Compliance Blog

Sep 07, 2016

The Adventures of a Non-Member: Joint-Owner Accounts

Written by Stephanie Lyon, Regulatory Compliance Counsel

Once upon a time, I traveled from Virginia to New York with the sole goal of recording a mortgage in the office of land records. I brought with me a cashier's check, the mortgage deed, and an affidavit signed by the loan officer and member. When I arrived at the recording office, the clerk informed me that the check I had was insufficient to cover the recording taxes associated with the property. I started writing a personal check to cover the difference but the clerk looked at the check disapprovingly. To my dismay, the land recording office would not accept my out-of-state check or any cash. I quickly embarked on a scouting trip to the nearest credit union to purchase a cashier's check before the office of land records closed. Unfortunately, that credit union would not provide me with a cashier's check as I was not within its field of membership as required by section 701.30 of NCUA rules and regulations. I finally ended up driving to a U.S. postal office a town away to obtain the cashier's check and successfully recorded the mortgage deed. While I did not make it on time to take my train, I was able to enjoy upstate New York hospitality. This story inspired me to blog about a frequently asked question regarding the extent of services non-members may receive from federal credit unions (FCUs).

The goal of FCUs is to promote thrift among [their] members by affording them an opportunity to accumulate their savings and to create a source of credit for provident or productive purposes. 12 C.F.R. 701, App. A, Art. I, 2. Under certain circumstances, NCUA has permitted FCUs to provide services to nonmembers as an incidental power designed to promote credit union membership. These determinations are scattered across multiple legal opinion letters and in some portions of NCUA's rules. We receive many questions about non-member joint accounts, so I thought I would address the issue coming off the long holiday weekend.

Federal credit unions often ask whether a non-member can be a joint owner on an account. The Federal Credit Union Act (FCU Act) provides that members may add non-member joint account owners under certain circumstances. While the FCU Act allows non-members to be joint owners on a member's account, it prohibits non-members from voting or receiving other member benefits:

Shares may be issued in joint tenancy with right of survivorship with any persons designated by the credit union member, but no joint tenant shall be permitted to vote, obtain loans, or hold office, unless he is within the field of membership and is a qualified member. See, 12 U.S.C. 1759.

Joint ownership implies the ability of one joint owner to withdraw all the funds in the account including the par value. See, e.g., Model U.C.C. 4-403(a). Some credit unions have stumbled upon the issue when non-member join owners wish to withdraw all funds and close the account hence ending the account holder's membership in the credit union. In order to prevent this situation some credit unions have added language to account agreements that only allow the member joint owner to close the account. Credit unions may want to look at their specific bylaws and account agreements for similar provisions or consider working with counsel to add the necessary language to prevent non-member joint owners from closing the member's account. Remember, even if the non-member joint owner withdraws all the funds from the account, the model bylaws have a section that allows the member a certain amount of time to bring the balance up to the par value to retain their member in good standing status. See, 12 C.F.R. 701, App. A, Art. III 3.

Aside from the joint-ownership, NCUA rules and regulations also allow FCUs to perform certain services for non-members that are within the field of membership of the credit union such as selling negotiable checks and offering check cashing services for a fee. See, 12 C.F.R. 701.30(a)-(b). Additionally, FCUs that are designated as low income credit unions (LICUs), have the ability to accept shares from non-members such as other credit unions and public units. See, 12 U.S.C. 1757(b). For more information on LICUs, see NCUA Letter to Credit Unions 10-CU-01.


Here is a picture of the cozy B&B I called home for a night while attempting to record a mortgage in Saratoga, NY.