Washington – The Consumer Financial Protection Bureau (CFPB) today published an enforcement memorandum that addresses prohibited practices in Federal Deposit Insurance Corporation (FDIC) insurance claims. Specifically, firms may not misuse the FDIC’s name or logo or make fraudulent claims about deposit insurance. The issue has taken on new importance with the emergence of financial technologies – such as crypto-assets, including stablecoins – and the risks consumers face if they are lured into these or other financial products or services through misrepresentation or false advertising.
“People know and trust the FDIC name and logo, and firms should not take advantage of that trust by making deceptive claims about deposit insurance,” said CFPB Director Rohit Chopra. “Companies undermine competition, undermine confidence in the deposit insurance system and jeopardize our hard-earned savings when they engage in false marketing or advertising.”
The Consumer Financial Protection Act prohibits deceptive acts and practices, including fraudulent representations involving the name or logo of the FDIC or deposit insurance, by covered firms. 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. The FDIC currently insures deposits at FDIC-insured banks and savings associations up to $250,000 per depositor, at an FDIC-insured bank, for each category of account ownership.
The Consumer Financial Protection Circular released today provides guidance to consumer protection law enforcement agencies that covered firms are likely to violate the Consumer Financial Protection Act’s fraud prohibition if they misuse the FDIC’s name or logo or engage in false advertising or make material misrepresentations to the public about insurance of deposits, regardless of whether such conduct (including misrepresentation of insured status) is knowingly committed. The Consumer Financial Protection Act is enforced by the CFPB, bank regulators and the states.
Specifically, on Circular emphasizes that:
- A misrepresentation of the FDIC logo or name is generally a material misrepresentation. Material misrepresentations are deceptive practices in violation of the Consumer Financial Protection Act. Representations made by covered firms to consumers about FDIC insurance are generally material. Misusing the FDIC’s name or logo or engaging in false advertising or making misleading claims to consumers about deposit insurance, whether or not such conduct is done knowingly, is likely to be fraudulent.
- Misrepresentation or misuse of the FDIC’s name or logo harms customers and exposes them to significant risk of unexpected losses. Customers may be at risk of loss if they discover their assets are not insured during times of financial difficulty. Due to their relatively recent entry into the consumer market, emerging financial products and services – such as digital assets, including crypto-assets – may pose particularly high 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 fraudulent if those claims expressly or impliedly indicate that the product or service is insured by the FDIC when this is not actually the case.
- Misusing the FDIC name or logo hurts honest companies. A covered firm that fraudulently advertises that its products or services are FDIC-insured may persuade individuals to purchase that firm’s products or services when individuals might otherwise have chosen similar products or services from one of the firm’s competitors engaged in fair advertising and marketing.
The Consumer Financial Protection Circular was issued in connection with the adoption by the FDIC of a regulation implementing a statutory provision that prohibits any person or organization from engaging in false advertising or misusing the name or logo of the FDIC and from making knowingly false statements regarding the extent or manner of insurance of FDIC deposits. The CFPB will exercise its authority to ensure that the public is protected from risks and harms that arise when firms fraudulently use the FDIC logo or name or make fraudulent misrepresentations about deposit insurance, regardless of whether those misrepresentations are made knowingly.
Read the statement from CFPB Director Chopra, a member of the FDIC Board of Directors, regarding the final rule regarding false advertising, misrepresentation of insured status, and misuse of the FDIC name or logo.
Read today Consumer Financial Protection Circular, Misrepresentations involving the name or logo of the FDIC or deposit insurance.
Read the CFPB blog, The CFPB is launching a new system to promote consistent enforcement of consumer financial protectionsto learn more about 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).
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.