**7535-01-U**

**NATIONAL CREDIT UNION ADMINISTRATION**

**12 CFR Part 740**

**RIN 3133-AD52**

**Accuracy of Advertising and Notice of Insured Status**

**AGENCY:** National Credit Union Administration (NCUA).

**ACTION:** Proposed rule.

**SUMMARY:** Section 740.4 of NCUA's rules requires that a federally
insured credit union continuously display the official NCUA sign at
every teller station or window where insured funds or deposits are
normally received. Section 740.4(c) requires that tellers accepting
share deposits for both federally insured credit unions and nonfederally
insured credit unions also post a second sign adjacent to the official
NCUA sign. Currently, the rules require this second sign to list each
federally insured credit union served by the teller along with a
statement that only these credit unions are federally insured. Due to
the evolution of shared branch networks it is now difficult for some
tellers to comply with this second signage requirement and, accordingly,
NCUA is proposing to revise the rule to replace the required listing of
credit unions with a statement that not all of the credit unions served
by the teller are federally insured and that members should contact
their credit union if they need more information.

**DATES:** Comments must be received by November 21, 2008.

**ADDRESSES**: You may submit comments by any of the following methods.
(**Please send comments by one method only**):

-   Federal eRulemaking Portal: http://www.regulations.gov. Follow the
    instructions for submitting comments.

-   NCUA Web Site:
    http://www.ncua.gov/RegulationsOpinionsLaws/proposed_regs/proposed_regs.
    html. Follow the instructions for submitting comments.

-   E-mail: Address to regcomments@ncua.gov. Include "\[Your name\]
    Comments on FCU Bylaws" in the e-mail subject line.

-   Fax: (703) 518-6319. Use the subject line described above for
    e-mail.

-   Mail: Address to Mary Rupp, Secretary of the Board, National Credit
    Union Administration, 1775 Duke Street, Alexandria, Virginia
    22314-3428.

-   Hand Delivery/Courier: Same as mail address.

**Public inspection**: All public comments are available on the agency's
website at
[http://]{.underline}www.ncua.gov[/RegulationsOpinionsLaws/comments]{.underline}
as submitted, except as may not be possible for technical reasons.
Public comments will not be edited to remove any identifying or contact
information. Paper copies of comments may be inspected in NCUA's law
library, at 1775 Duke Street, Alexandria, Virginia 22314, by appointment
weekdays between 9:00 a.m. and 3:00 p.m. To make an appointment, call
(703) 518-6546 or send an e-mail to [OGC]{.underline} Mail
\@ncua.gov[.]{.underline}

**FOR FURTHER INFORMATION CONTACT:** Elizabeth Wirick, Staff Attorney,
Office of General Counsel, National Credit Union Administration, 1775
Duke Street, Alexandria, Virginia 22314-3428 or telephone: (703)
518-6540.

**SUPPLEMENTARY INFORMATION**

**A. Background**

Part 740 of NCUA's regulations addresses the notice and advertising
requirements applicable to credit unions insured by the National Credit
Union Share Insurance Fund (NCUSIF) administered by NCUA. 12 CFR part
740. Section 740.4(a) requires these federally insured credit unions
post a sign at all teller stations that normally receive deposits. This
official NCUA sign reads: "Your savings federally insured to at least
\$100,000 and backed by the full faith and credit of the United States
Government" accompanied by the acronym "NCUA" and the words "National
Credit Union Administration, a U.S. Government Agency." 12 CFR 740.4(a).
The official NCUA sign informs and reassures members that their share
deposits are guaranteed, to certain limits, by the U.S. Government in
the event the credit union fails.

Section 740.4(c) imposes additional requirements on federally insured
credit unions participating in shared branch networks. Generally,
federally insured credit unions are prohibited from accepting funds at
teller stations or windows where nonfederally insured credit unions also
receive deposits. 12 CFR 740.4(c). Tellers in shared branch networks
(e.g., "Credit union centers, service centers, or branches servicing
more than one credit union") are currently exempted from this
prohibition, but only if they display a specific sign at each station or
window above or beside the official NCUA sign. [Id]{.underline}. This
second sign must state that "\[o\]nly the following credit unions
serviced by this facility are federally insured by the NCUA," followed
by the full name of each federally insured credit union displayed in
lettering "of such size and print to be clearly legible to all members
conducting share or share deposit transactions." [Id]{.underline}.

NCUA first adopted this requirement for a second sign in shared branches
back in 1971. 36 FR 902, 903 (Jan. 25, 1971). The requirement ensures
members of nonfederally insured credit unions are not confused regarding
the insurance status of their accounts when those members make deposits
through tellers shared with federally insured credit unions and that
display the mandatory official NCUA sign. 63 FR 10743, 10755 (March 5,
1998).

During the past 37 years, however, the nature of shared branching has
changed considerably. The first shared branches were local operations
involving just a few credit unions. Now, some shared branch networks are
national in scope and service hundreds, if not thousands, of individual
credit unions.[^1] Under these circumstances, NCUA believes the
requirement for by-name listing of each participating federally insured
credit union is problematic. Since the vast majority of credit unions
participating in the larger shared branch networks are federally
insured, members must now sift through a lengthy list of credit unions
to ascertain the insurance status of their particular credit union. The
length of the list would also require a large, obtrusive sign, and it is
difficult to keep the sign up-to-date as federally insured credit unions
frequently join or leave these networks.

Share branch networks are not only increasing in size but are also
changing in the nature of the facilities they employ. The earliest
shared branches consisted of shared service facilities run by non-credit
union entities such as credit union service organizations. Now, some
shared branch networks are structured to allow credit unions to use
their own branches, rather than separate facilities, to service members
of other credit unions. Given this trend, NCUA understands that some
nonfederally insured credit unions participating in shared branch
networks may accept deposits for federally insured credit unions at the
nonfederally insured credit union's locations, and vice versa. The
current rule does not adequately address the signage requirements in
these situations, such as whether the official NCUA sign should be
placed in nonfederally insured credit unions accepting federally insured
share deposits.

**B. Proposed Amendments to Part 740**

The proposed revision to §740.4(c) retains the general prohibition on
federally insured credit unions receiving funds at any teller station or
window where any nonfederally insured credit union also receives account
funds. The proposal contains three exceptions to this prohibition.

The first two exceptions permit tellers at federally insured credit
unions and shared branches operated by non-credit union entities to
receive deposits for nonfederally insured credit unions if these tellers
post a second sign adjacent to the official NCUA sign. In lieu of a
listing of all federally-insured credit unions, the revised second sign
will state that the credit union or facility participates in a shared
branch network and accepts deposits for members of other credit unions,
not all of which are federally insured. The revised second sign will
advise members to contact their credit union for information about its
insurance status.

The proposal requires the second sign to be conspicuous and to be
similar to the official NCUA sign in terms of design, color, and font.
NCUA will produce signs that meet this requirement and make the signs
available for purchase at a reasonable cost. Credit unions may either
use the NCUA-produced sign or produce their own sign, as long as the
sign meets the requirements of the rule.

The third exception to the general prohibition addresses signage
requirements at nonfederally insured credit unions. The proposal
clarifies that tellers in nonfederally insured credit unions may accept
deposits for federally insured credit unions as part of a shared branch
network. The proposal, however, forbids a nonfederally insured credit
union from displaying the official NCUA sign, as this could be very
confusing to the members of the nonfederally insured credit union. Also,
since the credit union will not display the official sign, there is no
need for it to display the second sign.

The current prohibition applies to tellers that accept deposits from
nonfederally insured credit unions and "other institutions." As far as
the Board is aware, banks and thrifts are the only types of non-credit
union institutions that take deposits, and, currently, they are all
federally insured. Accordingly, there is no need for the rule to address
"other institutions" and the proposed rule deletes that phrase. Also,
although the rule only addresses deposit-taking, federally insured
credit unions must ensure that if they participate in a shared branching
network that includes a nondeposit investment sales function that
function is physically separated from the deposit-taking function.
[See]{.underline} NCUA Letter to Credit Unions No. 150, [Sales of Mutual
Funds, Annuities, and Other Non-Deposit Investments]{.underline},
December 1993.

The proposed revisions also include additions to the definitions in
§740.1. 12 CFR 740.1. The phrase "nonfederally insured credit union" is
defined as a credit union with either no account insurance or with
primary account insurance from an entity other than NCUA. The phrases
"insured credit union" and "federally insured credit union," as used in
the rule, both refer to a credit union with NCUA account insurance.

**C. 30-Day Comment Period**

NCUA seeks public comment on the proposals discussed above. NCUA is
particularly interested in commenters' views about whether the proposals
are adequate to ensure that credit union members understand the
insurance status of their credit union accounts.

As a matter of agency policy, the NCUA Board generally provides a 60-day
comment period for proposed regulations. NCUA\'s Interpretive Ruling and
Policy Statement (IRPS) 87-2, 52 FR 35231 (Sept. 18, 1987), as amended
by IRPS 03-02, 68 FR 31949 (May 29, 2003). In this case, the NCUA Board
believes a 30-day comment period will suffice because the proposal
simplifies an existing rule and eases compliance burdens for federally
insured credit unions.

# REGULATORY PROCEDURES

## 

## [Regulatory Flexibility Act]{.underline}

The Regulatory Flexibility Act requires NCUA to prepare an analysis to
describe any significant economic impact a rule may have on a
substantial number of small credit unions, defined as those under ten
million dollars in assets. This proposed rule will not impose any
regulatory burden and in fact will ease existing compliance burdens on
federally insured credit unions participating in shared branch networks
and accepting deposits for both federally insured and nonfederally
insured credit unions. The proposed rule will not have a significant
economic impact on a substantial number of small credit unions, and,
therefore, a regulatory flexibility analysis is not required.

## 

## [Paperwork Reduction Act]{.underline}

NCUA has determined that the proposed rule would not increase paperwork
requirements under the Paperwork Reduction Act of 1995 and regulations
of the Office of Management and Budget. 44 U.S.C. 3501 [et
seq]{.underline}.; 5 CFR part 1320.

## [Executive Order 13132]{.underline}

Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, NCUA, an independent
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order. The proposed rule would not have substantial
direct effects on the states, on the connection between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government. NCUA has
determined that this proposed rule does not constitute a policy that has
federalism implications for purposes of the executive order.

## [The Treasury and General Government Appropriations Act, 1999 -- Assessment]{.underline} 

## [of Federal Regulations and Policies on Families]{.underline}

The NCUA has determined that the proposed rule would not affect family
well-being within the meaning of § 654 of the Treasury and General
Government Appropriations Act, 1999, Pub. L. 105-277, 112 Stat. 2681
(1998).

# List of Subjects in 12 CFR Part 740

# 

Advertisements, Credit unions, Signs and symbols.

By the National Credit Union Administration Board on October 16, 2008.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Mary F. Rupp

Secretary of the Board

For the reasons set forth above, NCUA proposes to amend 12 CFR part 740
as follows.

**PART 740 --- ACCURACY OF ADVERTISING AND NOTICE OF INSURED STATUS**

1\. The authority citation for part 740 continues to read as follows:

Authority: 12 U.S.C. 1766, 1781, 1785, and 1789.

2\. Amend §740.1 by revising paragraph (b), and adding paragraph (c), to
read as follows:

§740.1 Definitions.

\* \* \* \* \*

\(b\) *Insured credit union and federally insured credit union* as used
in this part mean a credit union with National Credit Union
Administration share insurance.

\(c\) *Nonfederally insured credit union* as used in this part means a
credit union with either no account insurance or with primary account
insurance provided by some entity other than the National Credit Union
Administration.

3\. Amend §740.4 by revising paragraph (c) to read as follows:

§740.4 Requirements for the official sign.

\* \* \* \* \*

\(c\) To avoid any member confusion from the use of the official NCUA
sign, federally insured credit unions are prohibited from receiving
account funds at any teller station or window where any nonfederally
insured credit union also receives account funds.  As exceptions to this
prohibition:

\(1\) A teller in a branch of a federally insured credit union may
accept account funds for nonfederally insured credit unions, but only if
the teller displays a conspicuous sign next to the official sign that
states "This credit union participates in a shared branch network with
other credit unions and accepts share deposits for members of those
other credit unions.  Not all of these other credit unions are federally
insured.  If you need information on the insurance status of your credit
union, please contact your credit union directly." This sign must be
similar to the official sign in terms of design, color, and font.

\(2\) A  teller in a facility operated by a non-credit union entity may
accept account funds for both federally insured credit unions and
nonfederally insured credit unions, but only if the teller displays a
conspicuous sign next to the official sign stating "This facility
accepts share deposits for multiple credit unions.  Not all of these
credit unions are federally insured.  If you need information on the
insurance status of your credit union, please contact your credit union
directly." This sign must be similar to the official sign in terms of
design, color, and font.

\(3\) A teller in a branch of a nonfederally insured credit union may
accept account funds for federally insured credit unions.  No teller in
a nonfederally insured credit union may display the official NCUA sign. 

\* \* \* \* \*

#   

[^1]: Two of the largest shared branch networks are Credit Union Service
    Centers (CUSC) and the Financial Service Centers Cooperative (FSCC).
    Currently, CUSC appears to have about 1200 participating federally
    insured credit unions and 22 participating nonfederally insured
    credit unions. FSCC appears to have about 270 participating
    federally insured credit unions and 12 participating nonfederally
    insured credit unions. Further, these organizations interlink,
    allowing deposits to be made through participants in one
    organization for the accounts at participants in the other.