By Stephanie Lyon, SVP of Compliance, Ncontracts
For too long, credit unions have been constrained by Customer Identification Program (CIP) requirements that made perfect sense in 2003 but have become barriers to effective member service in the digital banking world.
Now NCUA, along with other federal regulators, has introduced a targeted exemption that modernizes CIP rules by allowing credit unions to use trusted third parties to verify taxpayer identification numbers (TINs). For credit unions, this means greater flexibility to meet members where they are, especially in digital channels, without compromising compliance or security.
Under the new rules, credit unions can obtain a member’s TIN from trusted data aggregators, fintech partners, or government-authorized verification services while still meeting all their compliance obligations. This exemption is entirely optional. Credit unions that choose to use it must still maintain written CIP procedures. Members get a smoother onboarding experience, and the credit union is more likely to see potential members complete the account opening process.
Compare this to the reality many credit unions faced before the rules change: A potential member attempts to open an account online at a credit union at 10 p.m. on a Sunday, precisely when financial services should be most accessible. Yet they hesitate when asked for their full Social Security number, understandably concerned about data security given the frequency of high-profile breaches.
Under the previous regulatory framework, that member often abandoned the process entirely and credit unions lost potential relationships. Meanwhile, credit unions would lose members to fintechs who often required only partial TINs even before the regulators made the exemption official. The new exemption fundamentally changes this dynamic.
Balancing flexibility and security
This shift reflects what credit union executives have long understood: effective member service requires operational flexibility. When potential members cannot visit branches during standard business hours, or when digital-native members raise valid concerns about sharing personal information across multiple online touchpoints, credit unions need secure, streamlined alternatives that build trust and remove barriers to account access.
In this case, the change enhances operational efficiency by reducing how often sensitive information must be transmitted. Instead of asking members to repeatedly enter Social Security numbers across different digital platforms, credit unions can confirm identity through secure and established verification channels that work seamlessly in the background.
Flexibility doesn’t mean weaker security. The regulatory agencies have been careful to maintain robust safeguards. The regulatory order specifically requires that credit unions using this exemption maintain written procedures that: (1) enable the credit union to obtain TIN information prior to opening an account; (2) are based on the credit union’s assessment of relevant risk; and (3) are risk-based for the purpose of verifying member identity to the extent reasonable and practicable. Credit unions must still establish a reasonable belief that they know their members’ identities using risk-based procedures. They’re still responsible for vetting their third-party data sources and maintaining appropriate contractual protections.
What’s changed is the method, not the standard. Credit unions must still verify names, addresses, dates of birth, and other identifying information. The difference is that the TIN can come from a reliable third party rather than directly from the member during account opening.
Embracing the opportunity
In a world where many credit unions lack the same resources as larger competitors to deliver seamless digital experiences, compliance costs have often stood in the way of innovation. This exemption helps change that dynamic.
Credit unions can now partner with trusted fintech providers and data services to offer onboarding experiences that rival those of bigger institutions, while still preserving the personal touch and community focus that define the credit union difference.
Crucially, the rule recognizes that credit unions come in all sizes and serve very different communities. A $50 million credit union in a rural farming town may continue collecting TINs the traditional way, and that’s appropriate for its members. Meanwhile, a $2 billion credit union serving tech workers across multiple states may integrate third-party verification directly into its mobile app. Both approaches are compliant, and both meet member needs in ways that fit their unique contexts.
Ultimately, this regulatory shift provides more than technical relief; it reflects an acknowledgment that credit unions need flexibility to serve members in a digital-first world. For institutions already working with digital onboarding partners or catering to members who expect 24/7 account access, the exemption could be transformational. By reducing friction in account opening while maintaining security, the NCUA has given credit unions a valuable tool to enhance growth, strengthen member satisfaction, and uphold their promise of putting members first.