Regulatory Alert Summary

Prepared by NASCUS Legislative & Regulatory Affairs Department

January 2016

16-RA-02 Enhanced Share Insurance Coverage

The Credit Union Share Insurance Fund Parity Act amended the Federal Credit Union Act to require NCUA to provide enhanced, pass-through share insurance coverage for: 1) Interest on Lawyers’ Trust Accounts (IOLTAs); and 2) “other similar escrow accounts.”

“Other similar escrow accounts” is defined by NCUA as “an account where a licensed professional or other individual serving in a fiduciary capacity holds funds for the benefit of a client as part of a transaction or business relationship.” See 12 C.F.R. 745.14(c)(ii).

NCUA’s Regulatory Alert 16-RA-02, Enhanced Share Insurance Coverage, provides information on the three types of credit union accounts that NCUA identified as eligible for pass-through insurance coverage pursuant to the Congressional mandate:

  • Interest on Lawyers’ Trust Accounts (IOLTAs)
  • Real Estate Escrow Accounts
  • Prepaid Funeral Accounts

The Regulatory Alert includes enclosed guidance providing much more detail on the accounts and the pass-through coverage.

NCUA will also provide pass-through share insurance coverage on a case-by-case basis to other types of accounts that bear the characteristics of “other similar accounts.”

For the above accounts, if the primary account holder (the lawyer or escrow agent) is a member of the credit union, then all other depositors who contributed money to the account will receive share insurance coverage whether they are members or not.

NCUA’s guidance, enclosed in the Regulatory Alert, also addresses record keeping requirements, noting that “the account records of an insured credit union shall be conclusive as to the existence of any relationship pursuant to which the funds in the account are deposited and on which a claim for insurance coverage is founded.” In short, for pass-through share insurance coverage, the details of the relationship and the interests of the 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.”

NASCUS note: While not covered in detail in the LTCU, NASCUS’ summary of the final rule implementing the insurance coverage contains an important discussion of BSA/AML obligations that may arise if offering these accounts.

NCUA’s point of contact for questions or additional information is the Office of General Counsel at 703-518-6540 or ogcmail@ncua.gov.