The Federal Deposit Insurance Corporation (FDIC) has recently issued a final rule amending its regulations governing the use of official FDIC signs and insured depository institutions’ (IDIs) advertising statements. The new rule took effect on April 1, 2024, with an extended compliance date of January 1, 2025. The extended compliance date is intended to provide sufficient time for financial institutions to put in place processes, systems, and technological updates to implement the new regulatory requirements.

The rule aims to address the following key areas:

  • Modernization of the official sign display rules: The rule updates the requirements for displaying the official FDIC sign in branches to reflect the various layouts and designs of modern IDIs’ physical premises.
  • Digital sign requirements: The rule establishes the requirement for the display of the FDIC official digital sign on bank websites, mobile applications, and certain IDI automated teller machines (ATMs) and other devices.
  • Differentiation of deposit and non-deposit products: The rule requires the use of disclosures differentiating deposits and non-deposit products across all banking channels, including digital channels.
  • Clarification on misrepresentations of deposit insurance coverage: The rule clarifies the FDIC’s rules regarding misrepresentations of deposit insurance coverage by addressing specific scenarios where information provided to consumers may be misleading.
  • Amendment of the definition of “non-deposit product”: The rule amends the definition of “non-deposit product” to include crypto-assets and specifically address safe deposit box services.
  • Compliance policies and procedures: The rule requires IDIs to establish and maintain written policies and procedures addressing compliance with the final rule.

Banking has changed significantly since 2006, when the FDIC last updated its regulation on the official sign and advertising statement. Consumers are increasingly relying on internet and mobile banking channels to access IDI banking services, and financial technology companies are offering consumers new options and alternatives for accessing banking products and services. These developments may make it more difficult for depositors and consumers to understand when they are conducting business with an IDI and when their funds are protected by FDIC deposit insurance.

One of the key aspects of the FDIC’s new rule is the focus on misrepresentations and material omissions. The rule clarifies specific circumstances under which the use of the official advertising statement, FDIC-associated terms, or FDIC-associated images by a non-bank would constitute a misrepresentation of insured status. For instance, a non-bank’s use of the “Member FDIC” logo on its website or in its marketing materials would be a misrepresentation unless that logo is next to the name of one or more IDIs.

The rule also addresses situations where non-banks make statements regarding deposit insurance for their customers. It is deemed a material omission for the non-bank to fail to clearly and conspicuously disclose that it is not itself an FDIC-insured institution and that the FDIC’s deposit insurance coverage only protects against the failure of an FDIC-insured depository institution.

Furthermore, the rule stipulates that if a person makes statements regarding deposit insurance in a context that involves both deposits and non-deposit products, it is a material omission to fail to disclose that non-deposit products are not insured by the FDIC, are not deposits, and may lose value.

Lastly, the rule emphasizes that if a person makes statements regarding pass-through deposit insurance for its customers’ funds, it is a material omission to fail to clearly and conspicuously disclose that certain conditions must be satisfied for pass-through deposit insurance coverage to apply.