NEW: Finalized IOLTA rule doesn’t go far enough, CUNA says
ALEXANDRIA, Va. (12/17/15 UPDATED 12:10 p.m. ET)--The National Credit Union Administration finalized its rule on interest on lawyer trust accounts (IOLTAs) at its meeting this morning, which extends share insurance coverage to those accounts and other similar trust accounts. CUNA President/CEO Jim Nussle expressed disappointment in the rule, saying the NCUA failed to exercise its authority to extend coverage to prepaid card accounts.
“We have little doubt that the law gives NCUA the authority to extend insurance coverage to pre-paid accounts, and we are very disappointed that NCUA has not exercised that authority at this time,” Nussle said. “While we appreciate recent actions on business lending and field of membership aimed at removing from regulation requirements that are not in law, this final rule is an example of the agency unnecessarily impeding access to credit unions by making it more difficult for them to offer products and services to their members.”
The NCUA was required to pass an IOLTA rule after the Credit Union Share Insurance Parity Act was signed into law in December 2014. Under an IOLTA program, an attorney or law firm may establish an account at a financial institution to hold clients' funds to pay for legal services or other purposes.
While IOLTAs are covered under the NCUA's regulation, the NCUA was also given authority under the law to provide pass-through share insurance for “other similar trust accounts.”
The final version of the NCUA’s rule extends coverage to real estate escrow accounts and prepaid funeral accounts, as well as IOLTAs.
The rule will be effective 30 days after its publication in the Federal Register.