FDIC Adopts Rule on False Advertising and Misrepresentations
The FDIC adopted a rule establishing a process to identify and investigate conduct that may violate Federal Deposit Insurance Act Section 18(a)(4) as to misrepresentations of FDIC deposit insurance or misuse of the agency's name or logo. The rule will go into effect 30 days after publication in the Federal Register.
Among other things, the new rule applies to any person who:
- falsely represents (expressly or by implication) the FDIC-insured status for any "deposit liability, obligation, certificate or share" through the use of the FDIC's name or logo;
- knowingly misrepresents (expressly or by implication) the FDIC insured status, or the extent or manner of FDIC-insurance, for any "deposit liability, obligation, certificate, or share"; or
- aids or abets any other person engaged in such acts.
FDIC Acting Chair Martin J. Gruenberg stated that the final rule, among other things, clarifies (i) the FDIC's process of identification and investigation of potentially violative conduct, (ii) the standards used to evaluate such conduct and (iii) the procedures the FDIC will follow "when taking formal and informal enforcement actions to address violations of the statute." In addition, Mr. Gruenberg said that the final rule addresses the issue of non-bank entities making "unsubstantiated claims about the availability of deposit insurance." He said that the new rule will require non-bank entities to support claims and identify banks with which they have "existing business relationships and into which consumers' deposits may be placed." Mr. Gruenberg also noted that the FDIC Board may consider a proposed rule updating the sign and advertising requirements in the latter part of 2022.
The CFPB issued a corresponding Consumer Financial Protection Circular that, among other things, stated that misuse of the FDIC's name or logo would likely constitute a deceptive act or practice in violation of the Consumer Financial Protections Act. The Circular emphasized that "firms offering or providing digital assets, including crypto-assets, may be particularly prone to making such deceptive claims to consumers about FDIC deposit insurance coverage."