WASHINGTON (11/13/13, UPDATED: 5:14 p.m. ET)--Legislation that would extend share insurance coverage to trust accounts held in the name of nonmembers has just been introduced in the U.S. House.
The bill, supported by the Credit Union National Association, is known as the Credit Union Share Insurance Fund Parity Act (H.R. 3468) and was introduced by Reps. Ed Royce (R-Calif.) and Ed Perlmutter (D-Colo.), as expected. (News Now Nov. 12)
Specifically, the bill would provide National Credit Union Share Insurance Fund coverage for accounts such as Interest on Lawyers Trust Accounts (IOLTAs) so they are treated for deposit insurance purposes on the same basis as similar accounts insured by the Federal Deposit Insurance Corporation.
Upon the bill's introduction, CUNA sent a letter of support saying the credit union relief legislation is needed to correct a National Credit Union Administration interpretation of the Federal Credit Union Act that puts credit unions at a disadvantage. The NCUA has said that for a credit union to attract IOLTA accounts, all the clients must be members, rather than just the attorney establishing the account.
The inability of federally insured credit unions to extend share insurance coverage to IOLTAs means that despite the wishes of members to hold these accounts at credit unions, they must use a bank or thrift in order to receive the maximum deposit insurance coverage for all owners of the funds held in such an account, the CUNA letter to House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Ranking Member Maxine Waters (D-Calif.) said. That committee has scheduled a Thursday markup on the bill.