Washington – The Office of Financial Consumer Protection (CFPB) today published an implementing memorandum addressing prohibited practices in Federal Deposit Guarantee Corporation (FDIC) insurance claims. In particular, companies may not misuse the FDIC name or logo or make fraudulent statements about deposit insurance. The issue has gained new importance with the advent of financial technologies – such as crypto assets, including stablecoins – and the risks posed by consumers if they are attracted to these or other financial products or services through misrepresentation or false advertising.
“People know and trust the name and logo of the FDIC, and companies should not take advantage of that trust by making fraudulent statements about deposit insurance,” said CFPB Director Rohit Chopra. “Companies are undermining competition, undermining the credibility of the deposit guarantee system and threatening our hard-earned savings when engaging in counterfeit marketing or advertising.
The Consumer Financial Protection Act prohibits fraudulent acts and practices, including fraudulent representations, including the FDIC name or logo or deposit insurance, by covered companies. Deposit insurance has long been a means of fostering confidence in the banking system, and misrepresentation undermines consumer confidence and competition. The most common form of deposit insurance is administered by the FDIC. Currently, the FDIC insures deposits in FDIC-insured banks and savings associations up to $ 250,000 per depositor, a bank provided by the FDIC, for each category of account ownership.
IN Circular for financial protection of consumers published today provides guidance to law enforcement agencies that the companies covered are likely to violate the Financial Consumer Protection Act’s prohibition of fraud if they misuse the FDIC name or logo or engage in false advertising or make significant misconceptions to the public about insurance of deposits, whether or not such conduct (including misrepresentation of secured status) is committed knowingly. The Financial Consumer Protection Act is enforced by the CFPB, banking regulators and the United States.
In particular, on Circularly emphasizes that:
- Misrepresentation of the FDIC logo or name is usually a material misrepresentation. Significant misconceptions are fraudulent practices in violation of the Financial Consumer Protection Act. The representations made by covered companies to consumers about FDIC insurance will usually be substantial. Misuse of the FDIC name or logo or participation in false advertising or misrepresentation of consumers about deposit insurance, whether or not such conduct is intentional, is likely to be fraudulent.
- Misrepresentation or misuse of the FDIC name or logo harms customers and puts them at significant risk of unexpected losses. Clients may be at risk of loss if they find that their assets are not insured during financial difficulties. Due to their relatively recent entry into the consumer market, emerging financial products and services – such as digital assets, including crypto assets – can pose particularly acute risks to consumers. Allegations that financial products or services are “regulated” by the FDIC or “insured” or “eligible” for FDIC insurance are likely to be misleading if these claims explicitly or implicitly indicate that the product or service is insured by the FDIC when in fact it is not the case.
- Misuse of the FDIC name or logo is detrimental to honest companies. An undercover company that fraudulently advertises that its products or services are insured by the FDIC may persuade individuals to purchase that company’s products or services when individuals may have otherwise chosen similar products or services from one of the company’s competitors, engaged in honest advertising and marketing.
IN Circular for financial protection of consumers was issued in connection with the adoption by the FDIC of a regulation implementing a legal provision prohibiting any person or organization from engaging in counterfeit advertising or misusing the FDIC name or logo and making knowingly false claims about the degree or manner of insurance of FDIC deposits. The CFPB will exercise its powers to ensure that society is protected from the risks and harms that arise when companies fraudulently use the FDIC logo or name or make fraudulent misconceptions about deposit insurance, whether this misrepresentation is intentional.
Read the statement by CFPB Director Chopra, a member of the FDIC Board of Directors, about the final rule on false advertising, misrepresentation of insured status and misuse of the FDIC name or logo.
Read today Circular for financial protection of consumers, Fraudulent statements including the FDIC name or logo or deposit insurance.
Read the CFPB blog, CFPB has launched a new system to promote the consistent application of financial protection to consumersto learn more about Circulars for financial protection of consumers.
Consumers can lodge complaints about deposit products or other consumer financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
The Consumer Financial Protection Bureau is a 21st century agency that enforces and enforces federal financial legislation for consumers and ensures that markets for consumer financial products are fair, transparent and competitive. For more information visit consumerfinance.gov.