ARLINGTON, Va. – In a bold new policy stance, the NAFCU Board believes that all credit unions chartered in the U.S., state or federal, should be required to carry federal deposit insurance coverage. The trade group explained that its policy position is parallel to current bank and thrift requirements and that only nine states and Puerto Rico allow state chartered credit unions to carry private share insurance. "The issue that has dominated all NAFCU Board discussion is consumer awareness of the difference between privately insured and federally insured share accounts," NAFCU President and CEO Fred Becker remarked. NAFCU has been pushing for enforcement of disclosure requirements in Section 151 of the Federal Deposit Insurance Corporation Improvement Act, a provision that Congress has never funded. "Given the fact that the FDICIA disclosure requirements have never been enforced, the NAFCU Board has little confidence that the vast majority of members of privately insured credit unions are aware of the difference," Becker said. Section 151 requires privately insured institutions to disclose that they are not backed by the federal government in statements and when signing new accounts, as well as obtaining a signed acknowledgement from the accountholder that the funds are not federally insured. He added, "What we do know about the history of private insurance, and the failure of (Rhode Island Share Deposit and Indemnity Corporation) specifically, is that way too many consumers woke up one morning believing that their money was insured by the federal government or carried a similar guarantee, but saw their life savings lost or frozen for years. Regardless of the current and future health of privately insured credit unions and the companies that provide that insurance, the lack of uniform, tough and enforceable disclosure requirements removes the ability for far too many consumers to make an informed decision." State examiners uncovered a $14 million fraud in 1991 perpetrated in just one institution insured by RISDIC, which cause the entire fund to fall apart. As a result 35 credit unions insured by RISDIC failed, having a negative affect on the whole credit union community and consumer confidence, according to NAFCU. A year after RISDIC was closed down, only about 10% of the funds had been recovered. The state of Rhode Island issued bonds, repaid from a 0.5% increase in the state's sales tax, to help recoup members' money. "The NAFCU Board believes that its position on private insurance is good public policy and will serve to ensure the financial soundness of the millions of deposits that Americans have in credit unions.Recent history demonstrates that there is both a safety and soundness danger and a public relations disaster waiting to happen if credit unions are allowed to opt out of NCUSIF under a private insurance option," the NAFCU Board's backgrounder read. Becker noted the NCUA Board's letter to the Colorado commissioner regarding offering private share insurance in the state, which he said, "came as close as you can to saying, `Don't do this.'" He also said that discussions with NCUA have raised "one red flag after another" on the private share insurance issue. "In NAFCU's opinion, this is not an option worth the risk it imposes on consumers, the rest of the credit union community, or America's 82 million credit union members. In this regard, there is little doubt that America's consumers view the federal deposit insurance system as a tangible safety net," according to the NAFCU Board. NAFCU pointed to the recent influx of deposits at credit unions in the wake of the stock markets' downturn as evidence of this. "NAFCU has no desire to stifle the flexibility and creativity that is the hallmark of a healthy dual-chartering system," the board said. "However, ensuring the safety and soundness of the nation's depository system is a matter of overarching concern to the entire credit union community and to consumers at large." Despite the NAFCU Board's new policy on private insurance, it said it does not oppose credit unions maintaining private, supplemental insurance above and beyond that provided by the NCUSIF. Additionally, NAFCU's Board said the trade organization will not oppose a provision in the House regulatory relief bill permitting privately-insured credit unions access to the Federal Home Loan Bank system. [email protected]