UNITED STATES OF AMERICA

BEFORE THE NATIONAL CREDIT UNION ADMINISTRATION

In the Matter of

xxxxxxxxxxxxxx                                                     Docket 96-010

       xxx

xxxxxxxxxxxx

Insurance Claim

Bartow Employees Federal Credit Union

Decision and Order on Appeal

Decision

This matter comes before the National Credit Union Administration Board (Board) pursuant to 12 CFR 745.202 as an administrative appeal of the determination by the Liquidating Agent of Bartow Employees Federal Credit Union denying the xxxxxxxxx insurance claim in the amount of xxxxxxxxxx.  The April 15, 1996 appeal follows a reconsideration by the Liquidating Agent.

Summary of Claim

Originally, this appeal was for uninsured funds in the amount of xxxxxxxxxx and involved the following accounts:

Accounts xxxxxxxxxxxxx --  Appellants claim the accounts should be treated as individual accounts.  The Liquidating Agent  treated the accounts as joint accounts for the same combination of individuals, aggregating the accounts for insurance purposes.  The ALMC[1] paid Appellants xxxxxxxx -- Account xxxxxxxxxxxxxxxxx plus account xxxx xxxxxxxxxxxxxxxxxxxxxxxxxx -- and issued an uninsured share certificate for

xxxxxxxxxx.                 

Account xxxx --  Appellants claim the account should be paid to xxxxxxxxxxxxxxxx as an individual account.  The Liquidating Agent paid the account in full xxxxxxxxxxxx as               individual funds of xxxxxxxxxxxxxxxxxxxxxxx.

The Asset Liquidation Management Center (ALMC) continued to review and reconstruct the Appellants’ claims during the pendency of the appeal.  Such review was based on declaration of unposted dividends by the Board and new information provided by the Appellants.[2]  As a result of the review, the ALMC made additional payments on Appellants’ claims, reducing the amount subject to appeal.[3]  Thus, for purposes of this appeal, the Board is limiting its consideration to the remaining uninsured shares of xxxxxxxxxx as follows:

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxx             xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

                                                xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

  xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

General Background

Bartow Employees Center Federal Credit Union, located in Cartersville, Georgia, was an occupational credit union chartered to serve teachers in Cartersville county.  It had approximately 1200 members.  The Board placed the credit union into involuntary liquidation due to insolvency, effective November 27, 1995.

Facts

xxxxxxxxxxxxxxxxxxxxxxx, husband and wife, had three accounts at the credit union.

According to the signature cards, accounts xxxxxxxxxxxxx were joint accounts for xxxxxxxxxxxxxxxxxxxxxxx.  Accounts xxxxxxxxxxxxx were treated as individual accounts of xxxxxxxxxxxxxxxxxxxxxxx, respectively, from April 1988 until the credit union was liquidated.  The third signature card (for account xxxx) was in the name of xx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx  However, xxxxxxxxxxxx did not sign the signature card.  It was signed by xxxxxxxxxxxxxxxxxxxxxxx as joint account holders.  The funds in account xxxx consisted of funds transferred from accounts xxxx and xxxx.

Analysis

Part 745 of NCUA’s Regulations addresses share insurance coverage.  Section 745.2 states in part:

                        (a)This Part provides for determination by the [NCUA] Board

                        of the amount of members’ insured accounts.  The rules

                        for determining the insurance coverage of accounts

                        maintained by members in the same or different

                        rights and capacities in the same insured credit union

                        are set forth in the following provisions of this Part.  The

                        Appendix provides examples of the application of these

                        rules to various factual situations. . .

                        ...

                        (c)(4) The interests of the co-owners of a joint account

                        shall be deemed equal…

           

Section 745.3 addresses single ownership accounts.  The relevant provisions follow:

                        (a) Funds owned by an individual and deposited in the

                        manner set forth below shall be added together and insured

                        up to $100,000 in the aggregate.

                           (1) Individual accounts. Funds owned by an individual

                           ... and deposited in one or more accounts in the indivi-

                           dual’s own name shall be insured up to $100,000 in the

                           aggregate.

 

Section 745.8 addresses joint accounts.  The relevant provisions follow:

                        (a) Separate insurance coverage.  Accounts owned jointly…

                         shall be insured separately from    accounts individually

owned by any of the co-owners.

                        (b) Qualifying joint accounts.  Joint accounts are insured

                        separately from individual accounts up to a maximum of

                        $100,000 provided that each of the co-owners has personally

                        signed an account signature card and has a right of withdrawal

                        on the same basis as the other co-owners.

                        (c) Failure to qualify.  An account owned jointly which does

                        not qualify as a joint account for purposes of insurance of

                        accounts shall be treated as owned by the named persons

                        as individuals and the actual ownership interest of each such

                        person in such account shall be added to any other accounts

                        individually owned by such person and insured up to $100,000 in the aggregate... 

The NCUA Regulations state that single ownership accounts are insured up to $100,000 for each individual and that joint accounts shall be separately insured if certain qualifications are met.  Accounts xxxxxxxxxxxxx were originally set up as joint accounts for xxxxxxxxxxxxxxxxxxxx.  The Liquidating Agent originally insured these accounts pursuant to §745.8(d) of the Regulations for a total of xxxxxxxx.  Upon appeal, the xxxxxxxx submitted evidence to show that funds from these two joint accounts were transferred into two individual accounts, one for xxxxxxxxxxxxxx and the other for xxxxxxxxxxxx.  The credit union treated these accounts as individual single ownership accounts from the time of the transfer until the credit union liquidated.  Therefore, the accounts should be insured as individual ownership accounts pursuant to §745.3(a) of the Regulations.  The Liquidating Agent made the adjustment and paid additional proceeds to the xxxxxxxx. 

xxxxxxxxxxxx was a non-qualifying joint account because it lacked the signature of xx xxxxxxxxxxxxx.  The Liquidating Agent insured Account xxxx as individually owned funds of xxxxxxxxxxxxxxxxxxxxxxxx pursuant to  §745.8(c) of the Regulations. 

The xxxxxxxx are entitled to xxxxxxxx each in insurance coverage for their respective interests in the three accounts.  The xxxxxxxx have been paid the appropriate amounts according to the NCUA insurance regulations.

xxxxxxxxxxxx present no further argument or evidence to provide for additional insurance coverage.  There is no basis for any additional payout. 

      Order

For the reasons set forth above, it is ORDERED as follows:

The Board upholds the Liquidating Agent’s decision to deny xxxxxxxxxxxxxxxxxxxxxxxx claim in the amount of xxxxxxxxxx and denies the xxxxxxxxx appeal.

The Board’s decision constitutes a final agency determination.  Pursuant to

12 CFR 745.203(c), this final determination is reviewable in accordance with the provisions of Chapter 7, Title 5, United States Code, by the United States Court of Appeals for the District of Columbia or the court of appeals for the Federal judicial circuit where the credit union’s principal place of business was located.  Such action must be filed not later than 60 days after the date of this final determination.

So ORDERED this 16th day of October, 1996 by the National Credit Union Administration Board.

                                                           

                                                            _____________________

                                                            Becky Baker

                                                            Secretary of the Board


[1] The ALMC is the NCUA component responsible for, inter alia, the liquidation of federally-insured credit unions.  The Liquidating Agent is an NCUA employee responsible for conducting ALMC liquidation functions.  The terms “ALMC” and “Liquidating Agent” may be used interchangeable herein.

[2]  On March 13, 1996, the Board approved the payment of unaccrued and unposted dividends for credit union members through September 1995.  In addition, new evidence submitted by the Appellants established that accounts xxxxxxxxxxxxx should be treated as individual accounts rather than joint accounts for the same combination of individuals. 

[3]  The Liquidating Agent determined that accounts xxxxxxxxxxxxx should be insured individually rather than as joint accounts for the same combination of individuals.  It paid additional proceeds and issued a new certificate of uninsured shares for accounts xxxxxxxxxxxxx based on the Board’s approval of unposted dividends and the new evidence submitted.  It also increased the verified balance of account xxxx to account for unposted dividends approved by the Board.  xxxxxxxxxxxxxx was paid a total of xxxxxxxx for his interest in accounts xxxxxxxxxxxxx and xxxxxxxxxxxx was paid a total of xxxxxxxx for her interest in accounts xxxxxxxxxxxxx.  The Liquidating Agent originally determined that xxxxxxxxxxxxxxxxxxxxxxx each owned equal shares of account xxxx.  However, on June 13, 1996, the Liquidating Agent set forth the flow of shares from accounts xxxxxxxxxxxxx into account xxxx based on credit union records of transfers made in August 1992.  The Liquidating Agent determined that 49% of the proceeds of account xxxx came from xxxxxxxxxxxxxxxx account xxxx and 51% of the proceeds came from xxxxxxxxxxxxxx account xxxx.