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July 29, 2013 – The NAFCU Compliance Blog on Friday cleared up a little confusion about how federal credit unions may and may not describe their share certificates, and "certificate of deposit" isn't one of the permissible references.

This topic was raised by "quite a few eagle-eyed compliance professionals" who wrote in regarding theJuly NCUA Report's use of "CDs" or "certificates of deposit," noted NAFCU Director of Regulatory Compliance Steve Van Beek.

Van Beek draws on NCUA's official staff commentary to its rules on 12 CFR 707.2(a) – the definitions section of NCUA rules governing credit union share accounts. It states that credit unions can use adjectives and trade names to describe accounts such as "Best Share Draft Account," or "Ultra Money Market Share Account."

Approved synonyms for credit union accounts include:

• The term "checking account" may be used to describe share draft accounts.
• The term "money market account" may be used to describe money market share accounts.
• The term "savings account" may be used to describe regular share and share accounts.
• The terms "share certificate," "certificate account," or "certificate" may be used to describe share certificates and other dividend-bearing term share accounts.

Again, quoting the federal regulations, Van Beek wrote, "However, under no circumstances may a credit union describe a share account as a deposit account, or vice versa.For example, the term ‘certificate of deposit' or ‘CD' may not be used to describe share certificates and other dividend-bearing term share accounts."

NCUA's commentary notes that member savings in share accounts are "equity" investments, and returns are "dividends." "Federal credit unions may only offer dividend-bearing and non-dividend-bearing share accounts," he notes.