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WASHINGTON-The credit union industry was split in its opinions of the Federal Trade Commission’s proposal for disclosures concerning privately insured credit unions. American Share Insurance, the country’s last private insurer, wrote in its comment letter, “We believe it is important that the Commission promulgate reasonable and practical implementing regulations for the FDICIA and thereby provide needed guidance to privately insured credit unions that have operated for 13 years under a cloud of regulatory uncertainty. ASI believes the overall goal of the Proposed Rule should be to implement regulations that will protect consumers without unnecessarily burdening privately insured credit unions.” However, ASI President and CEO Dennis Adams made numerous suggestions to modify the proposal, such as clarifying the definition of `advertising’ and eliminating disclosures on ATMs, which often are not owned by the credit unions. He also recommended that the FTC hold a formal hearing on the matter rather than just a comment period in the rulemaking process. “ASI believes the Proposed Rule would impose a significant economic burden on these entities and potentially give rise to consumer harm and confusion,” he wrote. “Further, ASI believes that aspects of the Proposed Rule could have a significant anticompetitive effect by impeding the growth of, or even eliminating, private insurance as a competitive alternative to the federal insurance offered by the National Credit Union Share Insurance Fund (“NCUSIF”), which is administered by the National Credit Union Administration (“NCUA”). Competition from ASI has resulted in significant innovations and benefited consumers by providing meaningful choice in how credit unions can safely and responsibly insure their members’ deposits. By weakening the economic health of privately insured credit unions and effectively precluding credit unions that are federally insured from converting to private insurance, certain provisions of the Proposed Rule threaten to reduce or eliminate ASI as a competitive alternative to federal insurance.” ASI’s number one problem seemed to be with the written acknowledgements that the institution is not federally insured as required from all members. “[I]t would be impossible for federally insured credit unions to obtain written acknowledgements from 100% of their depositors prior to, or at the time of, conversion,” according to Adams. “Moreover, such a requirement would be redundant to, and substantially more onerous than, the noticed requirements contained in the NCUA’s regulations governing the conversion process. Indeed, the Commission’s written acknowledgement requirement would call into question the continued relevancy of many of the NCUA’s conversion rules.” CUNA agreed with ASI on this provision. The groups suggested that if a credit union alerted members in two newsletters then sent out the appropriate disclosures and a new signature card with the acknowledgement, it should be found in compliance with the reg. Additionally, CUNA asked for greater explanation of “conspicuous” in the regulation regarding the required disclosures. CUNA also disagreed with the FTC on the impact of the regulation on smaller institutions. “We believe a more thorough analysis of the impact of the rule on smaller institutions is required by the Regulatory Flexibility Act,” the letter read. On the other hand NAFCU cited the lack of disclosure found in 37% of locations where the Government Accountability Office made unannounced visits. “The proposed disclosures essentially track the statutory requirements imposed by the Federal Deposit Insurance Act (FDIA) (as amended by FDICIA),” President and CEO Fred Becker wrote. “NAFCU supports the proposed disclosures and believes they are necessary and will help consumers make informed decisions.” NAFCU, which has previously come out in opposition to private insurance for a primary insurance option, stated that the FTC should more clearly address deposits made over the Internet and include disclosure requirements for those as well. Corporate One Federal Credit Union President and CEO Lee Butke noted “unintended consequences” its members would face with the written acknowledgement provisions in the proposal regarding payment systems functions, like ACH and wire transfers, which corporates often provide. Additionally, the California and Nevada Credit Union Leagues have called the proposal “redundant” and “restrictive.” Credit unions were not the only ones commenting on the proposal: the bankers had something to say as well. “Given that private insurance is an option for credit unions and that credit unions increasingly exercise this option,” the American Bankers Association wrote, ” it is important that the Commission enforce the Section 43 disclosure requirements of the Federal Deposit Insurance Corporation Improvement Act (“ FDICIA”) informing consumers that their deposits in these institutions are not federally insured. The ABA agrees that these disclosures should be conspicuously displayed on all privately insured credit union materials and communications and at all locations.” America’s Community Bankers chimed in, too. “ACB strongly supports the FTC’s proposed disclosure rules for non-federally insured depository institutions. We emphatically believe that privately insured credit unions should abide by the law and that consumers and credit union members should be fully informed that deposits in privately insured credit unions are not backed by the full faith and credit of the United States government. Our country’s previous experience with private deposit insurance confirms the importance of consumer disclosures.” -

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