FTC (Finally) To Set Rules On Private Insurance
The massive spending bill passed by Congress in the waning days of its lame- duck session also included a provision that will finally allow the Federal Trade Commission to set rules for advertisements and public disclosures on private deposit insurance for credit unions-13 years after legislation requiring those rules.
The rulemaking has been delayed since the 1991 FDIC Improvement Act, which included the provision, because unidentified lawmakers have prevented the FTC from spending money on the process. As a result, because NCUA has disavowed any responsibility for privately insured credit unions, there has been no federal oversight of the program since the 1991 law and the 1991 RISDIC crisis, which eliminated all but one private deposit insurer, Dublin, Ohio-based American Share Insurance (ASI), and prompted hundreds of credit unions to convert to federal insurance under the NCUSIF.
The go-ahead for the FTC's rulemaking comes a year after the Government Accountability Office (GAO) found that a large number of privately insured credit unions were not complying with the 1991 law and adequately informing members that their savings are not federally insured.
That report called on Congress to lift the arcane ban preventing the FTC from funding enforcement of the provisions of the 1991 law requiring prominent disclosure of private insurance status. The GAO report found that 37 of 57 privately insured credit unions visited in Alabama, California, Illinois, Indiana and Ohio, did not post notices of their private insurance status.
There are about 220 state- chartered credit unions in 11 states that have private deposit insurance through ASI. And hundreds more credit unions have excess coverage-over the federal government's $100,000 per account limit-through private companies.