GAO: Privately insured CUs comply with disclosure rules,
but more CFPB guidance needed

March 30, 2017 -- Privately insured credit unions have largely complied with CFPB disclosure requirements of their status as non-federally insured financial institutions, but the rules for those disclosures should be clarified in guidance from the consumer bureau, the federal Government Accountability Office states in a report released Wednesday.

The guidance, GAO stated, would help state credit union supervisors and privately insured credit unions better interpret CFPB regulations, and inform consumers when an institution is not federally insured.

“Privately insured credit unions largely complied with the Bureau of Consumer Financial Protection (CFPB) requirements to disclose that they do not have federal deposit insurance,” GAO wrote in its report. “For instance, 45 of 47 credit unions GAO visited displayed required disclosures at teller windows, and 99 of 102 websites GAO reviewed included the disclosure on their main Internet page, as required.”

But GAO also noted that disclosure signs were missing at some drive-through windows at credit union facilities, as were printed materials (brochures and flyers) at some credit unions.

“The regulations require all advertising to include a disclosure, but do not define what constitutes advertising,” GAO stated. “In some cases, disclosure signs or text size were too small to be easily read, or were not placed conspicuously. CFPB's regulations on disclosures for privately insured credit unions do not specify signage dimensions or font size.

“Without clear disclosure requirements, state credit union supervisors and credit unions may not be consistent in how they interpret disclosure requirements and some consumers may not be informed that their deposits are not federally insured,” GAO added.

In its recommendations, the congressional oversight watchdog recommended that CFPB issue guidance for the privately insured institutions on disclosure. Specifically, GAO recommended that CFPB clarify whether drive-through windows require disclosure, describe what constitutes clear and conspicuous disclosure, including minimum signage dimensions and font size, and explain and provide examples of which communications are advertising.

CFPB agreed with the recommendations, GAO stated.

The report was mandated by a provision of the 2015 “Fixing America’s Surface Transportation Act” (FAST Act), which (among other things) gave privately insured credit unions access to Federal Home Loan Bank membership. The bill also required GAO to review private deposit insurers’ and credit unions’ compliance with disclosure requirements.

Credit Unions Largely Complied with Disclosure Rules, but Rules Should Be Clarified (GAO-17-259)