On November 9, 2010, the FDIC Board of Directors issued a final rule to implement section 343
of the Dodd-Frank Act. This separate coverage for noninterest-bearing transaction accounts
becomes effective on December 31, 2010, and terminates on December 31, 2012. Beginning
January 1, 2013, such accounts will be insured under the FDIC’s general deposit insurance
coverage rules.
The Dodd-Frank Act provision is similar to the FDIC’s TAGP, which expires on December 31,
2010. However, as emphasized in the final rule, it differs significantly from the TAGP in
defining a “noninterest-bearing transaction account.” The Dodd-Frank Act provides unlimited
insurance coverage only for traditional noninterest-bearing transaction accounts. Thus, unlike the
TAGP, the Dodd-Frank Act provision does not include within the definition of a noninterestbearing
transaction account either low-interest NOW accounts or IOLTAs. It is important that
IDI personnel and depositors understand this difference.
The Final Rule
The final rule revises the Corporation’s deposit insurance regulations to include noninterestbearing
transaction accounts as a new temporary deposit insurance account category. The final
rule explains that all funds held in noninterest-bearing transaction accounts are fully insured,
without limit, and that this unlimited coverage is separate from, and in addition to, the coverage
provided to depositors with respect to other accounts held at an IDI.
The final rule follows the definition of a noninterest-bearing transaction account in the Dodd-
Frank Act, which does not include any interest-bearing accounts. The Dodd-Frank Act definition
of noninterest-bearing transaction accounts encompasses only traditional, noninterest-bearing
demand deposit (or checking) accounts that allow for an unlimited number of transfers and
withdrawals at any time, whether held by a business, an individual or other type of depositor.
The final rule expressly states that low-interest NOW accounts and IOLTAs, which are covered
under the TAGP, are not covered under the Dodd-Frank Act definition of noninterest-bearing
transaction accounts and, thus, do not qualify for temporary unlimited coverage under this final
rule.
Specifically, a noninterest-bearing transaction account is a deposit account in which (1) interest
is neither accrued nor paid, (2) depositors are permitted to make an unlimited number of transfers
and withdrawals, and (3) the insured depository institution does not reserve the right to require
advance notice of an intended withdrawal. A deposit account that earns no interest does not
necessarily qualify as a noninterest-bearing transaction account. Money Market Deposit
Accounts and NOW accounts are not eligible for this unlimited coverage, regardless of the
interest rate.
Notice Requirements (December 31, 2010, implementation date)
The final rule imposes three notice and disclosure requirements to ensure that IDIs and
depositors are aware of and understand the types of accounts that will be covered by this
temporary deposit insurance coverage for noninterest-bearing transaction accounts. As explained
in detail in the attached Federal Register notice: (1) IDIs must post a prescribed notice in their
main office, each branch and, if applicable, on their Web site; (2) IDIs currently participating in
the TAGP must notify NOW account depositors and IOLTA depositors (currently protected
under the TAGP) that, beginning January 1, 2011, those accounts no longer will be eligible for
unlimited protection; and (3) IDIs must notify customers of any action they take that would
affect the deposit insurance coverage of funds held in noninterest-bearing transaction accounts.
