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FDIC Consumer News

Fall 2015

Dear FDIC: More Answers to Consumer Questions About Deposit Insurance

How can I be sure that deposits I send to an Internet bank are FDIC–insured?

Some FDIC-insured banks take deposits over the Internet, rather than through physical bank branches. Deposits placed over the Internet with an FDIC-insured bank are protected the same as deposits at a traditional bank. However, financial institutions on the Internet may not be insured by the FDIC. In addition, there have been incidents of con artists setting up websites that look like those of legitimate banks to trick consumers into divulging personal financial information or sending them funds.

If you are not familiar with an online bank, you'll want to confirm the correct URL for the institution's website, so you know that you are working with a FDIC-insured depository institution. Also, note that a bank can have one name that it uses for its traditional operations and a different name — often called a "trade name" — that it uses for marketing on the Internet. "It is important to determine the official name of the bank operating online to confirm both that it is FDIC-insured and to make sure you are not exceeding the deposit insurance limit by opening accounts at the bank's branches and then unknowingly opening accounts through the same bank's online site," explained Calvin Troup, an FDIC Senior Consumer Affairs Specialist.

For example, a depositor who is unsure about the true identity of a bank soliciting business on the Internet could inadvertently exceed the deposit insurance limit by, say, having a $150,000 single-owner CD at an Internet bank without realizing that it's a division of a bank where the depositor already has a single-owner deposit of $175,000. In that case, the funds would be combined and the $325,000 on deposit would exceed the FDIC's $250,000 deposit insurance limit by $75,000.

To verify that a particular website and/or trade name is affiliated with an FDIC-insured bank, you can call the FDIC and ask to speak to a Deposit Insurance Specialist.

I read in the newspaper that a local broker was advertising FDIC-insured certificates of deposit (CDs). Are you insuring brokers now, too?

The FDIC does not insure individual brokers or brokerage firms. However, an investment being offered by a broker may be FDIC–insured if the funds are placed in a deposit account at an FDIC–insured institution (and certain deposit insurance requirements are met). Your first question to the broker should be, "What is the name of the institution where my funds will be placed?" You then can verify that the institution is FDIC-insured, and the two fastest ways to do that are to check BankFind, the FDIC's online database, or call the FDIC and ask to speak to a Deposit Insurance Specialist.

You should also make sure you understand what kind of investment the broker is making on your behalf and ask about any potential risks. In addition, you may want to check whether complaints have been filed against that broker before you send them money. One way to check is through the Financial Industry Regulatory Authority (FINRA) website (for "registered" broker/dealers) or through your state government agency that regulates businesses (if it requires brokers to register to do business there). FINRA also has a toll-free number (1-844-574-3577) that investors can call for assistance or to raise concerns about issues with brokerage accounts and investments.

If you currently have deposits at that institution, make sure the new CD would not affect your insurance coverage if the total exceeds $250,000.

You can learn more about FDIC deposit insurance coverage by calling us at 1-877-ASK FDIC (1-877-275-3342) or visiting our website. For the hearing–impaired, please call 1-800-925-4618.