The CFPB is taking steps to protect depositors from false FDIC insurance claims

Washington, DC – The Consumer Protection Bureau (CFPB) today issued an enforcement memorandum that addresses prohibited actions related to Federal Deposit Insurance Corporation (FDIC) insurance claims. In particular, firms may not misuse the FDIC’s name or logo or make misleading claims about deposit insurance. The issue has gained renewed importance with the emergence of financial technologies such as crypto-assets, including stablecoins, and the risks consumers face if they are lured into certain financial products or services through misleading or false advertising.

“People know and trust the FDIC name and logo, and firms should not abuse that trust by making misleading claims about deposit insurance,” said CFPB Director Rohit Chopra. “Companies undermine competition, undermine confidence 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 claims involving the FDIC or deposit insurance name or logo, by covered firms. Deposit insurance has long been a means of increasing confidence in the banking system, and the distortion of these protections undermines consumer confidence and market competition. The most common form of deposit insurance is the FDIC. The FDIC currently insures deposits at FDIC-insured banks and savings associations up to $250,000 per depositor at each FDIC-insured bank for each category of account ownership.

The Circular on financial protection of consumers issued today provides guidance to consumer protection law enforcement agencies that covered firms are likely to violate the Consumer Protection Act’s prohibition against deception if they misuse the FDIC’s name or logo or engage in false advertising or make material misrepresentations to the public about deposit insurance, regardless of whether such behavior (including distortion of information about the insured status) is carried out knowingly. The Consumer Financial Protection Act is enforced by the CFPB, banking regulators, and the states.

In particular, Circular emphasizes that:

  • A misrepresentation of the FDIC logo or name is usually a material misrepresentation. Material misrepresentations are deceptive practices that violate the Consumer Protection Act. Statements to consumers about FDIC insurance covered by firms are usually material. Misusing the FDIC’s name or logo or engaging in false advertising or providing false information to consumers about deposit insurance, whether or not such conduct is knowingly done, is likely to be misleading.
  • Misrepresentation or misuse of the FDIC name or logo harms customers and exposes them to significant risk of unexpected losses. Clients may be at risk of loss if they discover that their assets are not insured during times of financial distress. Due to their relatively recent entry into the consumer market, new financial products and services such as digital assets, including cryptoassets, may pose particularly serious risks to consumers. Claims that financial products or services are “regulated” by the FDIC or are “insured” or “subject to” FDIC insurance are likely to be misleading if those statements directly or indirectly indicate that the product or service is FDIC insured when in fact it is not. so. case.
  • Misusing the FDIC name or logo hurts honest companies. A protected firm that misleadingly advertises that its products or services are FDIC-insured may persuade individuals to purchase the firm’s products or services when individuals might otherwise have chosen similar products or services from one of the firm’s competitors who engage in honest advertising and marketing.

The Circular on financial protection of consumers was issued in connection with the adoption by the FDIC of a regulation implementing a statutory provision prohibiting any person or entity from engaging in false advertising or misusing the name or logo of the FDIC, or from knowingly misrepresenting the extent or manner of the FDIC’s deposit insurance . The CFPB will use its authority to ensure that the public is protected from the risks and harms that arise when firms misrepresent the FDIC logo or name or make misleading statements about deposit insurance, whether or not these misrepresentations are made intentionally.

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

Read today Circular on financial protection of consumers, Misleading statements containing the FDIC or deposit insurance name or logo.

Read the CFPB blog, CFPB launches new system to promote consistent enforcement of consumer financial protectionsto learn more about Circulars on consumer financial protection.

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

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