WASHINGTON — CUNA putting its two cents in on a Department of Education rule preserved a service and income stream for federally insured credit unions.
In response to a comment letter by CUNA, the Department of Education agreed to revise its final rule on disbursement of federal student aid funds to include credit unions. "We believe that the Department's intention behind the proposed FDIC deposit insurance requirement is an admirable one: To reduce the risk of loss of student funds due to the failure of a depository institution or due to fraud," CUNA Executive Vice President and General Counsel Eric Richard wrote. "Permitting NCUSIF insurance as well as FDIC insurance would in no way increase the risk of loss of student funds."
He beseeched the department to "consider this comment despite its filing after September 7th because the definition of "bank account" used in the proposed rule…will have the consequence–presumably unintended and certainly unfortunate–of eliminating student access to credit union services; services upon which many university students rely." CUNA's letter was filed Sept. 28.
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In fact, Richard wrote, "NCUSIF-insured credit unions are subject to stringent federal regulation and examination standards that are at least as rigorous as those that apply to FDIC-insured banks and thrifts. Since NCUSIF insurance is at least equivalent to FDIC insurance–if not superior because the NCUSIF is better capitalized than FDIC's deposit insurance fund–we ask that the Department of Education not favor one form of federal deposit insurance and discriminate against the other."
The same day the letter was delivered, the Department of Education contacted CUNA to let them know that in response to their comment letter that morning, in addition to a university administrator a couple weeks ago, the department was amending its final rule to include NCUSIF-insured credit union accounts in their student aid disbursement rule. In a phone call, DoE explained that the initial exclusion was an oversight.
The final rule will be published in the Federal Register on or about Nov. 1.
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