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Financial Institution Letter

Unfair or Deceptive Acts or Practices by State-Chartered Banks

TO: CHIEF EXECUTIVE OFFICER (also of interest to Compliance Officer) 
SUBJECT: Unfair or Deceptive Acts or Practices Under Section 5 of the Federal Trade Commission Act 
Summary: The FDIC and the Board of Governors of the Federal Reserve System are issuing guidance to state-chartered banks to outline the standards that the agencies will consider when applying the prohibitions against unfair or deceptive acts or practices found in section 5 of the Federal Trade Commission Act. The guidance also provides information about managing risks relating to unfair or deceptive acts or practices, including best practices. 

The Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve System are jointly issuing the attached guidance to state-chartered banks regarding unfair or deceptive acts or practices prohibited by section 5 of the Federal Trade Commission (FTC) Act.

In FIL-57-2002 , issued May 30, 2002, the FDIC informed state nonmember banks that these prohibitions apply to their activities, and that the FDIC would issue guidance about how institutions could avoid engaging in practices that might be viewed as unfair or deceptive. In its corresponding release, the Federal Reserve Board indicated that it would work with the FDIC to prepare additional guidance for state member banks on this subject. The attached guidance fulfills these commitments.

Specifically, the guidance explains:

  • the standards used to assess whether an act or practice is unfair or deceptive; 
  • the interplay between the FTC Act and other consumer protection statutes; and 
  • guidelines for managing risks related to unfair and deceptive practices. 

Although most insured banks adhere to high levels of professional conduct, managers of all banks must remain vigilant against possible unfair or deceptive acts or practices to protect consumers and to minimize their own risk.

For more information about the guidance, please contact April P. Breslaw, Section Chief (202- 898-6609); Deirdre Foley, Senior Policy Analyst (202-898-6612); or Mira N. Marshall, Senior Policy Analyst (202-898-3912), in the Division of Supervision and Consumer Protection.

For your reference, FDIC Financial Institution Letters (FILs) may be accessed from the FDIC’s Web site at www.fdic.gov/news/financial-institution-letters/2004/index.html.

Michael J. Zamorski

Director

Division of Supervision and Consumer Protection

Distribution

FDIC-Supervised Banks (Commercial and Savings)

Note

Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center , 801 17 th Street, NW , Room 100, Washington , DC 20434 (1-877-275-3342 or (703) 562-2200).

FIL-26-2004
Attachments
Last Updated: March 11, 2004