Washington DC – The Consumer Financial Protection Bureau (CFPB) today issued an enforcement memorandum that addresses prohibited practices in claims about 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 new importance with 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 misrepresentations or false advertising.
“People know and trust the FDIC name and logo, and firms should not prey on that trust by making misleading representations 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 by covered firms, including misleading representations that include the name or logo of the FDIC or the Deposit Insurance Corporation. Deposit insurance has long been a means of promoting confidence in the banking system, and misinterpretation of those protections undermines consumer confidence and market competition. The most common form of deposit insurance is administered by the FDIC. Currently, the FDIC insures deposits at FDIC-insured banks and savings associations up to $250,000 per depositor, per FDIC-insured bank, for each account ownership class.
The Consumer Financial Protection Circular Issued today provides guidance to consumer protection promoters who are likely to violate the Consumer Financial Protection Act’s prohibition on deception if covered firms misuse the FDIC’s name or logo or engage in false advertising or material misrepresentations to the public about deposit insurance. Such conduct (including misrepresentation of insured status) is knowingly engaged in. The Consumer Financial Protection Act is enforced by the CFPB, banking regulators and states.
In particular, the circular emphasizes that:
- A misrepresentation of the FDIC logo or name will generally be 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 will generally be material. Misusing the FDIC’s name or logo or engaging in false advertising or misrepresentation to consumers about deposit insurance, even if such conduct is knowingly engaged in, is likely to be misleading.
- Misinterpretation or misuse of the FDIC name or logo harms customers and places them at significant risk of unexpected loss. Clients may be at risk of loss if they discover their assets are uninsured during a financial crisis. Due to their relatively recent entry into the consumer market, emerging financial products and services – such as crypto-assets – may present digital assets with particularly serious risks to consumers. Claims that financial products or services are “regulated” by the FDIC or “insured” or “eligible for” FDIC insurance may be misleading if those claims expressly or impliedly imply that the product or service is FDIC-insured when in fact it is. no case
- Misuse of the FDIC name or logo harms honest companies. A covered 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 selected similar products or services from one of the firm’s competitors through honest advertising and marketing.
The Consumer Financial Protection Circular The FDIC was promulgated in connection with the rule implementing statutory provisions prohibiting any person or entity from engaging in false advertising or misusing the FDIC’s name or logo and from knowingly misrepresenting the scope or manner of FDIC deposit insurance. The CFPB will use its authority to ensure that the public is protected from the risks and harms that arise when companies use the FDIC logo or name in a misleading manner or make misleading misrepresentations about deposit insurance, even if those misrepresentations are knowingly made.
Read a statement from CFPB Director Chopra, member, FDIC Board of Directors, on the final rule regarding false advertising, misrepresentation of insured status, and misappropriation of the FDIC’s name or logo.
Read today Consumer Financial Protection Circular, Misleading representations involving the name or logo of the FDIC or deposit insurance.
Read the CFPB blog, The CFPB has launched a new system to promote continued enforcement of consumer financial protectionsTo learn more about Consumer Financial Protection Circulars.
Consumers can submit 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 enforces and enforces federal consumer financial laws and ensures that the marketplace for consumer financial products is fair, transparent and competitive. For more information, visit consumerfinance.gov.