Certificate of Deposit?

If you Google “credit union” and “CD” you just might find some federal credit unions advertising certificates of deposit.  This would be a problem.  Take a look at Part 707 of the NCUA rules and regulations.  In this regulation, the NCUA adopted the Truth in Savings Act.  In 707.2(a)5v, the NCUA makes it very clear that credit unions should not describe share accounts as deposit accounts:

“However, 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.  Similarly, the terms ‘time account’… and ‘time deposit’… may not be used to describe term share accounts.”

This applies to most state credit unions as well.  If you are a state chartered credit union and your state laws allow you to take “deposits” then you may well be able to use the “CD” moniker.  Georgia may be one example.  If you are a federal credit union, you are out of luck.  You are also out of compliance if you are using the term “CD” to describe accounts at the credit union in advertising, agreements, disclosures or what have you.

This is one of those areas where I have seen confusion, if not noncompliance, across the country.  The reasoning behind this rule is the nature of the term share account.  A share account is not a deposit account from the NCUA’s perspective.  So what do we call dividend bearing term share accounts?  The NCUA permits “share certificates”, “certificate account” or “certificate.”


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