ALEXANDRIA, Va. — NCUA issued a legal opinion letter stating that the Federal Credit Union Act trumps Virginia law when it comes to a federal credit union's dividend and fee practices regarding dormant accounts.
NCUA legal opinion letter (06-1214) pre-empted Virginia's Division of Unclaimed Property objection to a federal credit union retroactively waiving account fees or reinstates dividends previously unpaid because of an inactive status. “NCUA's longstanding position is that a state law, which attempts to govern an FCU's imposition of account fees and charges, including inactive or dormant accounts, directly conflicts with ?107(6) of the Federal Credit Union Act (FCUA) and ?701.35 of NCUA regulations and is preempted by federal law,” the letter read. NCUA noted that it had pre-empted an earlier version of this same law.
Additionally, the letter explained, “The FCUA grants FCUs exclusive authority to determine terms, rates and conditions for member share accounts except as limited by the NCUA Board. NCUA regulations state:
A federal credit union may, consistent with this section, parts 707 and 740 of this subchapter, other federal law, and its contractual obligations, determine the types of fees or charges and other matters affecting the opening, maintaining and closing of a share, share draft or share certificate account. State laws regulating such activities are not applicable to federal credit unions.”
NCUA also pointed out that reversing account fees and paying associated dividends keeps the money from going back to the state, but is more beneficial to the consumer.
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