The National Association of Federally-Insured Credit Unions (NAFCU) reached out to the National Credit Union Administration (NCUA) on its proposed regulations governing share insurance coverage.
In a letter, NAFCU Senior Regulatory Affairs Counsel James Akin said NAFCU supports the proposed amendments that simplify share insurance rules, but it also urged the agency to implement a phased approach, among other recommendations.
Specifically, Akin said NAFCU approves of the plan to create a “trust accounts” category for both revocable and irrevocable trusts.
“The proposed rule, which aims to establish a “trust accounts” category, simplifies the share insurance regulations by providing coverage for both revocable and irrevocable trusts deposited at federally insured credit unions (FICUs). The streamlining of these regulations is a positive development, as it tackles the existing intricacies and ambiguities associated with the different and independent rules governing these kinds of trusts,” Akin wrote.
However, Akin cautioned that there may be instances where accountholders lack the necessary information to calculate share insurance coverage under the new rule.
“This could occur in complex trust structures or when there are changes in beneficiaries. Accountholders might not always have immediate access to updated details, making it challenging to determine the number of eligible beneficiaries, particularly in trusts involving multiple generations or those set up for estate planning,” he wrote.
Regarding the proposed amendments to regulations regarding mortgage servicing accounts (MSAs), Akin said NAFCU supports consistent share insurance treatment of MSAs.
“This approach simplifies the insurance coverage determination for MSAs, making it easier for credit unions to understand and apply the rules. The inclusion of funds paid by mortgagors for taxes and insurance premiums in the insurance coverage further clarifies the extent of protection available under these accounts,” he stated.
Akin urged the NCUA to provide additional clarity, which would help credit unions to manage MSAs more efficiently and with greater confidence in their compliance.
Finally, Akin noted NAFCU’s appreciation for the proposal’s improvements in recordkeeping requirements, especially for agents, fiduciaries, and third parties. However, he cautioned NCUA to provide sufficient time when from adopting the FDIC’s record keeping rules. He also called attention to the potential uneven impact on smaller credit unions and suggested a phased approach.