On December 13, 2022, the FDIC issued a request for touch upon a proposal to modernize the laws governing use of the FDIC’s official signage and promoting of FDIC-insured standing by insured depository establishments (IDIs), and to make clear laws issued earlier in 2022 concerning misrepresentations of deposit insurance coverage protection. The proposed rule was printed within the Federal Register on December 21, 2022 and feedback are due no later than February 21, 2023.
The proposed rule is the FDIC’s newest pronouncement on subjects the company has centered on repeatedly in latest months: use and misuse of the FDIC title, brand and official signage, and misrepresentation of insured standing. A last rule issued by the FDIC on Could 17, 2022 expanded the scope of the beforehand present official signage and promoting guidelines by including extra element about prohibitions in opposition to participating in false promoting or making misrepresentations about deposit insurance coverage. (Click on right here to take heed to our podcast episode in regards to the last rule.) The CFPB chimed in at the moment to assist the FDIC rule, asserting that such misrepresentations would violate the CFPA’s prohibition on misleading conduct. Shortly after issuing that last rule, the FDIC rapidly adopted with advisory steerage to IDIs, and started pursuing investigations and enforcement actions in opposition to various fintechs in reference to alleged misrepresentations about insured standing, particularly fintechs providing crypto-related merchandise.
The FDIC’s acknowledged coverage aims to be achieved by the rule now being proposed embody bringing “the understanding and confidence traditionally offered by the FDIC signal at conventional IDI department teller home windows to the various and evolving digital channels via which depositors are more and more dealing with their banking wants immediately.” The company proposes to perform this by means together with signage necessities that will apply to all banking channels, would extra clearly distinguish between insured deposits and non-deposit merchandise, and would higher distinguish IDIs from non-bank fintechs that supply choices for accessing banking services. The proposed rule additional would amend the FDIC’s latest regulation addressing misrepresentations of deposit insurance coverage protection: “Specifically, the FDIC is anxious that sure enterprise relationships between IDIs and non-banks could also be complicated to customers, and proposes to require clear disclosures that will higher inform customers as to when their funds are protected by FDIC deposit insurance coverage.”
The proposed rule features a full rewrite of Subpart A of 12 CFR Half 328, with intensive adjustments, and materials adjustments to Subpart B. The regulation would proceed to require FDIC signage at bodily financial institution premises, with sure adjustments to the present necessities a few of that are meant so as to add a degree of flexibility, corresponding to by allowing use of digital indicators topic to sure limitations. New necessities for banks added by the proposed rule would mandate show of a digital FDIC signal on banks’ digital deposit-taking channels, corresponding to on-line banking web sites and cell purposes, show of FDIC signage on ATM screens, and use of a “non-deposit signal” to make clear when a non-insured product is obtainable on the identical banking location or via the identical banking channel as an insured deposit.
The FDIC is also proposing restricted adjustments to its official promoting assertion necessities, including an possibility for a shortened assertion.
The proposed laws embody extra element about what the company would contemplate misuse of FDIC-associated phrases and pictures by non-banks: “For instance, a non-bank’s use of the ‘Member FDIC’ brand on its web site or in its advertising and marketing supplies could be a misrepresentation except that brand is subsequent to the title of a number of IDIs.” The proposal additionally warns in opposition to practices that will represent a fabric omission prohibited by the regulation, corresponding to failure to reveal that an individual is a non-bank when an announcement is made concerning deposit insurance coverage, and failure to state that non-deposit merchandise aren’t insured by the FDIC when an announcement is made concerning deposit insurance coverage.
Reflecting the company’s ongoing considerations about crypto-related merchandise, the proposed rule would explicitly embody crypto-assets within the regulation’s definition of “non-deposit product.”
CFPB Director Rohit Chopra, a member of the FDIC Board of Administrators, issued an announcement in assist of the proposed rule, noting that as a consequence of vital evolution within the monetary sector together with on-line and cell banking, elevated choices of uninsured monetary merchandise, and “convoluted” bank-nonbank partnerships, this replace to the laws is lengthy overdue.
We encourage banks, fintechs, and business commerce teams to fastidiously assessment this proposal and take the chance to offer considerate enter to the FDIC, together with with regard to the operational burdens and prices (preliminary and ongoing) which may be imposed by the proposed rule if adopted, and what is likely to be an inexpensive date by which compliance could be obligatory.
