CFPB takes steps to protect depositors from false claims about FDIC insurance

washington dc – The Consumer Financial Protection Bureau (CFPB) today issued an enforcement memorandum addressing prohibited claims practices under Federal Deposit Insurance Corporation (FDIC) insurance. Specifically, companies may not misuse the FDIC’s name or logo or make misleading representations about deposit insurance. The issue has taken on renewed importance with the emergence of financial technologies such as crypto-assets, including stablecoins, and the risks it poses to consumers if they are lured into these or other financial products or services by false claims or false advertising .

“People know and trust the FDIC name and logo, and businesses should not take advantage of that trust by making misleading representations about deposit insurance,” said CFPB Director Rohit Chopra. “Companies undermine competition, erode trust in the deposit insurance system and threaten our hard-earned savings when they engage in false marketing or advertising.”

The Consumer Financial Protection Act prohibits deceptive acts and practices, including misleading representations involving the name or logo of the FDIC or deposit insurance, by covered companies. Deposit insurance has long been a means of promoting confidence in the banking system, and misrepresenting these protections undermines consumer confidence and market 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, per FDIC-insured bank, for each category of account ownership.

The Consumer financial protection circular issued today provides guidance to consumer protection officials that covered firms are likely to violate the Consumer Financial Protection Act’s prohibition on deception if they misuse the FDIC’s name or logo or make false advertising or make material misrepresentations to the public about deposit insurance, regardless of whether such conduct (including misrepresentation of insured status) is done knowingly. The CFPB, banking regulators, and states enforce the Consumer Financial Protection Act.

Specifically, the circular highlights that:

  • Misrepresenting the FDIC’s logo or name will usually be a material misrepresentation. Material misrepresentations are deceptive practices that violate the Consumer Financial Protection Act. Representations made by covered companies to consumers about FDIC insurance are often material. Misusing the FDIC’s name or logo or engaging in false advertising or making misrepresentations to consumers about deposit insurance, regardless of whether such conduct is done knowingly, is likely to be deceptive
  • Misrepresentation or misuse of the FDIC’s name or logo harms customers and puts them at significant risk of unexpected losses. Customers may be at risk of loss if they discover their assets are uninsured during a time of financial difficulty. Due to their relatively recent entry into the consumer market, emerging financial products and services such as digital assets, including cryptoassets, may present particularly serious risks to consumers. Claims that financial products or services are “regulated” by the FDIC or “insured” or “eligible for” FDIC insurance are likely to be misleading if such claims expressly or impliedly indicate that the product or service is insured by the FDIC when this is not in fact the Caixa.
  • Misuse of the FDIC name or logo harms honest businesses. A covered company that falsely advertises that its products or services are FDIC-insured may persuade individuals to purchase that company’s products or services when individuals may have selected similar products or services from one of the company’s competitors which is engaged in honest advertising and marketing.

The Consumer financial protection circular was issued in connection with the FDIC’s adoption of a regulation implementing a statutory provision prohibiting any person or organization from engaging in false advertising or misusing the name or logo of the FDIC and from misrepresenting the extent or form of FDIC deposit insurance. The CFPB will exercise its authority to ensure that the public is protected from the risks and harms that occur when companies deceptively use the FDIC logo or name or make misleading statements about deposit insurance, regardless of whether they misrepresentations are made knowingly.

Read the statement from CFPB Director Chopra, a member of the FDIC Board of Directors, on the final rule on false advertising, misrepresentations of policyholder status, and misuse of the FDIC name or logo.

Read today’s Consumer financial protection circular, Misrepresentations involving the name or logo of the FDIC or deposit insurance.

Read the CFPB blog, CFPB launches new system to promote consistent enforcement of consumer financial protectionsto know more Consumer Financial Protection Circulars.

Consumers can file complaints about deposit products, or other consumer financial products or services, by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

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The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer financial law and ensures that markets for consumer financial products are fair, transparent and competitive. For more information, visit consumerfinance.gov.

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