1/11/2023
All financial institutions run the risk of failing or going bankrupt. In this situation, agencies such as the FDIC and NCUA come to the rescue of consumers.
The latter is in charge of backing the money of credit union account holders for up to $250,000. We tell you a little more about this federal agency.
Origin and purpose of the National Credit Union Administration (NCUA)
Like the FDIC, FHA and other institutions, the NCUA is an independent federal agency. Its job is to insure and supervise most (98%) of the chartered credit unions in the United States.
It was created in 1970 because of the growth of these institutions and the need to regulate them more efficiently. Along with the launch of the NCUA, the federal government also established the NCUSIF (National Credit Union Share Insurance Fund).
This federal fund is responsible for insuring deposits made at credit unions. All credit unions regulated by NCUA are protected by the NCUSIF until NCUA withdraws membership.
In some cases, state-certified credit unions are privately insured or have protection from institutions that are not backed by the government.
In contrast, the NCUSIF receives full support and funding from the national government. That's why they include 6,000 members and the savings of these entities have never been lost.
How does NCUA work?
When we review the dynamics of the National Credit Union Administration, we find that it is composed of a three-member board. This board is elected by the President of the United States and ratified by the Senate. Each of the members in charge has a term of 6 years and only two can be from the same political party.
As part of its operation, NCUA must review its policies every 3 years. In the interest of transparency, the NCUA allows the public to comment on proposed regulations and those under review.
Anyone who is affiliated with a credit union is protected by the NCUSIF. Account underwriting is the responsibility of credit unions, which must contribute the equivalent of 1% of their protected shares and deposits.
These funds are used for NCUA's operating expenses and to cover any claims. In addition, NCUA has several assistance programs for financially troubled institutions.
All credit unions insured by NCUA must display the NCUSIF notice at their main and branch offices. If a credit union wants to receive NCUA endorsement, it needs state or national certification.
If you want to know if your funds are protected, you can call your financial institution or visit the website: ncua.gov
Difference between NCUA and FDIC
The Federal Deposit Insurance Corporation (FDIC) works the same way as the NCUA. The only difference between the two is that the former protects funds in bank accounts and the latter protects money in federal credit union accounts.
What is the coverage of the National Credit Union Administration?
Similar to the FDIC, this federal agency offers insurance of up to $250,000 per person at each credit union. For example, if you have more than one account per category, the sum of the funds you have must be within that amount to be protected. To raise this limit, you can add categories or use another entity.
In the event a credit union goes bankrupt, the NCUA will be responsible for the money. As long as the principal amount is within the stated amount, the agency will pay within three business days.
In certain circumstances, the National Credit Union Administration may move an account to another insured entity before sending the funds to the account holders.
Under certain conditions, you may be able to obtain insurance in excess of $250,000. This depends on the type of account you have and the categories protected.
Let's say you have a personal account, a joint account and a trust for your children. Because of the difference in categories, you can get insurance up to $750K.
Categories not insured by NCUA
This applies to investment instruments with which there is presumed to be a risk of loss involved. Incidentally, the potential theft of funds in a credit union is also not protected by NCUA. In these cases, there is a "bond blanket" that handles defalcations that do not involve the failure of the entity.
If you want to know more about the government institutions that regulate finance, Busconómico has a simple and clear overview of each one.
Español: Qué es la National Credit Union Administration (NCUA)