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WASHINGTON-The Federal Trade Commission recently announced that it was publishing a notice seeking public comment on proposed disclosure requirements for credit unions and other depository institutions lacking federal deposit insurance. The FTC was delayed more than a decade in writing regulations implementing section 43 of the Federal Deposit Insurance Corporation Improvement Act of 1991 because, after passing the bill, Congress refused to fund enforcement of it. Congress lifted this ban in 2003 by appropriating funds to the cause. Lawmakers agreed to the funding shortly after the General Accounting Office found compliance “varied considerably,” according to FTC’s notice, and that the “most apparent impact on consumers, from the lack of enforcement of these provisions, may result from credit unions not providing adequate disclosures that they are not federally insured.” American Share Insurance President and CEO Dennis Adams noted, “My general observation is fairly brief.It very much tracked the law.” At first blush, he said he did not see anything new or overly burdensome about it. In fact, when the law was passed and since, ASI has educated members on compliance, even though there was no enforcement of it. Under the law, institutions lacking federal deposit insurance must disclose that fact in periodic statements, conspicuous notices in the facilities, and in all advertising, including print, electronic, Web page, or broadcast media. FTC’s notices quote the statute as reading that covered institutions shall “include conspicuously in all advertising and at each place where deposits are normally received a notice that the institution is not federally insured.” No exceptions are listed in the notice; it includes ATMs, credit union service centers, and shared branches. Additionally, the law requires new and existing depositors to sign acknowledgements that the institution is not federally insured. Section 43 does provide for exceptions to the disclosures for depository institutions not engaged in retail deposits, which the FTC has asked whether such an exemption would be appropriate. In states where there is required language for the disclosures, it should be sufficient for FTC’s purposes, so long as it is consistent with the purpose and requirements of section 43. If the state’s language does not meet FTC requirements, it would likely be preempted, according to the notice. FTC asked numerous questions in its notice on what types of banks and savings associations do not carry federal deposit insurance and how many exist. The commission was also trying to get a feel for the costs and burdens of such a regulation and whom it would fall on, as well as asking how to reduce these burdens. The FTC asked how long institutions would need for compliance, among other things. The FTC’s final regulation will cover 212 credit unions and 20 banks and thrifts, according to the commission. Adams noted that the FTC has already met with ASI and other interested groups within the credit union community. However, the insurer will be commenting by the deadline on the notice of proposed rulemaking. “We’ve communicated to our advisory council.as soon as rules are proposed we would continue with constructive comments,” Adams said. The notice of proposed rulemaking is available at www.ftc.gov. Public comments are due by June 15, 2005. “We already have it in our business plan,” Adams said of education efforts once regulations are out. He added, “We view this as a favorable opportunity to help members deal with the laws and regulations.” Already, ASI audits credit unions for disclosures as part of its regular examinations. -

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