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Wash. state regulators letter interprets dividend
OLYMPIA, Wash. (4/17/08)--Credit unions need to be clear in their advertising and avoid statements that may be misleading, inaccurate or untrue when using the terms “dividends” and “interest,” according to the state of Washington Division of Credit Unions. Linda Jekel, state director of credit unions, sent Interpretive Letter 1-08-03 to state-chartered credit union CEOs April 9. “Since both interest and dividends are allowed for state-chartered credit unions, and every credit union is responsible for handling its own consumer disclosure, it is important to verify that the terms are being used correctly,” she wrote. Many credit unions use the terms interchangeably when, in fact, they are two different things, Jekel wrote. “‘Interest’ is compensation, fixed by agreement, for the use of money, with rights generally enforceable by contract,” she explained. “‘Dividends’ are discretionary payments, distributed from authorized sources, upon approval by boards of directors. Both pay investors in an amount expressed as an ‘APY’--annual percentage yield.” Jekel advised the state’s credit unions to check all forms and advertising materials, including information posted on their websites. She also suggested checking all the fine print and footnotes on all consumer disclosures and advertising, making certain that the terms “interest” and “dividend” are used accurately and consistently, not interchangeably.
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