The FDIC Board is considering today a Final Rule to address false advertising, misrepresentation of insured status, and misuse of the FDIC’s name or logo.
Section 18(a)(4) of the Federal Deposit Insurance Act prohibits any person from engaging in false advertising by misusing the name or logo of the FDIC or from making knowing misrepresentations about the existence of or the extent or manner of deposit insurance.1 For insured depository institutions, enforcement rests initially with the bank’s primary federal regulator, and the FDIC has back-up enforcement authority. The FDIC also has enforcement authority for non-bank entities.2
In recent years, the FDIC has observed an increasing number of instances where firms or individuals have misused the FDIC’s name or logo, or have made false or misleading representations about deposit insurance. For example, the FDIC has seen a number of instances where scammers have made false or misleading assertions that their products offer the protections afforded by FDIC insurance. We have also seen circumstances where certain non-banks were making unsubstantiated claims about deposit insurance. These practices not only harm those who are targeted with the false promise of deposit insurance, but, if left unchecked, could also undermine confidence in the FDIC, FDIC-insured banks, and the U.S. banking system.3
Today’s final rule is an important step to protect consumers by providing transparency about how the FDIC will curb false or misleading advertisements about deposit insurance and misuse of the FDIC’s name and logo.
Historically, while the FDIC has routinely acted under the statute to protect consumers by limiting the use of the FDIC’s name, seal, and logo to insured depository institutions and preventing false and misleading representations about deposit insurance, the FDIC has never issued specific regulations addressing false representations related to deposit insurance or the misuse of the FDIC’s name or logo. The final rule provides clarity about the process by which the FDIC will identify and investigate conduct that may violate the statute, the standards under which such conduct will be evaluated, and the procedures which the FDIC will follow when taking formal and informal enforcement actions to address violations of the statute.
One important aspect of the final rule is the steps it takes to address situations in which non-bank entities make unsubstantiated claims about the availability of deposit insurance. In particular, the final rule requires non-banks to support those claims and identify the bank or banks with which they have existing business relationships and into which consumers’ deposits may be placed. This information can play a key role in enabling consumers, and the FDIC, to evaluate the accuracy of these claims about deposit insurance.
The final rule also creates a process by which institutions and members of the public can report suspected instances of false advertising, misuse, or misrepresentation regarding deposit insurance. Given the proliferation of these issues in recent years, it is vital that the FDIC utilizes all of the tools available to identify and address these situations.
In conclusion, the final rule is an important step to address growing misuse of the FDIC’s name or logo and false or misleading representations about deposit insurance. I believe this rule will protect not only consumers, but also FDIC-insured banks and the U.S. banking system, by better enabling the FDIC to prevent false or misleading statements and misuse of its name and logo in a manner that could undermine public trust and confidence.
I would further note that, while the rule adopted by the Board today is an important step, the FDIC is also considering revising and clarifying the agency’s official sign and advertising rules related to FDIC deposit insurance.4 The FDIC official sign and advertising rules were last significantly updated in 2006. In that time, it has become more challenging for consumers to know when they are dealing with an insured institution and that their money is safe in an insured product.
Last year, the FDIC issued a request for information on this subject. I expect that later this year the FDIC Board will consider a proposed rule to update the sign and advertising requirements to account for the changes in how insured institutions offer products and services to consumers, including through digital channels. Upon completion, I believe these complementary rulemakings will enhance consumers’ awareness of when they are doing business with an insured institution and when their money is insured.
I would like to thank the FDIC staff for their thoughtful work in bringing this final rule to the Board today. I am pleased to support this final rule.
1 12 USC. 1828(a)(4), available at https://www.fdic.gov/regulations/laws/rules/1000-2000.html#fdic1000sec.18a.
2 Id. Other federal and state agencies also may have authority to address misrepresentations of deposit insurance under various federal and state laws, and both the statute and the final rule recognize these other authorities. See 12 USC 1828(a)(4)(F) (providing that no provision of paragraph (4) “shall be construed as barring any action otherwise available, under the laws of the United States or any State, to any Federal or State agency or individual.”)
3 Deposit insurance is a fundamental component of the FDIC’s role in maintaining stability and public confidence in the U.S. financial system. When an insured depository institution fails, the FDIC ensures that the institution’s customers have timely access to their insured deposits. The basic limit of federal deposit insurance coverage is currently $250,000 per depositor. See https://www.fdic.gov/resources/deposit-insurance/index.html for more information on deposit insurance.
4 12 CFR Part 328, available at https://www.ecfr.gov/current/title-12/chapter-III/subchapter-B/part-328.