Washington Regulator: Member Deposits Are the Personal Property of the Credit Union

An interpretive letter issued by the Washington Division of Credit Unions states that a deposit is the personal property of a credit union.

The interpretive letter addresses the transfer or sell of some of a credit union's deposits to another Washington state-chartered credit union.

The letter states that according to state law a Washington state-chartered credit union may “dispose of its interests in personal property.” The state credit union regulator believes this includes "a sale or transfer of its interest in those deposits." It is clear that the state regulator views these member deposits as personal property of the credit union or "[a]t the very least, a deposit confers upon the credit union a right to use those funds, which is a property right of the credit union."

No where in the letter does it say that members approval is required when these deposits are transferred from one credit union to another.

It is clear from this interpretive letter that the Washington Division of Credit Unions believes credit union shareholders are similar bank depositors, not owners.

The letter also addresses other issues for credit unions accepting deposits including,

• it may only accept member deposits, unless it is a low-income designated credit union;
• it will need to verify that the transferred deposits are from persons who qualify as a member and determine their application requirements;
• it is required to conduct its own customer due diligence in compliance with the Bank Secrecy Act; and
• it should as best practice identify any members from the transferred deposits that would, as a result, exceed federal deposit insurance limits and allow such members to withdraw transferred funds without penalty for a short period of time before or after the credit union accepts the transferred deposits.