WASHINGTON—Both CUNA and NAFCU are disappointed in the final IOLTA rule, saying the agency could have done more with the regulation.
The NCUA board Thursday, by a 3-0 vote, passed a final rule covering interest on lawyer trust accounts (IOLTAs) and certain other escrow accounts involving prepaid cards.
Following President Obama’s signing of the Credit Union Share Insurance Fund Parity Act late last year, share insurance coverage is now provided for nonmembers who pay into lawyers' trust accounts. NCUA's new final rule adds share insurance coverage for nonmembers who pay into real estate agents' escrow accounts and funeral directors' escrow accounts. The new and very detailed rule also leaves open the possibility of adding share insurance coverage for nonmembers who pay into "other similar escrow accounts" under the law.
However, NCUA determined that prepaid cards do not legally qualify as "other similar escrow accounts" under the law. So only members' funds in prepaid cards will continue to receive share insurance coverage, according to the rule. (Click here for the final rule.)
“We have little doubt that the law gives NCUA the authority to extend insurance coverage to prepaid accounts, and we are very disappointed that NCUA has not exercised that authority at this time,” said CUNA president and CEO Jim Nussle. “While we appreciate recent actions on business lending and field of membership aimed at removing from regulation requirements that are not in law, this final rule is an example of the agency unnecessarily impeding access to credit unions by making it more difficult for them to offer products and services to their members.”
“NAFCU and our members appreciate the agency’s efforts to incorporate the 'Credit Union Share Insurance Fund Parity Act' into its rules and regulations,” said NAFCU President and CEO Dan Berger. “However, we believe the agency could have done more in adopting a more flexible definition of 'other similar' escrow accounts.”