By Donya Parrish, MCU VP- Risk Management
As a consumer, it is obvious to me that credit unions are in a different situation than you have been in previous years. As a compliance person, you are sure getting my attention. Why? There are ads on nearly every billboard, reader board, and in local publications advertising your “CD” rates.
It is not a well-known fact, but did you realize credit unions are not supposed to use the term “CD” or “Certificate of Deposit” to describe your product? You can call them “certificates” or “share certificates”, but using “CD” takes you right out of compliance with NCUA Part 707, even if it does save precious space in your ad.
The Official Staff Commentary to 12 CFR at 707.2(a)(5)(v) states, “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.”
In this time of working to attract funds for liquidity and encourage those in your community to take advantage of rates some haven’t even seen in their lifetime, make sure you are not attracting the wrong kind of attention — that of your competitors, or worse yet, your examiners! While I don’t expect anyone would shut the doors over this issue, it is a simple change you can make to avoid the scrutiny.