The FDIC has a significant consumer protection
responsibility. The agency enforces compliance with consumer protection laws, including
the Community Reinvestment Act (CRA) and fair lending laws. It also educates insured
depository institutions and consumers in areas such as fair lending, community
reinvestment and deposit insurance. The FDICs Division of Compliance and Consumer
Affairs (DCA) primarily carries out the Corporations consumer protection activities,
with support from other divisions and offices.
The FDIC continued working with the other federal banking agencies, financial
institutions and community organizations to better implement the CRA regulations. The CRA
is a law that encourages FDIC-insured lenders to help meet their communities credit
One option for CRA compliancethe "strategic plan"offers banks
both flexibility and certainty, regardless of their asset size or product mix. The plan
allows an institution to tailor its CRA goals and objectives to address its
communitys needs, consistent with the institutions business strategy,
operational focus, capacity and constraints. Once an institution has proposed specific
goals, the FDIC will work with the institution to determine the goals
appropriateness and reasonableness. If the goals meet the criteria for either a
satisfactory or outstanding rating, the FDIC will approve the goals and the institution
will know its CRA performance rating provided it achieves those goals.
The FDIC's Guidelines for Strategic Plan Submissions, issued in March 1998,
presents existing FDIC policy guidance in a more user-friendly format. Since the CRA
strategic plan became an alternative CRA assessment method in January 1996, relatively few
banks have exercised the option. This publication encourages institutions to consider the
strategic plan method by providing "how-to" guidance for developing a workable
strategic plan. It also includes references to help with data-gathering and analysis over
Also during 1998, the FDIC, the Office of the Comptroller of the Currency, and the
Federal Reserve Board initiated a three-part project to promote consistency in the CRA
examination process for "large" banks. The project included eight joint
interagency examinations, a review of sample CRA performance evaluations from each agency,
and an interagency-sponsored CRA forum in October to address ways for improving
examination consistency. The agencies will review the project results and consider
recommendations for developing more consistent application of CRA examination procedures.
Kate Spears of the Division of Compliance
and Consumer Affairs (DCA) discusses deposit insurance with bank employees during one
of the many educational outreach seminars conducted by DCA around the country.
DCA examines FDIC-supervised banks for compliance with consumer protection, fair
lending, and community reinvestment laws and regulations. During 1998, the FDIC initiated
1,989 examinations. At year-end, 96 percent of FDIC-supervised banks were rated
satisfactory or outstanding for compliance with consumer protection and fair lending laws,
while 99 percent were rated satisfactory or outstanding for compliance with the CRA. These
percentages were fairly similar to 1997 levels.
During 1998, a total of 161 FDIC-supervised banks were required to reimburse over $1
million to 31,222 consumers for violations of the Truth in Lending Act, which requires
accurate disclosures of interest rates and finance charges. The reimbursements ordered in
1998 stem from compliance examinations conducted in 1998 and in previous years.
To improve risk management, DCA increased the focus of the examination process on areas
of highest risk to the public, financial institutions and the FDIC. This
"scoping" policy ensures an on-site presence in all FDIC-supervised institutions
every three years.
Another risk-management effort is relying more on an institutions internal and
external audit programs, which promote self-regulation. For example, under the Community
Reinvestment Act, institutions are not required to perform any internal assessment of
their CRA performance. However, if in the normal course of business, an institution
conducted an analysis of its lending, service or investment activity, assessment area,
community development lending, or other activities reviewed for CRA purposes, an examiner
might request that information to review and use for the CRA examination. This would, in
effect, reduce or limit CRA examination procedures.
Also, new interagency procedures were issued in August 1998 to assist compliance
examiners when reviewing an interstate branch that has been operating for more than one
year. Section 109 of the Reigle-Neal Interstate Banking and Branching Efficiency Act of
1994 prohibits banks from establishing or acquiring interstate branches primarily for
To ensure quality and efficiency in the FDICs fair lending examination program,
the Corporation in 1998 helped create interagency fair lending examination procedures and
conducted new training and development programs for its compliance examiners.
The goal of the new fair lending examination procedures was to give examiners guidance
in taking an efficient risk-based approach to examining for compliance with the Fair
Housing Act and the Equal Credit Opportunity Act. The procedures also are a blueprint for
financial institutions wishing to conduct a thorough self-assessment.
Two new training and development programs were created for compliance examiners in
1998. One gave examiners practical knowledge of existing fair lending examination
methodologies, familiarized them with the new interagency fair lending examination
procedures and identified emerging issues. The other program sharpened senior compliance
examiners fair lending expertise.
Financial institutions are continuing to use the Internet as an alternative delivery
channel for offering an increasing number of consumer products and services online, such
as deposit account applications, bill payment, and funds transfers. At year-end 1998, more
than 950 FDIC-supervised institutions operated on the Internet. Over 200 were
"transactional" sites that provided customers the ability to pay bills, transfer
funds and open accountsan increase of 500 percent over 1997. The FDIC responded to
emerging electronic banking issues in areas such as consumer protection and fair lending
laws and regulations, consumer privacy concerns, and bank fraud on the Internet.
The FDIC and other members of the Federal Financial Institutions Examination Council
issued interagency guidance on the applicability of federal consumer protection and fair
lending laws and regulations. The same guidance stressed the importance of a compliance
review of electronic banking operations. During 1998, DCA also trained its compliance
examiners nationwide on electronic banking systems, risks, and compliance examination
Changes in the financial services industry, such as industry consolidation, new
business affiliations with brokerage and insurance firms, and increasing use of
technology, have renewed consumers concern about the privacy of personal
information. Of particular concern to the public is financial institutions
participation in the rapid growth of electronic commerce online, primarily over the
Internet. In 1998, the FDIC issued guidance to financial institutions to raise awareness
about consumer privacy concerns. Institutions were encouraged to take voluntary actions to
provide consumers with privacy protections in the online environment. The FDIC also issued
information. That policy statement has been posted on the FDICs Web site.
During 1998, the FDIC launched a "Suspicious Internet Banking" Web site,
allowing the public to check whether an online institution is chartered by a legitimate
regulatory authority and insured by the FDIC before transacting business with it. The site
also allows the public to report any Internet banking sites they believe may be
The FDIC offers a wide range of information and assistance to thousands of consumers
and depository institution employees each year in areas ranging from federal deposit
insurance to banking industry practices. DCA coordinates the agencys efforts to
educate consumers and bankers on these important topics.
Since 1980, the FDICs primary means of disseminating information to the public
and banking community has been its toll-free Consumer Affairs Call Center (1-800-934-3342
or 1-800-925-4618 for the hearing impaired). Beginning in 1997, the FDIC increased public
awareness of its Call Center and, as a result, the Call Center received more than 90,000
calls from consumers and bankers in 1998, approximately 30 percent more than in 1997. DCA
regional offices received another 13,500 calls from consumers and bankers during the year.
DCA also received 2,300 written inquiries from consumers and 267 written inquiries from
bankers in 1998, over one-third more than in 1997. The increase is attributed primarily to
the success of DCAs efforts to raise public awareness of the FDICs educational
services. Another 2,399 inquiries were referred to other state and federal agencies.
To make it faster and easier for consumers and depository institution employees to
obtain information from the FDIC, consumers and bankers can send questions and requests to
the agency electronically at firstname.lastname@example.org and
receive a quick response via electronic mail. More than 1,000 of the inquiries received
were submitted by electronic mail to the FDICs "consumer mailbox" in 1998,
compared to 555 in 1997 and 120 in 1996.
Most consumer inquiries received by DCAwhether by telephone, electronic mail or
traditional mailinvolved requests to verify whether specific financial institutions
are insured by the FDIC or questions about FDIC deposit insurance coverage. Other common
inquiries were requests for copies of FDIC consumer publications, questions about banking
practices and consumers rights under federal consumer protection laws, and requests
for guidance on filing a consumer complaint against a financial institution. Most
inquiries from financial institutions concerned the deposit insurance rules, requests for
FDIC publications and consumer brochures, and questions about regulatory matters,
including requests for guidance on the fair lending, community reinvestment, and consumer
The FDIC develops educational tools designed to promote consumer and banker
understanding of federal deposit insurance, banking, and federal consumer protection laws.
An example is the recently developed Electronic Deposit Insurance Estimator, known as
"EDIE." EDIE is a user-friendly Internet application that consumers and bankers
can use to calculate the amount of insurance coverage for deposit accounts at FDIC-insured
financial institutions. EDIE can be found on the FDICs Web site at www.fdic.gov/edie.
The FDIC also initiated a public awareness campaign regarding the Year 2000 challenge.
During 1998, the FDIC published a brochure and a "statement stuffer" to help
bankers educate their customers about the Year 2000 computer issue and what is being done
to assure that the banking industry is ready for the new millennium. The FDIC also devoted
an entire issue of its quarterly FDIC Consumer News to the Year 2000. More
information on these and other efforts to educate consumers and bankers on Y2K can be
found on (click here).
The FDIC investigates complaints it receives from consumers about FDIC-supervised
financial institutions. It also tracks the volume and nature of these complaints to
monitor trends and identify emerging issues that may raise consumer protection concerns.
In 1998, the FDIC received almost 3,900 written consumer complaints against
state-chartered nonmember banks. Nearly two-thirds of these complaints concerned consumer
credit card accounts issued by FDIC-supervised credit card banks. The most common
complaints about credit card banks in 1998 involved billing disputes and account errors,
disclosure of reasons for denying credit requests, misdirected credit card applications,
reporting consumers credit history, and credit card fees and service charges.
To improve consumer awareness and understanding of credit card issues, DCA:
Centralized credit card complaints and inquiries to ensure greater consistency
in its responses, and stepped up analysis and monitoring of specific issues.
Prepared a brochure that describes what consumers need to know when applying for
credit cards. This brochure will be used at outreach events, mailed to major consumer
organizations and placed on the FDICs Web site.
Included articles about emerging credit card issues in FDIC Consumer News.
The FDIC frequently meets with community and consumer groups, financial institution
representatives and government officials to exchange views or provide information about
community reinvestment, community and economic development, and fair lending issues. In
1998, the FDICs Community Affairs Program sponsored or participated in over 200 such
events across the country. The activities were primarily of two typesthose focusing
on educating and those fostering partnerships between financial institutions and
community-based organizations to promote community and economic development in low- and
The educational activities focused largely on encouraging insured depository
institutions understanding of and compliance with CRA. They often were conducted
in cooperation with state banking associations.
The FDIC also held several meetings and conferences to promote CRA compliance. Their
size and purpose ranged from small meetings on the bank examination process with
community-based organizations to co-sponsoring conferences in Miami and Las Vegas attended
by more than 250 financial institutions, real estate developers, community-based
organizations and others involved in community development. The FDIC reached more than
6,000 financial institution representatives through these initiatives.
The Corporation also made major strides in fostering ongoing communication between
banks and community organizations. These efforts are expected to result in new
partnerships, strengthen existing alliances, increase lending activities, improve lending
performance or develop strategies to help meet identified credit needs. For the first
time, the FDIC co-sponsored a national conference that focused on community and economic
development. The theme of the conference co-sponsored with the American Bankers
Association was "Revitalization and Development: Joining Forces for Healthy
Communities." Attended by more than 250 financial institution representatives,
community based-organizations and government representatives, the conference confirmed the
FDICs strong commitment to helping the financial institutions it supervises further
Two other 1998 events demonstrate the success of the FDICs partnership-building
efforts and show the FDICs commitment to using a variety of techniques to address
the needs of the communities of FDIC-supervised institutions. One event was a regional
conference in Chattanooga, TN, which the FDIC co-sponsored with the Appalachian Regional
Commission. The conference was designed to bring attention to the needs of the communities
located within the Appalachian Region. Cooperating in the effort were the Tennessee Valley
Authority, the Small Business Administration, the Department of Agriculture, and various
development districts and government officials throughout the region. The second event was
a hands-on effort to form a "micro-loan" program for small businesses in the
Greater Humboldt Park area of Chicago, IL. A micro-loan pool involving eight financial
institutions and an intermediary to serve small businesses was established in this
predominantly low-income Hispanic community.