Summary:

The Federal Deposit Insurance Corporation (FDIC) finalized a rule to amend part 328 of its regulations to modernize the rules governing use of the official FDIC sign and insured depository institutions’ (IDIs’) advertising statements to reflect how depositors do business with IDIs today, including through digital and mobile channels. The final rule also clarifies the FDIC’s regulations regarding misrepresentations of deposit insurance coverage, which apply to any person, including IDIs and non–bank entities. The final rule addresses specific scenarios where consumers may be misled as to whether they are conducting business with an IDI and whether their funds are protected by federal deposit insurance. The final rule extends the certainty and confidence the FDIC official sign has consistently provided since the 1930s at traditional IDI branch teller windows to the evolving digital banking channels through which depositors increasingly handle their banking needs today.

Statement of Applicability: This Financial Institution Letter applies to all FDIC–insured depository institutions.

Highlights:

In recent years, the banking industry and practices have changed significantly, including continued evolution of bank branches in serving depositors, substantially increased reliance on internet and mobile banking channels to access banking products and services, and growth in financial technology (fintech) companies working with IDIs.

While these technological and market developments can benefit depositors and consumers, some developments may increase the potential for consumer confusion regarding FDIC deposit insurance coverage. The FDIC has observed an increase in misleading representations about deposit insurance on the internet and other digital channels, which can result in consumer confusion and harm. These types of misleading statements create uncertainty and could dilute and undermine the public confidence that underpins banks and our nation’s broader financial system.

The final rule is intended to enable consumers to better understand when they are conducting business with an IDI and when their funds are protected by the FDIC’s deposit insurance coverage.

For IDIs, the rule:

• modernizes the rules governing the display of the FDIC official sign in branches and extends the application of sign requirements to other physical premises where consumers have access to, or transact with, deposits (e.g., café–style locations);
• establishes and requires the display of the FDIC official digital sign on bank websites, mobile applications, and certain IDI automated teller machines (ATMs) and other like devices;
• requires the use of signs that differentiate insured deposits from non–deposit products across banking channels and disclosure that certain financial products are not insured by the FDIC, are not deposits, and may lose value; 
• requires a one–time per web session notification when a logged–in bank customer leaves the IDI’s digital deposit–taking channel, for example, through a hyperlink, to access non–deposit products on a non–bank third party’s website;
• provides IDIs with additional flexibility for satisfying official sign and advertising statement requirements; and
• requires IDIs to establish and maintain written policies and procedures addressing compliance with part 328, which must include, as appropriate, provisions related to monitoring and evaluating activities of certain third parties that provide services to IDIs or offer certain IDI products.

For any person, including IDIs or non–bank entities, the rule clarifies that:

• use of the FDIC’s official advertising statement or FDIC associated terms or images in a manner that inaccurately states or implies that a person other than an IDI is insured by the FDIC is a misrepresentation unless the advertising statement is next to the name of one or more IDIs;
• if a non–bank makes statements regarding deposit insurance for its customers, it is a material omission for the non–bank to fail to clearly and conspicuously disclose that it is not itself an FDIC–insured institution and that the FDIC’s deposit insurance coverage only protects against the failure of an FDIC–insured depository institution;
• if a person makes statements regarding deposit insurance in a context that where deposits and non–deposit products are both offered on a website in close proximity, it is a material omission to fail to disclose that non–deposit products: are not insured by the FDIC; are not deposits; and may lose value, subject to certain limited exceptions; and
• if a person makes statements regarding pass–through deposit insurance for its customers’ funds, it is a material omission to fail to clearly and conspicuously disclose that certain conditions must be satisfied for pass–through deposit insurance coverage to apply.

The amendments made by the final rule will take effect on April 1, 2024 with an extended compliance date of January 1, 2025.

Additional Related Topics:

• Third–Party Relationships