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FDIC Consumer News - Fall 1999

Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

New Law "Modernizes" the Financial Services Industry

Eliminates legal barriers separating banks from insurance and securities firms

As FDIC Consumer News went to print, Congress approved and President Clinton signed a major banking law changing the way financial services are offered to the public. Here's a summary of key provisions of the "financial modernization" law that are of interest to consumers:

  • After decades of debate, the lawmakers agreed to remove legal restrictions—some dating back to the Depression era—on the authority of banks to affiliate with insurance and securities companies. The new law will make it easier for banking organizations to become "financial supermarkets" that offer a wide range of products and services, in areas such as insurance, stocks and mutual funds.

  • Federal regulators will be required to adopt consumer protection rules governing bank sales of insurance. For example, these regulations must prohibit an institution from misleading a consumer that an insurance product bought at the bank is federally insured. (Only deposits at an insured bank are eligible for FDIC insurance.) Also, a bank will be required to disclose that it cannot condition the approval of a loan on the consumer's purchase of insurance from that bank or one of its affiliates.

  • All financial institutions (including banks, thrifts, credit unions, insurance companies and securities brokers) must describe their privacy policies to customers when accounts are opened and at least once a year thereafter. The new law addresses such issues as what the financial institution must tell the customer about how it may share "nonpublic" personal information with an affiliate or a third party. Also, with certain exceptions, financial institutions must give their customers the chance to "opt out" of the sharing of this kind of personal information with nonaffiliated third parties. Details about the types of customer information that can or cannot be shared, and related issues will be finalized in rules from financial regulators.

  • Automated teller machine (ATM) operators will be required to disclose clearly, at the machine, any user fees charged to non-customers and give them a chance to cancel a transaction before incurring a fee.

The new law also makes it a federal crime, punishable by up to five years in prison, for anyone to use fraud or deception to learn account numbers or other personal information from a financial institution. This provision of the law is aimed primarily at "pretext calling," or situations when someone uses a false identity to trick an institution or a customer into divulging personal information.

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Last Updated 12/03/1999 communications@fdic.gov