Compliance Center: NCUA Responds to Credit Union Share Insurance Parity Act
December 22, 2014
December 22, 2014
On Friday, December 19th, the National Credit Union Association (NCUA) released an announcement about the previous day’s signing of the Credit Union Share Insurance Parity Act. Lawyers’ Trust accounts at federally insured credit unions are now insured to the full limit allowed by the NCUSIF.
The Credit Union Share Insurance Fund Parity Act (H.R. 3468) provided for pass-through insurance coverage for the deposits and shares for interest on lawyers trust accounts (IOLTA). The lawyer who is a member of the credit union can set up an IOLTA account, and each of his clients’ funds within the IOTLA will be covered up to $250,000 in share insurance.
In the press release from the NCUA chairman Matz was quoted saying, “Credit unions now have parity with banks and, effective immediately, can fully insure lawyers’ trust accounts up to $250,000 for each owner of the funds, which they could not do before. An attorney who is a member of the credit union where the trust account is opened now has a choice of financial institutions for that trust account. This enhances public confidence in both the banking and the credit union systems now that federal share and deposit insurance programs administered by NCUA and the FDIC are the same.”
Prior to the passage of H.R. 3468, credit unions could not offer the same level of insurance for IOLTA accounts as was offered by banks. This was because not all clients of the lawyers were members of the credit union that held the trust account.
The NCUA will make changes to part 745 of its regulations to fully conform to the Act, but accounts are fully insurable under the new law.
Compliance Question of the Week
Are there any IRS reporting requirements if the credit union plans to give each new member a $25 cash gift in connection with opening a new share deposit account?
Yes. A cash gift pair or credited to a member in relation to the opening of a credit union deposit account is considered interest. When the interest paid to the member by credit union (or the fair market value of merchandise given) exceeds $10 within a calendar year, a 1099-INT is required. Therefore, the credit union would need to complete form 1099-INT for each member who received the $25 cash gift.
National Credit Union Administration (NCUA)
The NCUA announced that the first round of grants for low income credit unions in 2015 will open on February 2.
NCUA Chairman Matz issued a comment letter to the Department of Defense regarding the Military Lending Act proposed changes, urging the Department to ensure credit unions’ ability to provide affordable credit alternatives to military members.
Consumer Financial Protection Bureau (CFPB)
The CFPB released a report on college credit card agreements.
Federal Reserve Bank (FRB)
The December issue of FedFlash is now available.
Office of Foreign Assets Control (OFAC)
OFAC has updated the SDN list as of December 18, 2014. The last update prior to this was December 17, 2014.
Questions? Contact the Compliance Hotline: 1.800.546.4465, email@example.com.