained in 12 CFR part 745.
The examples, as well as the rules which they interpret, are predicated upon the assumption that: (1) Invested funds are actually owned in the manner indicated on the credit union's records and (2) the owner of funds in an account is a credit union member or otherwise eligible to maintain an insured account in a credit union. If available evidence shows that ownership is different from that on the institution's records, the National Credit Union Share Insurance Fund may pay claims for insured accounts on the basis of actual rather than ostensible ownership. Further, the examples and the rules which they interpret do not extend insurance coverage to persons otherwise not entitled to maintain an insured account or to account relationships that have not been approved by the Board as an insured account.
All funds owned by an individual member (or, in a community property state, by the husband-wife community of which the individual is a member) and invested in one or more individual accounts are added together and insured to the $100,000 maximum. This is true whether the accounts are maintained in the name of the individual member owning the funds, in the name of the member's agent or nominee, or in a custodial loan account on behalf of the member as a borrower. (§ 745.3(a) (1), (2) and (3).) All such accounts are added together and insured as one individual account. Funds held in one or more accounts in the name of a guardian, custodian, or conservator for the benefit of a ward or minor are added together and insured up to $100,000. However, such an account or accounts will not be added to any other individual accounts of the guardian, custodian, conservator, ward, or minor for purposes of determining insurance coverage. (§ 745.3(b).)
Question: Members A and B, husband and wife, each maintain an individual account containing $100,000. In addition, they hold a joint account containing $100,000. What is the insurance coverage?
Answer: Each account is separately insured up to $100,000, for a total coverage of $300,000. The coverage would be the same whether the individual accounts contain funds owned as community property or as individual property of the spouses (§ 745.3(a)(1) and § 745.8(a)).
Question: Members H and W, husband and wife, reside in a community property state. H maintains a $100,000 account consisting of his separately-owned funds and invests $100,000 of community property funds in another account, both of which are in his name alone. What is the insurance coverage?
Answer: The two accounts are added together and insured to a total of $100,000. $100,000 is uninsured (§ 745.3(a)(1)).
Question: Member A has $92,500 invested in an individual account, and his agent, Member B, invests $25,000 of A's funds in a properly designated agency account. B also holds a $100,000 individual account. What is the insurance coverage?
Answer: A's individual account and the agency account are added together and insured to the $100,000 maximum, leaving $17,500 uninsured. The investment of funds through an agent does not result in additional insurance coverage for the principal (§ 745.3(a)(2)). B's individual account is insured separately from the agency account (§ 745.3(a)(1)). However, if the account records of the credit union do not show the agency relationship under which the funds in the $25,000 account are held, the $25,000 in B's name could, at the option of the NCUSIF, be added to his individual account and insured to $100,000 in the aggregate, leaving $25,000 uninsured (§ 745.2(c)).
Question: Member A holds a $100,000 individual account. Member B holds two accounts in his own name, the first containing $25,000 and the second containing $92,500. In processing the claims for payment of insurance on these accounts, the NCUSIF discovers that the funds in the $25,000 account actually belong to A and that B had invested these funds as agent for A, his undisclosed principal. What is the insurance coverage?
Answer: Since the available evidence shows that A is the actual owner of the funds in the $25,000 account, those funds would be added to the $100,000 individual account held by A (rather than to B's $92,500 account) and insured to the $100,000 maximum, leaving $25,000 uninsured. (§ 745.3(a)(2).) B's $92,500 individual account would be separately insured.
Question: Member C, a minor, maintains an individual account of $750. C's grandfather makes a gift to him of $100,000, which is invested in another account by C's father, designated on the credit union's records as custodian under a Uniform Gift to Minors Act. C's father, also a member, maintains an individual account of $100,000. What is the insurance coverage?
Answer: C's individual account and the custodian account held for him by his father are each separately insured: The $100,000 maximum on the custodian account, and $750 on his individual account. The individual account held by C's father is also separately insured to the $100,000 maximum. (§ 745.3 (a)(1) and (b).)
Question: Member G, a court-appointed guardian, invests in a properly designated account $100,000 of funds in his custody which belong to member W, his ward. W and G each maintain $25,000 individual accounts. What is the insurance coverage?
Answer: W's individual account and the guardianship account in G's name are each insured to $100,000 providing W with $125,000 in insured funds. G's individual account is also separately insured. (§ 745.3 (a)(1) and (b).)
Question: X Credit Union acts as a servicer of FHA, VA, and conventional mortgage loans made to its members but sold to other parties. Each month X receives loan payments, for remittance to the other parties, from approximately 2,000 member mortgagors. The monies received each month total $1,000,000 and are maintained in a custodial loan account. What is the insurance coverage?
Answer: X Credit Union acts as custodian for the 2,000 individual mortgagors. The interest of each mortgagor is separately insured as his individual account (but added to any other individual accounts which the mortgagor holds in the Credit Union) (§ 745.3(a)(3)).
The term “revocable trust account” includes a testamentary account, tentative or “Totten” trust account, “payable-on-death” account, or any similar account which evidences an intention that the funds shall pass on the death of the owner of the funds to a named beneficiary. If the named beneficiary is a spouse, child, grandchild, parent, brother or sister (as defined in subsection 745.4(d)) of the owner, the funds in all such accounts are insured for the owner up to $100,000 in the aggregate as to each such beneficiary. If the beneficiary of such an account is other than the spouse, child, grandchild, parent, brother or sister of the owner, the funds in the account are, for insurance purposes, added to any other individual (single ownership) accounts of the owner and insured up to $100,000 in the aggregate. If a revocable trust account is held in the name of a fiduciary other than the owner of the funds, any other accounts held by the fiduciary are insured separately from such revocable trust account.
Question: Member H invests $200,000 in a revocable trust account with his son, S, and his daughter, D, as named beneficiaries. What is the insurance coverage?
Answer: Since S and D are children of H, the owner of the account, the funds are insured up to $100,000 as to each beneficiary
Question: Member H invests $100,000 in each of four “payable-on-death” accounts. Under the terms of each account contract, H has the right to withdraw any or all of the funds in the account at any time. Any funds remaining in the account at the time of H's death are to be paid to a named beneficiary. The respective beneficiaries of the four accounts are H's wife, his mother, his brother, and his nephew. H also holds an individual account containing $100,000. What is the insurance coverage?
Answer: The accounts payable on death to H's wife, mother and brother are each separately insured to the $100,000 maximum (Sec. 745.4(b)). The account payable to H's nephew is added to H's individual account and insured to $100,000 in the aggregate, leaving $100,000 uninsured (Sec. 745.4(c)).
Question: Member H and W jointly invest in a “payable-on-death” account for the benefit of their son, S, and daughter, D. The account is held by H and W with right of survivorship. What is the maximum insurance coverage available on the account?
Answer: Since S and D are the children of H and W, the account will be insured up to $100,000 as to each beneficiary separately from any accounts of the owner, H and W (§ 745.4(b)). H would be entitled to $100,000 insurance for S and $100,000 for D. W would be entitled to the same coverage for a total of $400,000 on the account. However, upon the death of either H or W, insurance coverage would be reduced to $200,000.
All funds belonging to a decedent and invested in one or more accounts, whether held in the name of the decedent or in the name of his executor or administrator, are added together and insured to the $100,000 maximum. Such funds are insured separately from the individual accounts of any of the beneficiaries of the estate or of the executor or administrator.
Question: Member A, administrator of Member D's estate, sells D's automobile and invests the proceeds of $12,500 in an account entitled “A Administrator of the estate of D.” A has an individual account in that same credit union containing $100,000. Prior to his death, D had opened an individual account of $100,000. What is the insurance coverage?
Answer: The $12,500 is added to D's individual account and insured to $100,000, leaving $12,500 uninsured. A's individual account is separately insured for $100,000 (§ 745.5).
All funds invested in an account or accounts by a corporation, a partnership or an unincorporated association engaged in any independent activity are added together and insured to the $100,000 maximum. The term “independent activity” means any activity other than the one directed solely at increasing coverage. If the corporation, partnership or unincorporated association is not engaged in an independent activity, any account held by the entity is insured as if owned by the persons owning or comprising the entity, and the imputed interest of each such person is added for insurance purposes to any individual account which he maintains.
Question: Member X Corporation maintains a $100,000 account. The stock of the corporation is owned by members A, B, C, and D in equal shares. Each of these stockholders also maintains an individual account of $100,000 with the same credit union. What is the insurance coverage?
Answer: Each of the five accounts would be separately insured to $100,000 if the corporation is engaged in an independent activity and has not been established merely for the purpose of increasing insurance coverage. The same would be true if the business were operated as a bona fide partnership instead of as a corporation (§ 745.6). However, if X corporation was not engaged in an independent activity, then $25,000 (
Question: Member C College maintains three separate accounts with the same credit union under the titles: “General Operating Fund,” “Teachers Salaries,” and “Building Fund.” What is the insurance coverage?
Answer: Since all of the funds are the property of the college, the three accounts are added together and insured only to the $100,000 maximum (§ 745.6).
Question: The men's club of X Church carries on various social activities in addition to holding several fund-raising campaigns for the church each year. The club is supported by membership dues. Both the club and X Church maintain member accounts in the same credit union. What is the insurance coverage?
Answer: The men's club is an unincorporated association engaged in an independent activity. If the club funds are, in fact, legally owned by the club itself and not the church, each account is separately insured to the $100,000 maximum (§ 745.6).
Question: The PQR Union, a member of the ABC Federal Credit Union, has three locals in a certain city. Each of the locals maintains an account containing funds belonging to the parent organization. All three accounts are in the same insured credit union. What is the insurance coverage?
Answer: The three accounts are added together and insured up to the $100,000 maximum (§ 745.6).
For insurance purposes, the official custodian of funds belonging to a public unit, rather than the public unit itself, is insured as the accountholder. All funds belonging to a public unit and invested by the same custodian in an insured credit union are added together and insured to the $100,000 maximum, regardless of the number of accounts involved and regardless of whether the funds are invested in accounts located in or outside the state. If there is more than one official custodian for the same public unit, the funds invested by each custodian are separately insured up to $100,000. If the same person is custodian of funds for more than one public unit, he is separately insured to $100,000 with respect to the funds of each unit held by him in properly designated accounts. The maximum coverage for an official custodian of funds of the United States would be $100,000.
For insurance purposes, a “political subdivision” is entitled to the same insurance coverage as any other public unit. “Political subdivision” includes any subdivision of a public unit or any principal department of such unit: (1) The creation of which has been expressly authorized by state statute, (2) to which some functions of government have been allocated by state statute, and (3) to which funds have been allocated by statute or ordinance for its exclusive use and control.
Question: As Comptroller of Y Consolidated School District, A maintains a $125,000 account in the credit union containing school district funds. He also maintains his own $100,000 member account in the same credit union. What is the insurance coverage?
Answer: The two accounts will be separately insured, assuming the credit union's records indicate that the account containing the school district funds is held by A in a fiduciary capacity. Thus, $100,000 of the school's funds and the entire $100,000 in A's personal account will be insured (§ 745.10(a)(2) and § 745.3).
Question: A, as city treasurer, and B, as chief of the city police department, each have $100,000 in city funds invested in custodial accounts. What is the insurance coverage?
Answer: Assuming that both A and B have offical custody of the city funds, each account is separately insured to the $100,000 maximum (§ 745.10(a)(2)).
Question: A is Treasurer of X County and collects certain tax assessments, a portion of which must be paid to the state under statutory requirement. A maintains an account for general funds of the county and establishes a separate account for the funds which belong to the State Treasurer. The credit union's records indicate that the separate account contains funds held for the State. What is the insurance coverage?
Answer: Since two public units own the funds held by A, the accounts would each be separately insured to the $100,000 maximum (§ 745.10(a)(2)).
Question: A city treasurer invests city funds in each of the following accounts: “General Operating Account,” “School Transportation Fund,” “Local Maintenance Fund,” and “Payroll Fund.” By administrative direction the city treasurer has allocated the funds for the use of and control by separate departments of the city. What is the insurance coverage?
Answer: All of the accounts are added together and insured in the aggregate to $100,000. Because the allocation of the city's funds is not by statute or ordinance for the specific use of and control by separate departments of the city, separate insurance coverage to the maximum of $100,000 is not afforded to each account (§§ 745.1(d) and 745.10(a)(2)).
Question: A, the custodian of retirement funds of a military exchange, invests $1,000,000 in an insured credit union. The military exchange, a nonappropriated fund instrumentality of the United States, is deemed to be a public unit. The employees of the exchange are the beneficiaries of the retirement funds but are not members of the credit union. What is the insurance coverage?
Answer: Because A invested the funds on behalf of a public unit, in his capacity as custodian, those funds qualify for $100,000
Question: A is the custodian of the County's employee retirement funds. He deposits $1,000,000 in retirement funds with the credit union. The “beneficiaries” of the retirement fund are not themselves public units nor are they within the credit union's field of membership. What is the insurance coverage?
Answer: Because A invested the funds on behalf of a public unit, in his capacity as custodian, those funds qualify for $100,000 share insurance even though A and the public unit are not within the credit union's field of membership. Since the beneficiaries are neither public units nor members of the credit union they are not entitled to separate share insurance. Therefore, $900,000 is uninsured (§ 745.10(a)(2)).
Question: A county treasurer deposits in an insured credit union $100,000 in each of the following accounts:
Answer: The “County Roads Department,” “County Water District” and “County Public Improvement District” accounts would each be separately insured to $100,000 if the funds in each such account have been allocated by law for the exclusive use of a separate county department or subdivision expressly authorized by State statute.
Funds in the “General Operating” and “Emergency Fund” accounts would be added together and insured in the aggregate to $100,000, if such funds are for countywide use and not for the exclusive use of any subdivision or principal department of the county, expressly authorized by State statute (§§ 745.1(d) and 745.10(a)(2)).
Question: A, the custodian of Indian tribal funds, lawfully invests $1,000,000 in an account in an insured credit union on behalf of 15 different tribes; the records of the credit union show that no tribe's interest exceeds $100,000. A, as official custodian, also invests $1,000,000 in the same credit union on behalf of 100 individual Indians, who are not members; each Indian's interest is $10,000. What is the insurance coverage?
Answer: Because each tribe is considered a separate public unit, the custodian of each tribe, even though the same person, is entitled to separate insurance for each tribe (§ 745.10(a)(5)). Since the credit union's records indicate no tribe has more than $100,000 in the account, the $1,000,000 would be fully insured as 15 separate tribal accounts. If any one tribe had more than a $100,000 interest in the funds, it would be insured only to $100,000 and any excess would be uninsured.
However, the $1,000,000 invested on behalf of the individual indians would not be insured since the individual indians are neither public units nor, in the example, members of the credit union. If A is the custodian of the funds in his capacity as an official of a governmental body that qualified as a public unit, then the account would be insured for $100,000, leaving $900,000 uninsured.
The interest of a co-owner in all accounts held under any form of joint ownership valid under state law (whether as joint tenants with right of survivorship, tenants by the entireties, tenants in common, or by husband and wife as community property) is insured up to $100,000. This insurance is separate from that afforded individual accounts held by any of the co-owners.
An account is insured as a joint account only if each of the co-owners has personally signed a membership card or an account signature card and possesses the same withdrawal rights 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. However, the records of the credit union must show that the account is being maintained for joint owners. There is also another exception in the case of a minor discussed below.) An account owned jointly which does not qualify as a joint account for insurance purposes is insured as if owned by the named persons as individuals. In that case, the actual ownership interest in the account of each person is added to any other accounts individually owned by such person and insured up to $100,000 in the aggregate.
Any individual, including a minor, may be a co-owner of a joint account. Although, generally, each co-owner must have signed an account signature card and must have the same rights of withdrawal as other co-owners in order for the account to qualify for separate joint account insurance, there is an exception for minors. If state law limits or restricts a minor's withdrawal rights—for example, a minimum age requirement to make a withdrawal—the account will still be insured as a joint account.
The interests of a co-owner in all joint accounts that qualify for separate insurance
Question: Members A and B maintain an account as joint tenants with right of survivorship and, in addition, each holds an individual account. Is each account separately insured?
Answer: If both A and B have signed the membership or signature card and possess equal withdrawal rights with respect to the joint funds, their interests in the joint account are separately insured from their interests in the individual accounts. (§ 745.8 (a) and (b).) If the joint account is represented by a share certificate, their individual signatures are not required for that account.
Question: Members H and W, husband and wife, reside in a community property state. Each holds an individual account and, in addition, they hold a qualifying joint account. The funds in all three accounts consist of community property. Is each account separately insured?
Answer: Yes. An account in the individual name of a spouse will be insured up to $100,000 whether the funds consist of community property or separate property of the spouse. A joint account containing community property is separately insured. Thus, community property can be used for individual accounts in the name of each spouse and for a joint account in the name of both spouses. In this example, each individual account is insured up to $100,000 (§ 745.3(a)(1)), and the interests of both the husband and wife in the joint account are each insured up to $100,000 (§ 745.8(a)).
Question: Two accounts of $100,000 each are held by a member husband and his wife under the following names: John Doe and Mary Doe, husband and wife, as joint tenants with right of survivorship. Mrs. John Doe and John Q. Doe (community property). How much insurance do the husband and wife have?
Answer: They have $200,000 of insurance. Both the husband and wife are deemed to have a one half interest ($50,000) in each account. (§ 745.2(c)(4).) The husband's interest in both accounts would be added together and insured for $100,000. The wife's insurance coverage would be determined the same way. (§ 745.8(a).)
Question: The following accounts are held by members A, B and C, each of whom has personally executed signature cards for the accounts in which he has an interest. Each co-owner of a joint account possesses the necessary withdrawals rights.
What is the insurance coverage?
Question: A, B and C hold accounts as set forth in Example 4. Members A and B are husband and wife; C, their minor child, has failed to sign the signature card for Account No. 7. In Account No. 5, according to the terms of the account, C cannot make a withdrawal without A's written consent. (This is not a limitation imposed under state law.) In Account No. 6, the signatures of both B and C are required for withdrawal. A has provided all of the funds for Accounts numbered 5 and 7 and under state law has the entire actual ownership interest in these two accounts. What is the insurance coverage?
Answer: If any of the co-owners of a joint account have failed to meet any of the joint account requirements, the account is not a qualifying joint account. Instead, the account is treated as if it consisted of commingled individual accounts of each of the co-owners in accordance with his or her actual ownership interest in the funds, as determined under applicable state law. (§ 745.8(c).)
Account No. 5 is not a qualifying joint account because C does not have equal withdrawal rights with A. Based on the terms of the account, C can only make a withdrawal if he has A's written consent. Account No. 7 is not a qualifying joint account because C did not personally sign the signature card. Therefore, all of the funds in Accounts 5 and
Account 6 is a qualifying joint account for insurance purposes since each co-owner has the right to withdraw funds on the same basis. Account 4 is also a qualifying joint account. A's interest in Account 4 is insured for $45,000. B's interest of $45,000 in Account 4 is added to her interest of $45,000 in Account 6 and insured for $90,000. C's interest in Account 6 is insured for $45,000.
Question: Assume the same accounts as Example 5(a) except that, on Account No. 5, C's right to make a withdrawal is limited by state law which precludes a minor from making a withdrawal without the co-owner's written consent. What is the insurance coverage?
Answer: In this situation, Accounts 4, 5, and 6 all qualify as joint accounts. A, B, and C will each have $90,000 of insured funds based on: A's interest in Account 4 ($45,000) and 5 ($45,000), B's interest in Accounts 4 ($45,000) and 6 ($45,000), and C's interest in Accounts 5 ($45,000) and 6 ($45,000). As in Example 5(a), Account No. 7 does not qualify as a joint account and would be added to A's individual account for insurance purposes.
A trust estate is the interest of a beneficiary in an irrevocable express trust, whether created by trust instrument or statute, that is valid under state law. Thus, funds invested in an account by a trustee under an irrevocable express trust are insured on the basis of the beneficial interests under such trust. The interest of each beneficiary in an account (or accounts) established under such a trust arrangement is insured to $100,000 separately from other accounts held by the trustee, the settlor (grantor), or the beneficiary. However, in cases where a beneficiary has an interest in more than one trust arrangement created by the same settlor, the interests of the beneficiary in all accounts established under such trusts are added together for insurance purposes, and the beneficiary's aggregate interest derived from the same settlor is separately insured to the $100,000 maximum.
A beneficiary's interest in an account established pursuant to an irrevocable express trust arrangement is insured separately from other beneficial interests (trust estates) invested in the same account if the value of the beneficiary's interest (trust estate) can be determined (as of the date of a credit union's insolvency) without evaluation of contingencies except for those covered by the present worth tables and rules of calculation for their use set forth in § 20.2031-10 of the Federal Estate Tax Regulations (26 CFR 20.2031-10). If any trust estates in such an account cannot be so determined, the insurance with respect to all such trust estates together shall not exceed the basic insured amount of $100,000.
In order for insurance coverage of trust accounts to be effective in accordance with the foregoing rules, certain recordkeeping requirements must be met. In connection with each trust account, the credit union's records must indicate the name of both the settlor and the trustee of the trust and must contain an account signature card executed by the trustee indicating the fiduciary capacity of the trustee. In addition, the interests of the beneficiaries under the trust must be ascertainable from the records of either the credit union or the trustee, and the settlor or beneficiary must be a member of the credit union. If there are two or more settlors or beneficiaries, then either all the settlors or all the beneficiaries must be members of the credit union.
Although each ascertainable trust estate is separately insured, it should be noted that in short-term trusts the insurable interest or interests may be very small, since the interests are computed only for the duration of the trust. Thus, if a trust is made irrevocable for a specified period of time, the beneficial interest will be calculated in terms of the length of time stated. A reversionary interest retained by the settlor is treated in the same manner as an individual account of the settlor.
As stated, the trust must be valid under local law. A trust which does not meet local requirements, such as one imposing no duties on the trustee or conveying no interest to the beneficiary, is of no effect for insurance purposes. An account in which such funds are invested is considered to be an individual account.
An account established pursuant to a revocable trust arrangement is insured as a form of individual account and is treated under section B, supra, dealing with Testamentary Accounts.
IRA and Keogh accounts are separately insured, each up to $100,000. Although credit unions may serve as trustees or custodians for self-directed IRA and Keogh accounts, once the funds are taken out of the credit union, they are no longer insured.
In the case of an employee retirement fund where only a portion of the fund is placed in a credit union account, the amount of insurance available to an individual member/beneficiary on his interest in the account will be in proportion to his interest in the entire employee retirement fund. If, for example, the member's interest represents 10% of the entire plan funds, then he is presumed to have only a 10% interest in the plan account. Said another way, if a member has a vested
Question: Member S invests $45,000 in trust for B, the beneficiary. S also has an individual account containing $90,000 in the same credit union. What is the insurance coverage?
Answer: Both accounts are fully insured. The trust account is separately insured from the individual account of S (§§ 745.3(a)(1) and 745.9-1).
Question: S invests funds in trust for A, B, C, D, and E. A, B, and C are members of the credit union, D, E and S are not. What is the insurance coverage?
Answer: This is an uninsurable account. Where there is more than one settlor or more than one beneficiary, all the settlors or all the beneficiaries must be members to establish this type of account. Since D, E and S are not members, this account cannot legally be established or insured.
Question: Member S invests $500,000 in trust for ABC Employees Retirement Fund. Some of the beneficiaries are members and some are not. What is the insurance coverage?
Answer: The account is insured as to the determinable interests of each member beneficiary to a maximum of $100,000 per member. Member interests not capable of evaluation and nonmember interests shall be added together and insured to a maximum of $100,000 in the aggregate (§ 745.9-1).
Question: Member S is trustee for the ABC Employees Retirement Fund containing $1,000,000. Member A has a determinable interest of $90,000 in the Fund (9% of the total). S invests $500,000 of the Fund in trust in an insured credit union and the remaining $500,000 elsewhere. Some of the beneficiaries of the Fund are members of the credit union and some are not. S does not segregate each employee's interest in the Fund. What is the insurance coverage?
Answer: The account is insured as to determinable interest of each member beneficiary, adjusted in proportion to the Fund's investment in the credit union. A's insured interest in the account is $45,000, or 9% of $500,000. This reflects the fact that only 50% of the Fund is in the account and A's interest in the account is in the same proportion as his interest in the overall plan. Each beneficiary who is a member would be similarly insured. Members’ interests not capable of evaluation and nonmembers’ interests are added together and insured to a maximum of $100,000 in the aggregate. (§ 745.9-1.)
Question: Member A has an individual account of $100,000 and establishes an IRA and accumulates $50,000 in that account. Subsequently A becomes self employed and establishes a Keogh account in the same credit union and accumulates $100,000 in that account. What is the insurance coverage?
Answer: Each of A's accounts would be separately insured for up to $100,000. In the example, A would be fully insured for $250,000 (§ 745.3(a)(1) and § 745.9-2).
Question: Member A has a self-directed IRA account with $70,000 in it. The FCU is the trustee of the account. Member transfers $40,000 into a blue chip stock; $30,000 remains in the FCU. What is the insurance coverage?
Answer: Originally, the full $70,000 in A's IRA account is insured. The $40,000 is no longer insured once it is moved out of the FCU. The $30,000 remaining in the FCU is insured (§ 745.9-2).
12 U.S.C. 1766, 1784, 1786, and 1787; 42 U.S.C. 4012a; Pub. L. 101-410, 104 Stat. 890; Pub. L. 104-134, 110 Stat. 1321-358 (28 U.S.C. 2461 note).
56 FR 37767, Aug. 8, 1991, unless otherwise noted.
(a) This part describes the various formal and informal adjudicative actions and non-adjudicative proceedings available to the National Credit Union Administration Board (“NCUA Board”), the grounds for those actions and proceedings, and the procedures used in formal and informal hearings related to each available action. As mandated by section 916 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”) (12 U.S.C. 1818 note), this part incorporates uniform rules of practice and procedure governing formal adjudications generally, as well as proceedings involving cease-and-desist actions, assessment of civil money penalties, and removal, prohibition and suspension actions. In addition, the Uniform Rules are incorporated in other subparts of this part which provide for formal adjudications. The administrative actions and proceedings described herein, as well as the grounds and hearing procedures for each, are controlled by sections 120(b) (except where the Federal credit union is closed due to insolvency), 202(a)(3) and 206 of the Federal Credit Union Act (“the Act”), 12 U.S.C. 1766(b), 1782(a)(3), 1786. Should any provision of this part be inconsistent with these or any other provisions of the Act, as amended, the Act shall control. Judicial enforcement of any action or order described in this part, as well as judicial review thereof, shall be as prescribed under the Act (12 U.S.C. 1751
(b) As used in this part, the term insured credit union means any Federal credit union or any state chartered credit union insured under subchapter II of the Act unless the context indicates otherwise.
This subpart prescribes uniform rules of practice and procedure applicable to adjudicatory proceedings required to be conducted on the record after opportunity for a hearing under the following statutory provisions:
(a) Cease-and-desist proceedings under section 206(e) of the Act (12 U.S.C. 1786(e));
(b) Removal and prohibition proceedings under section 206(g) of the Act (12 U.S.C. 1786(g));
(c) Assessment of civil money penalties by the NCUA Board against institutions and institution-affiliated parties for any violation of:
(1) Section 202 of the Act (12 U.S.C. 1782);
(2) Section 1120 of FIRREA (12 U.S.C. 3349), or any order or regulation issued thereunder;
(3) The terms of any final or temporary order issued under section 206 of the Act or any written agreement executed by the National Credit Union Administration (“NCUA”), any condition
(4) Any provision of law referenced in section 102(f) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or regulation issued thereunder;
(d) Remedial action under section 102(g) of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a(g)); and
(e) This subpart also applies to all other adjudications required by statute to be determined on the record after opportunity for an agency hearing, unless otherwise specifically provided for in subparts B through J of this part.
For purposes of this subpart:
(a) Any term in the singular includes the plural, and the plural includes the singular, if such use would be appropriate;
(b) Any use of a masculine, feminine, or neuter gender encompasses all three, if such use would be appropriate;
(c) The term
(d) Unless the context requires otherwise, a party's counsel of record, if any, may, on behalf of that party, take any action required to be taken by the party.
For purposes of this subpart, unless explicitly stated to the contrary:
(a)
(b)
(c)
(d)
(e)
(f)
(2) Any insured state credit union as that term is defined in section 101(7) of the FCUA (12 U.S.C. 1752(7)).
(g)
(h)
(i)
(j)
(k)
(l)
(m)
(n)
The NCUA Board may, at any time during the pendency of a proceeding perform, direct the performance of, or waive performance of, any act which could be done or ordered by the administrative law judge.
(a)
(b)
(1) To administer oaths and affirmations;
(2) To issue subpoenas, subpoenas duces tecum, and protective orders, as authorized by this part, and to quash or modify any such subpoenas and orders;
(3) To receive relevant evidence and to rule upon the admission of evidence and offers of proof;
(4) To take or cause depositions to be taken as authorized by this subpart;
(5) To regulate the course of the hearing and the conduct of the parties and their counsel;
(6) To hold scheduling and/or pre-hearing conferences as set forth in § 747.31;
(7) To consider and rule upon all procedural and other motions appropriate in an adjudicatory proceeding, provided that only the NCUA Board shall have the power to grant any motion to dismiss the proceeding or to decide any other motion that results in a final determination of the merits of the proceeding;
(8) To prepare and present to the NCUA Board a recommended decision as provided herein;
(9) To recuse himself or herself by motion made by a party or on his or her own motion;
(10) To establish time, place and manner limitations on the attendance of the public and the media for any public hearing; and
(11) To do all other things necessary and appropriate to discharge the duties of a presiding officer.
(a)
(2)
(3)
(b)
(a)
(b)
(2) If a filing or submission of record is not signed, the administrative law judge shall strike the filing or submission of record, unless it is signed promptly after the omission is called to the attention of the pleader or movant.
(c)
(a)
(b)
(1) That the counsel has personally and fully discussed the possibility of conflicts of interest with each such party and non-party; and
(2) That each such party and non-party waives any right it might otherwise have had to assert any known conflicts of interest or to assert any non-material conflicts of interest during the course of the proceeding