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Depository institutions operating without federal share or deposit insurance will be required soon to disclose that fact under a final Federal Trade Commission rule issued Tuesday and welcomed by NAFCU.

The rule implements a provision of the 1991 Federal Deposit Insurance Corporation Improvement Act that requires the FTC to set disclosure requirements for institutions lacking federal deposit coverage. FTC had no funding to implement the rule for many years. It issued its proposed rule in 2005 and made additional revisions to conform with later amendments to the underlying statute.

NAFCU President Fred Becker welcomed the FTC final rule. "We are pleased to see this rule finally approved," he said. "NAFCU has always advocated that all credit unions should have federal insurance, but in the absence of that, consumers should be well-informed of their choices regarding deposit insurance," he said.

NCUA Chairman Debbie Matz likewise applauded the move. "Effective consumer protection starts with relevant, practical information, and the FTC has taken an important step to equip members of non-federally insured institutions with essential details about their accounts.

"In these uncertain and difficult economic times, consumers should know more about how their money is insured, and should know that the federal deposit insurance provided by the National Credit Union Share Insurance Fund is the best option for credit union members."

All federally chartered and most state-chartered banks, thrifts and credit unions are required to maintain federal deposit or share insurance, which currently guarantees all deposits to $250,000. NCUSIF-insured credit unions are held to rigorous safety and soundness rules of NCUA, and Congress has explicitly stated that shares insured by the NCUSIF are backed by the full faith and credit of the United States government.

Under the FTC final rule, all non-federally insured institutions must disclose that they lack federal deposit insurance and that the federal government does not guarantee consumers will get their money back if the institution fails. These disclosures must be made on account statements, in advertising and inside branches at deposit windows.

NAFCU's 2005 comments are noted in the preamble to the final rule. The rule takes effect 30 days after publication in the Federal Register; for the text, use the link below.