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What is the NCUA?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 27 November 2016
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The National Credit Union Administration (NCUA) is a federal agency in the United States which oversees credit unions. It issues charters for new credit unions, sets credit union policy, and insures deposits at credit unions through the National Credit Union Share Insurance Fund (NCUSIF). The goal of the NCUA is to keep credit unions in the United States healthy and strong, and to protect people who deposit their money in credit unions by ensuring that credit unions remain safe and secure.

Credit unions are cooperatively-owned financial institutions which are controlled by their members. Members of a credit union can deposit funds, borrow money, participate in investments, and engage in a variety of other financial activities with their credit union accounts. Unlike a bank, a credit union shares its profits with its members by issuing dividends quarterly or annually. Credit unions are generally very safe, secure places to keep money, and they tend to be more community-oriented than banks.

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The NCUA was established in 1934 as part of the Federal Credit Union Act. This act of Congress was designed to legislate the business of credit unions in the United States to protect consumers from the failure of credit unions. It was one among a number of pieces of legislation passed in the wake of the Great Depression to prevent such an event from occurring again. Under the terms of the Federal Credit Union Act, the NCUA is administered in five different regions, and it is managed by a Presidentially-appointed three member Board of Directors.

When a group wishes to open a credit union, they apply to the NCUA for a charter. If a credit union does not have an NCUA charter, depositors should be aware that it is not backed by the full faith and credit of the United States government, and they could potentially lose their deposits. Credit unions with NCUA charters are backed by the NCUSIF, an organization which is similar to the Federal Deposit Insurance Corporation (FDIC).

Depositors who are considering credit unions are sometimes told that they should stick with banks because credit unions are not insured by the FDIC. While this is technically true, it ignores the fact that credit unions have their own version of the FDIC, and the NCUSIF is actually a very strong fund, with member credit unions typically depositing money in excess of the requirements. Using an NCUA credit union can also be safer than using a bank in some situations, because credit unions typically acquire each other rather than allowing each other to fail, working cooperatively to keep the network of credit unions strong.

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