Statement from CFPB Director Rohit Chopra, Final Rule Regarding False Advertising, Misrepresentation of Insured Status, Misuse of FDIC Name or Logo

WASHINGTON, May 18 (TNStalk) — The Consumer Financial Protection Bureau issued the following statement on May 17, 2022by the director Rohit Chopra:

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the Federal Deposit Insurance Corporation (FDIC) Board of Directors Votes Final Rule to Implement Procedures Regarding Federal Deposit Insurance Act prohibition of misleading advertising through the misuse of the name or logo of the FDIC or make false statements about deposit insurance coverage./1

I am voting in favor of the final rule aimed at strengthening the FDIC ability to identify and investigate potential violations of the prohibition, take enforcement action against such violations, and protect the overall integrity of the federal deposit insurance framework.

Along with our vote today, the Consumer Financial Protection Bureau (CFPB) also publishes guidelines for consumer protection officials outlining how misrepresentations about deposit insurance, even those who don’t “know” about it, can violate consumer financial protection law.

Federal deposit insurance, administered by the FDIC, has inspired confidence in our country’s banking system for nearly 90 years./2 Depositors have peace of mind that their insured funds are safe and secure, even if their bank were to face financial difficulties. Public confidence in federal deposit insurance and the FDICfostered a stable banking system by reducing the risk of destructive bank runs./3 FDIC insurance is a privilege and insured institutions that repeatedly break the law or otherwise engage in unsafe and unsound practices may have their eligibility for FDIC insurance terminated by the Régie./4

Some market participants may seek to illegally take advantage of the trust placed in FDIC-insured products and services by luring individuals and businesses through misleading advertisements and misrepresentations about federal deposit insurance. Those attracted may lose money unexpectedly when they discover that their assets are not federally insured during times of financial hardship. Honest banks and companies that trade honestly FDIC-insured accounts are at a competitive disadvantage when competitors use deceptive advertising and marketing. The spread of pernicious and illegal marketing can undermine confidence in the integrity of our nation’s deposit insurance framework.

In 2008, Congress amended the Federal Deposit Insurance Act to prohibit anyone from misleading advertising by misusing the name or logo of the FDIC or make false statements about the existence of deposit insurance./5 The law provides for the FDIC power to investigate and take administrative enforcement action against anyone who violates the ban. While the FDIC enforced this ban, it never enacted specific rules.

The settlement the FDIC Board is voting on today provides procedures for identifying and investigating such conduct as well as formally and informally enforcing the ban. The settlement also provides standards for assessing potential violations, establishes a point of contact to receive complaints about potential violations, and directs consumers to where they can obtain information or verification on insurance coverage applications. -deposits./6

Deposit insurance misrepresentation claims are particularly relevant today. FDIC staff noted an increase in potential violations in recent years. We are particularly concerned about potential misconduct involving new technologies, including so-called stablecoins and other crypto-assets. While new technologies can bring significant benefits to households, workers and small businesses, they nevertheless pose risks to consumers who can be lured by misrepresentations or false advertisements about deposit insurance.

It is important to note that while today’s rules expressly reiterate the FDIC authority under section 18(a)(4) of the Federal Deposit Insurance Act, it does not prohibit any other action authorized by law or regulation by the FDIC or any other agency./7

the CFPB has a number of responsibilities to protect the marketplace from consumer abuse and unfair competition in deposit accounts, including rules regarding institutions offering uninsured deposit accounts and disclosure to depositors of their accounts./ 8

the CFPB supports the FDIC efforts to eradicate misrepresentation by issuing a circular on consumer financial protection. The Circular states that covered persons or service providers subject to the Consumer Financial Protection Act are likely to violate the law’s prohibition against deception if they misuse the name or logo of the FDIC or falsely advertise or make false statements to consumers about deposit insurance./9

The Consumer Financial Protection Circular notes that such conduct may violate the Consumer Financial Protection Act, whether knowingly or unknowingly (including misrepresentation of insured status). For example, the Circular states that claims that financial products or services are “regulated” by the FDIC or “insured” or “eligible for” FDIC insurance are misleading if such claims expressly or by implication state that the product or service is FDIC-insured when this is not the case.

Our federal deposit insurance framework protects the hard-earned money of individuals, families and small businesses. It also underpins the stability of the country’s banking system. Today’s actions by the CFPB and FDIC clarify and improve agency powers to ensure the integrity of the federal deposit insurance framework is preserved and protected.

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Footnotes :

1/ Section 18(a)(4) of the Federal Deposit Insurance Act; 12 U.S.C. 1828(a)(4). https://www.fdic.gov/regulations/laws/rules/1000-2000.html#:~:text=1000%20%2D%20Federal%20Deposit%20Insurance%20Act&text=(A)%20IN%20GENERAL., be%20prescribed%20by%20the%20society.

2/ “A brief history of deposit insurance in United States.” Federal Deposit Insurance Corporation. September 1998. https://www.fdic.gov/bank/historical/brief/brhist.pdf.

3/ Douglas W. Diamond and Philip H. Dybvig. “Bank run, deposit insuranceand Liquidity.” Journal of Political Economy, flight. 91, No. 3. june 1983. https://www.jstor.org/stable/1837095?seq=2.

4/12 USC 1818(a).

5/ Section 126(a) of the Emergency Economic Stabilization Act 2008. https://www.congress.gov/110/plaws/publ343/PLAW-110publ343.pdf .

6/ For example, non-bank entities that place a customer’s deposits in an insured depository institution (IDI) must identify the IDIs in which the funds can be placed. The non-bank institution must have existing direct or indirect relations with these IDIs. This will allow clients to verify claims regarding the insured status of their funds. The final rule allows nonbank entities that place deposits through a depository network to provide customers with a hyperlink to a current list of network IDIs.

7/ Section 328.109 has been added to the Final Rule and states: “Nothing in this Subpart shall be construed to bar any action otherwise available, under the laws or regulations of United States or any state, to any federal or state agency or person. »

8/ See for example 12 USC 1831t.

9/ “Circular on the financial protection of consumers 2022-02: Misleading representations involving the FDIC name or logo or deposit insurance.” Consumer Financial Protection Bureau. May 2022.

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