A proposed rule to provide “transparency” in the way the federal bank deposit insurer responds to the misuse of the agency’s name or logo, and false representations that a product is federally insured, was issued Wednesday on a notation vote of the insuring agency’s board.
The proposed rule by the Federal Deposit Insurance Corp. (FDIC) is out for comment for 60 days following its publication in the Federal Register, the agency said Thursday in a Financial Institution Letter (FIL).
The FDIC said it has observed an increasing number of instances where financial services providers or other entities or individuals have misused the FDIC’s name or logo or have made false or misleading representations that would suggest to the public that their products are FDIC-insured. It said its proposed rule would further clarify its procedures for identifying, investigating, and – where necessary – taking formal and informal action to address potential violations of Section 18(a)(4) of the Federal Deposit Insurance Act (FDIA).
Additionally, it said, the proposed rule would establish a point-of-contact for receiving complaints about potentially false or misleading representations regarding deposit insurance; and would direct depositors and prospective depositors to where they could obtain information or verification about deposit insurance claims.
The FDIC noted that while it has broad statutory authority in this area, it has never issued specific regulations regarding false representations related to FDIC insurance or the misuse of the FDIC’s name or logo. It also pointed out that it is not required to promulgate such rules. But it said it believes the proposal, if adopted, “would establish a more transparent process that will benefit all parties and would promote stability and confidence in FDIC deposit insurance and the nation’s financial system.”
Noting the request for information (RFI) issued earlier this month regarding the FDIC official sign and official advertising requirements, the agency said the RFI RFI focuses on soliciting information on the modernization of the FDIC’s advertising requirements applicable to insured depository institutions, and related topics, but it recognizes that responses to the RFI might be worth considering for a final rule.
“While questions related to misrepresentation and misuse have been removed from that document [the RFI], there remains a degree of overlap between the RFI and the proposed rule,” it said, “and responses to the RFI may provide information that is relevant to consideration of the proposed rule. For example, the RFI asks about how to deal with parties that may be fraudulently impersonating insured depository institutions, which necessarily overlaps with the proposed rule. Therefore, the FDIC will consider relevant comments submitted in response to the RFI, together with comments submitted in response to the proposed rule, in adopting the final rule.”