How To Deal With Inactive Accounts

November 19, 2015 at 9:27 am Leave a comment

As a life-long suburbanite from Long Island I of course know what every  good rancher knows: that a herd must be culled to remain strong. I also know  a financial institution can be harmed by  inactive members.  So today I’m giving you advice that will save you money and make your overall membership stronger regardless of where your credit union is located .

New York’s annual  period for reporting abandoned property recently came to an end and, having  sampled  some of the questions that come into the Association’s compliance hotline,  I am here to remind all of you FCUs  out there that NCUA has granted you ample power to fee accounts out of their misery.  Used properly these powers can help minimize the amount of unclaimed funds your credit union must deal with.

And let’s be honest unclaimed property is annoying to deal with.  In NYS most funds are considered unclaimed after three years of account inactivity. The process for sending these funds back to the state is in desperate need of a statutory overhaul to reflect modern technology.  You must compile a list of dormant accounts, mail letters to these account holders, publish a list of dormant accounts  and ultimately remit the unclaimed funds to the state. The final report is due by November 10.  A great New York state resource is the Comptroller’s Handbook on Abandoned Property.  (

Is there anything you can do to help minimize the time and expense associated with this process? Absolutely.  NCUA has opined on several occasions that you can Fee these accounts out of existence before they  become abandoned property so long as you comply with Truth in Savings notice requirements(12 CFR 707.4).  The power to fee inactive accounts  trumps state level restrictions  on dormant accounts.   For example Virginia passed a law stipulating that fees could not be assessed against a dormant account unless three conditions were satisfied including providing the account holder with three months advanced notice of the fee.  NCUA authorized federal credit unions to charge the fee anyway, concluding that the fee was preempted by NCUA’s regulations permitting credit unions to charge dormant account fees.  It explained that:

“A state does not have authority to regulate an FCU’s account operation until an account achieves unclaimed property status, which is five years in Virginia. Once unclaimed property status is reached, the state does not acquire any authority to reach back and affect an FCU’s action’s before an account’s abandonment.” (

Just so we are all on the same page here you still l have to comply with a state’s abandoned property law but that law can’t block you from charging inactivity fees

An even more expansive interpretation of FCU powers was issued in 2008 when the agency said that a Texas FCU could close accounts that have been inactive more than 12 months with balances of between one cent and 500 dollars and mail the members the balance  provided it did so consistent with its own policies and bylaws.

One more thing to keep in mind.  An FCU may have bylaws that terminate a member’s membership if  his  share balance falls below par  value  and the member does not increase the balance within a specified time period. Although the time period is left to an FCU’s discretion in the FCU Bylaws, it cannot be zero and should be reasonable.

By the way tune in to today’s Board meeting at 10AM if you get a chance.  The Board is expected propose FOM reforms. ….



Entry filed under: Compliance. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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