Patelco Credit Union has announced that it will be insured by the National Credit Union Administration (NCUA) starting on January 1, 2008. Since November 2002, Patelco has been insured by the private insurer, American Share Insurance (ASI). I first reported in October that Patelco had applied to the NCUA for this change. It looks like the approval process went smoothly.
For those who aren't aware of Patelco, it's one of the nation's largest credit union. They have a history of offering great deals on CDs, savings accounts and other banking products. And they're one of the few credit unions in which it's easy for anyone to qualify for membership. For more info on their latest CD deals (including their 5.50% 9-month CD) and on qualifying for membership, please refer to this previous Patelco post.
Patelco listed the following reasons for converting back to the NCUA:
- The maximum amount of NCUSIF insurance for IRA accounts has been increased to $250,000; this is a substantial improvement in the Federal program.
- The cost borne by Patelco for deposit insurance through NCUSIF will be lower.
- Recently, we have found that our private insurance coverage has limited our ability to work with some Federal agencies.
- Finally, private insurance has not enhanced our ability to increase our branch network through partnerships with other credit unions.
Several readers in my previous post speculated on the real reasons Patelco went with ASI in 2002 and is now going back to the NCUA. In 2002, Patelco had to receive approval by a vote of its members to switch to private insurance. It apears that the change back to NCUA was approved by Patelco's board of directors.
As one reader noted, the way a credit union can dump NCUA insurance is a little worrisome. Members will often vote the way that the board recommends. Most members probably won't hear both sides of the issue. ASI may sound better than NCUA since it covers more, but as one reader mentioned, "who knows if they can really pay up when the time comes." And with the subprime mess, who knows how bad it'll get.
It's important to note that not all credit unions can switch. Credit unions with federal charters (those that have federal in the name) are required to be NCUA insured. Only state chartered credit unions can drop NCUA coverage, and this depends on state laws and state regulators. I do know it's possible for a credit union to change from a federal to state charter. This recently occurred in Georgia at the Credit Union of Georgia. More info on charters is available at this NCUA page (thanks to the reader who provided this info).
As I mentioned in my previous post, I'm glad to see Patelco returning to NCUA coverage. There's something about federal insurance that provides confidence that insured deposits will be covered no matter what the future may bring. But there could be downsides as one reader in my previous post mentioned. It may be easier to attract depositors now with NCUA coverage so they won't have to offer rates as high. Hopefully, that won't happen.
Thanks to the reader who emailed me info on this news.