Share Draft Account Law and Legal Definition
Share draft account is a transaction account that a member maintains at a credit union. In the U.S. Credit Unions a deposit account or a demand account in which the funds deposited are payable on demand are often called as a share draft account. Likewise, checking accounts in the U.S. banks are also called as a share draft account. A share draft account can be drawn on through the share drafts payable to third parties. In a share draft account the account holder can issue an unlimited number of written checks. Usually a share draft account is secured with federal insurance. In each quarter the interest earned on share-draft accounts is compounded.
A share draft account is similar to a Negotiable Order of Withdrawal Account, or NOW account offered by credit unions. It was created under the Consumer Checking Account Equity Act of 1980. It is also called as a share account.
In Credit Union Nat'l Asso. v. Board of Governors of Federal Reserve System, 700 F. Supp. 1152, 1155 (D.D.C. 1988), the court held that “credit unions, unlike banks, are cooperative and nonprofit depository institutions, which provide to their members, among other bank-like services, share draft accounts. Share draft accounts are the equivalent of checking accounts, in that they are used by members in the same [*1155] manner that bank customers employ their checking accounts. Share drafts are drawn on the credit union by a member, payable to a specific payee out of the share draft account maintained by the member of the credit union”.
