Can a Credit Union Use More Than One Name?
Learn why a credit union might use multiple names and how the NCUA regulates the institutions that do so.
The short answer is yes, but the NCUA does provide guidance on how to avoid confusion.
Credit unions are permitted to operate under multiple names and, as the NCUA explains in guidance on the topic, the “limited number” that does so includes both “federal credit unions and federally-insured state-chartered credit unions.”
However, in a follow-up legal opinion, the agency states that the practice is only permissible, “if the FCU takes reasonable steps to ensure members are fully apprised of the use of different names.”
The reason for this stipulation, according to the guidance, is the agency’s worry that using more than one name “may cause confusion for members and others in their dealings with credit unions.”
Specific NCUA Concerns
The NCUA lays out two instances in which issues may arise when a credit union operates branches under different names.
The first concerns a scenario where, “members might believe they are dealing with two different institutions with separate share insurance coverage,” and therefore unknowingly make multiple deposits that together exceed insurance limits.
A second potential concern noted relates to the NCUA or a state agency running into trouble if inquiries related to a certain credit union are filed under different charter names.
Put simply, the issue is that by using more than one name, a credit union may be seen, by members, regulators or others, as more than one entity.
Steps Credit Unions Should Take
For those credit unions that either currently or wish to use more than one name, the NCUA lists four potential “steps to ensure that members and others are not confused or misled in their dealings with the credit union.”
The first suggestion pertains to language, and specifically, “Disclosing, clearly and conspicuously, in signs, advertising, mailings, and similar materials that different branches or facilities are a branch, unit, or division of the same insured credit union.” Essentially, any terminology that does not suggest a sole entity in these cases is to be avoided, while the guidance further notes that NCUA regulations explicitly prohibit any type of promotional material that is “inaccurate or deceptive in any particular.”
Second, regarding confusion over charter name, the agency recommends “Using the legal name of the credit union for legal documents, certificates of deposit, signature cards, loan agreements, account statements, checks, drafts, and other similar documents.”
Next, the guidance focuses on internal training and states that, “A federally-insured credit union should instruct staff to inquire of members, prior to opening new accounts, whether they have accounts with the credit union at its other branches or facilities operated under a different name.” Further, in the case of a merger, staff should be proactive about identifying to members any particular branch or facility that is now part of the continuing credit union.
Lastly, the agency recommends that any member opening a new account be asked to sign a “statement acknowledging that they are aware that the differently named branches or facilities are, in fact, part of the same credit union and that shares held at each office are not separately insured.”
Why Would a Credit Union Use More Than One Name?
According to the NCUA, the primary reasons a credit union would use multiple names are due to a merger or as part of a marketing strategy. One specific example highlighted in the letter cited above concerns a credit union wanting to use “its sponsor’s subsidiaries to name its branch offices.”
However, the agency also acknowledges that certain institutions simply “find it beneficial in serving their members.”
Beyond the NCUA’s guidance on this topic, it is also worth noting the language in the legal opinion is explicit about the necessity of following the outlined protocol.
Further, as every credit union’s aim should be to better serve its members, causing them as little confusion as possible—on any front—should naturally be a major goal of all initiatives.
Finally, the NCUA notes their recommendations are not meant to be exhaustive and, as such, any credit union should seek to take any and all further steps necessary to ensure the greatest possible transparency on the matter.
Branch Strategy & Analysis