The CFPB takes action to protect depositors from false claims about FDIC insurance

Washington DC – The Consumer Financial Protection Bureau (CFPB) today issued an enforcement memorandum addressing prohibited practices on claims related to Federal Deposit Insurance Corporation (FDIC) insurance. Specifically, firms 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 posed to consumers if they are lured towards these or financial products or services through misrepresentations or false advertising.

“People know and trust the FDIC name and logo, and firms should not violate that trust by making misleading representations about deposit insurance,” said CFPB Director Rohit Chopra. “Companies undermine competition, erode 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 fraudulent representations involving the name or logo of the FDIC or deposit insurance, by covered firms. Deposit insurance has long been a tool to foster confidence in the banking system, and misinterpreting 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.

of Consumer Financial Protection Circular issued today provides guidance to consumer protection enforcers that covered firms are likely to violate the Consumer Financial Protection Act’s prohibition on fraud if they misuse the FDIC’s name or logo or engage in false advertising or make material misrepresentations to the public about with deposit insurance, regardless of whether such conduct (including misrepresentation of the insured’s status) is knowingly engaged in. The Consumer Financial Protection Act is enforced by the CFPB, banking regulators and states.

Specifically, to Circular states that:

  • Misrepresentation of the FDIC logo or name will usually be a material misrepresentation. Material misrepresentations are deceptive practices in violation of the Consumer Financial Protection Act. Representations made by covered firms to consumers regarding FDIC insurance will usually be material. Misusing the FDIC’s name or logo or engaging in false advertising or making misrepresentations to consumers about deposit insurance, whether or not such conduct is knowingly engaged in, 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. Consumers may be at risk of loss if they discover that their assets are not insured during a time of financial distress. Because of their relatively recent entry into the consumer market, emerging financial products and services—such as digital assets, including cryptoassets—may pose particularly acute 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 those claims expressly or implicitly indicate that the product or service is insured by the FDIC, when in in fact it is not the case.
  • Misuse of the FDIC’s name or logo harms honest companies. A covered firm that deceptively 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 a competitor of the firm engaged in honest advertising and marketing.

of Consumer Financial Protection Circular was issued in connection with the adoption by the FDIC 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 making misrepresentations about the extent or manner of deposit insurance. FDIC. The CFPB will exercise its authority to ensure that the public is protected from the risks and damages that arise when firms fraudulently use the FDIC logo or name or make fraudulent misrepresentations about deposit insurance, regardless of whether such misrepresentations are knowingly made.

Read the Statement by CFPB Director Chopra, Member, FDIC Board of Directors, on the Final Rule Regarding False Advertising, Misrepresentations of Insured Status, and Misuse of the FDIC’s Name or Logo.

Read today Consumer Financial Protection Circular, Fraudulent representations involving the name or logo of the FDIC or deposit insurance.

Read the CFPB blog, CFPB issues 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).

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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 consumer finance.gov.

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