FDIC suggests steps for consumers when placing deposits at FDIC-insured banks through an agent - April 7, 2010
Today, consumers can purchase FDIC-insured deposit products, including checking, savings and certificate of deposit (CD) accounts, through a host of companies and organizations that advertise in newspapers and on the Internet. These entities include financial companies and consumer membership organizations (for example, affinity groups, consumer groups, unions, professional groups, alumni associations and recreational clubs). These entities act as agents (or endorse agents) that place deposits at FDIC-insured banks on consumers' behalf.
When you purchase a deposit product through an agent, you are relying on that agent to tell you all the important things you need to know about your account. For example, the agent should tell you what will happen to your money, the terms and conditions that apply, and whether your funds are eligible for FDIC insurance coverage. Before entrusting an agent with your money, the FDIC recommends that you get answers to the questions listed below. You should be able to get answers to these questions from the account documentation provided to you, such as the deposit agreement or periodic statements you receive, or by contacting your agent.
Questions to Help You Make an Informed Decision
- Will your funds be deposited in an FDIC-insured bank? Your funds will be insured by the FDIC only if the agent places your funds at an FDIC-insured bank. The agent should be able to provide you with the name of the bank (or banks) where your money will be deposited. After obtaining the bank name from the agent, you can verify the insured status of the bank by using the FDIC's Bank Find at www2.fdic.gov/idasp/main_bankfind.asp or calling the FDIC at 1-877-275-3342.
If the agent is unable to identify the bank, or if the statements and other materials from the agent are inconsistent as to the identity of the bank, you might not wish to entrust the agent with your money. Also, if you already maintain a deposit account at the same bank, be aware that the FDIC will add together both accounts (the account opened by the agent and the account opened by you) in applying the current $250,000 insurance limit in the event of the bank's failure.
- Will your funds be placed in an insured deposit product? The FDIC only insures deposit products, such as checking accounts, savings accounts, money market deposit accounts and CDs. The FDIC does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if you purchased these investments at an FDIC-insured bank.
- Will the interest rate and maturity date promised by the agent match the interest rate and maturity date offered by the bank? The agent may promise that your funds will earn interest at a particular interest rate. Further, in the case of a CD, the agent may promise that your investment will mature on a particular date. You should ask the agent whether the promised interest rate and maturity date will match the interest rate and maturity date offered by the FDIC-insured bank. If these terms do not match, it may indicate that your funds will not be placed on deposit at an FDIC-insured bank and may not be eligible for FDIC insurance coverage.
You also may want to ask your agent whether the FDIC's requirements for titling of deposit accounts placed by agents will be met. If the account is titled in the name of the agent, and not in your name, the deposit will not be insured to you unless the agent satisfies the FDIC's requirements for "pass-through" insurance coverage (that is, coverage that "passes through" an agent or custodian to the actual owner(s) of the funds). Deposits placed by an agent at an FDIC-insured bank can be insured as the consumer's funds if (1) the bank's records indicate that the deposit account is held by the agent on behalf of others (for example, the account is titled "XYZ Broker for Clients"), (2) the records maintained by either the bank or the agent identify the actual owner or owners of the funds, and (3) the funds actually are owned by the agent's principals or customers, and not by the agent itself. Your agent should be aware of these requirements.
Consumers are encouraged to review all account documentation carefully. Information in your account agreement should clearly outline the terms and conditions that apply to the account, and should be consistent with the information reflected in periodic account statements. If you have any questions about these materials, contact the agent for clarification and assistance.
For additional information about FDIC deposit insurance coverage, go to www.fdic.gov/deposit/deposits or call 1-877-275-3342 to talk to an FDIC Deposit Insurance Specialist. Also, see Certificate of Deposit: Tips for Savers at www.fdic.gov/deposit/deposits/certificate.