[Federal Register Volume 75, Number 107 (Friday, June 4, 2010)]
[Rules and Regulations]
[Pages 31682-31688]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-13085]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

16 CFR Part 320

RIN 3084-AA99


Disclosures for Non-Federally Insured Depository Institutions 
Under the Federal Deposit Insurance Corporation Improvement Act 
(FDICIA)

AGENCY: Federal Trade Commission (FTC or Commission).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Federal Deposit Insurance Corporation Improvement Act of 
1991 (FDICIA) directs the Commission to prescribe the manner and 
content of certain mandatory disclosures for depository institutions 
that lack federal deposit insurance. On March 13, 2009, the Commission 
published a supplemental notice of proposed rulemaking seeking comment 
on disclosure rules for such institutions. After reviewing comments 
received in response, the Commission now publishes a final rule.

DATES: This final rule will become effective on July 6, 2010.

ADDRESSES: Copies of this document are available from: Public Reference 
Branch, Room 130, Federal Trade Commission, 600 Pennsylvania Avenue, 
NW, Washington, DC 20580. The complete record of this proceeding is 
also available at that address. Relevant portions of the proceeding, 
including this document, are available at (http://www.ftc.gov).

FOR FURTHER INFORMATION CONTACT: Hampton Newsome, (202) 326-2889, 
Attorney, Division of Enforcement, Bureau of Consumer Protection, 
Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 
20580.

SUPPLEMENTARY INFORMATION:

I. Introduction

    In 1991, as part of the Federal Deposit Insurance Corporation 
Improvement Act (FDICIA), Congress directed the Commission to prescribe 
certain disclosures for depository institutions lacking federal deposit 
insurance. Congress then prohibited the FTC from spending resources on 
FDICIA's disclosure requirements until 2003. After Congress lifted that 
ban, the Commission published proposed disclosures consistent with 
FDICIA's statutory directives (70 FR 12823 (March 16, 2005)). Many 
commenters raised concerns with the proposal.\1\ Thereafter, Congress 
passed the Financial Services Regulatory Relief Act of 2006 (FSRRA) 
(Pub. L. 109-351) amending FDICIA. The FSRRA amendments addressed 
almost all of the concerns raised by commenters about the FTC's 
proposed rule. The Commission published a supplemental notice on March 
13, 2009 (74 FR 10843) seeking comments on a proposal consistent with 
the FSRRA amendments. The Commission has reviewed the comments received 
in response and now publishes a final rule.
---------------------------------------------------------------------------

    \1\ See (http://www.ftc.gov/os/comments/FDICIA/index.shtm).
---------------------------------------------------------------------------

II. Background

    Under existing law, all federally chartered and most state-
chartered depository institutions must have federal deposit insurance. 
Federal deposit insurance funds currently guarantee all deposits at 
federally

[[Page 31683]]

insured institutions up to and including $250,000 per depositor.\2\ 
Federally insured banks and credit unions must display signs disclosing 
this guarantee at each station or window where insured deposits are 
normally received in the depository institution's principal place of 
business and in all its branches.\3\
---------------------------------------------------------------------------

    \2\ On October 3, 2008, the enactment of the Emergency Economic 
Stabilization Act of 2008 (Pub. L. No. 110-343) raised the basic 
limit on federal deposit insurance coverage from $100,000 to 
$250,000 per depositor. The Helping Families Save Their Homes Act of 
2009 (Pub. L. No. 111-22) extended the $250,000 coverage until 
December 31, 2013.
    \3\ See 12 CFR Part 328 and 12 CFR Part 740.
---------------------------------------------------------------------------

    Although the vast majority of depository institutions have federal 
deposit insurance, there are some exceptions. For example, the Puerto 
Rican government provides deposit insurance for non-federal credit 
unions located in Puerto Rico. In addition, approximately 170 state-
chartered credit unions in approximately nine states do not have 
federal deposit insurance, and seek to protect their customers through 
private deposit insurance.\4\
---------------------------------------------------------------------------

    \4\ A 2003 U.S. Government Accountability Office (GAO) report 
indicated that eight states had credit unions that purchased private 
deposit insurance in lieu of federal insurance. An additional nine 
states allowed private deposit insurance but did not have any 
privately insured credit unions. All other states required credit 
unions to have federal deposit insurance. ``Federal Deposit 
Insurance Act: FTC Best Among Candidates to Enforce Consumer 
Protection Provisions,'' GAO-03-971 (Aug. 2003), 6-7. The Commission 
understands that there are a small number of state banks and savings 
associations that do not have federal deposit insurance.
---------------------------------------------------------------------------

    In response to incidents affecting the safety of deposits at 
certain financial institutions lacking federal deposit insurance, 
Congress amended the Federal Deposit Insurance Act (FDIA) in 1991 by 
adding Section 43 (12 U.S.C. 1831t), which imposes several requirements 
on non-federally insured institutions\5\ and private deposit 
insurers.\6\ In general, Section 43(b), as amended by FSRRA, mandates 
that depository institutions lacking federal deposit insurance provide 
certain disclosures to consumers.\7\ Specifically, in all periodic 
statements, signature cards, passbooks, and share certificates, the 
institution must disclose that it does not have federal deposit 
insurance and that, if the institution fails, the federal government 
does not guarantee that depositors will receive their money back 
(hereinafter ``required long disclosure'').\8\ Moreover, in most 
advertising and at deposit windows, principal places of business, and 
branches, the institution must disclose that it is not federally 
insured (hereinafter ``required short disclosure'').\9\
---------------------------------------------------------------------------

    \5\ ``Depository institutions'' lacking federal insurance 
include credit unions, banks, and savings associations that are not 
either: a) insured depository institutions as defined under the 
FDIA; or b) insured credit unions as defined in Section 101 of the 
Federal Credit Union Act (FCUA) (12 U.S.C. 1752). The FDIA defines 
``insured depository institution'' as any bank or savings 
association the deposits of which are insured by the FDIC pursuant 
to this chapter (12 U.S.C. 1813(c)). The FCUA defines ``insured 
credit union'' to mean ``any credit union the member accounts of 
which are insured by the National Credit Union Administration'' (12 
U.S.C. 1752).
    \6\ Congress passed these amendments as part of FDICIA. See Pub. 
L. No. 102-242, 105 Stat. 2236 (1991) (Section 151 of FDICIA, 
Subtitle F of Title 1, S. 543). Section 43 was initially designated 
as Section 40 of the FDIA. See also S. Rep. No. 167, 102 Cong., 
1\st\ Sess., at 61 (1992).
    \7\ The definition of ``depository institution'' in Section 
43(f)(2) includes any entity that, as determined by the FTC, engages 
in the business of receiving deposits and could reasonably be 
mistaken for a depository institution by the entity's current or 
prospective customers (i.e., ``look-alike'' institutions). The 
Commission has not identified any ``look-alike'' institutions to 
date and is not addressing the issue in this proceeding. If, in the 
future, the Commission or commenters identify ``look-alike'' 
institutions of concern that are not subject to existing legal 
requirements, the FTC will consider whether to develop requirements 
for such entities.
    \8\ 12 U.S.C. 1831t(b).
    \9\ Id.
---------------------------------------------------------------------------

    For many years after FDICIA's passage, Congress prohibited the 
Commission from using FTC resources to enforce the law's requirements. 
In 2003, Congress lifted this prohibition for certain provisions of 
FDICIA, including the disclosure provisions of Section 43.\10\ 
Subsequently, the Commission published a Notice of Proposed Rulemaking 
(NPRM) seeking comments on its proposed implementation of Section 43 
(70 FR 12823 (March 16, 2005)). In response, the Commission received 
numerous comments raising serious concerns with the proposal.\11\
---------------------------------------------------------------------------

    \10\ Making Appropriations for Agriculture, Rural Development, 
Food and Drug Administration, and Related Agencies, for the Fiscal 
Year Ending September 30, 2004, and for Other Purposes, H.R. Conf. 
Rep. No. 108-401, Cong., 1\st\ Sess., at 88 (2003).
    \11\ The Commission received 162 comments in response to the 
NPRM. See comments at (http://www.ftc.gov/os/comments/FDICIA/index.shtm).
---------------------------------------------------------------------------

    In October 2006, Congress substantially addressed the commenter 
concerns directly by amending Section 43 as part of FSRRA. These new 
amendments rendered significant portions of the Commission's proposed 
Rule obsolete. In particular, the new statutory provisions: (1) 
significantly altered Section 43(b)(3) (12 U.S.C. 1831t(b)(3)), which 
requires institutions to obtain signed acknowledgments from depositors 
related to the lack of federal deposit insurance; (2) established 
specific exemptions to the advertising disclosure requirements; (3) 
modified the requirements for disclosures on periodic statements and 
account records and at depository locations; and (4) limited some of 
the FTC's authority under the law and provided state regulators with 
specific enforcement authority.\12\
---------------------------------------------------------------------------

    \12\ The FSRRA amendments did not alter the basic content of the 
required disclosures. Section 43 continues to require depository 
institutions lacking federal deposit insurance affirmatively to 
disclose that fact to their depositors or members. (12 U.S.C. 
1831t(b)).
---------------------------------------------------------------------------

    In response to the FSRRA amendments, the Commission published a 
supplemental notice of proposed rulemaking which discussed the FSRRA 
amendments in detail, proposed conforming rule changes in light of the 
FSRRA amendments, and sought comments on these changes. The Commission 
has reviewed the comments received in response\13\ and, as discussed in 
detail below, now issues its final rule.
---------------------------------------------------------------------------

    \13\ The Commission received 29 comments in response to the 
supplemental notice. See comments at (http://www.ftc.gov/os/comments/fdiciasupplement/index.shtm).
---------------------------------------------------------------------------

III. Comment Analysis

    The comments on the supplemental rule notice raised two substantive 
issues: 1) disclosure requirements for institutions participating in 
shared branching networks and service centers; and 2) the timing of 
signed acknowledgment requirements.

A. Shared Branching Networks and Service Centers

    Background: Under FDICIA, non-federally insured institutions must 
post required disclosures wherever ``deposits are normally 
received.''\14\ Such locations could include places that are not owned 
or controlled by the non-federally insured institution. For instance, 
the Commission indicated in its supplemental notice (74 FR at 10846) 
that disclosures should appear at credit union service centers 
(independent facilities that provide services for a group of 
institutions) to the extent such facilities contain stations where 
deposits of non-federally insured institutions ``are normally 
received.'' The statute does not define the term ``normally received.''
---------------------------------------------------------------------------

    \14\ 12 U.S.C. 1831t(b)(2).
---------------------------------------------------------------------------

    Issue and Comments: In response to the supplemental notice, many 
commenters raised concerns about whether the disclosure requirements 
apply to shared branching networks. Shared branching allows 
participating institutions to accept deposits and provide additional 
services for members of other institutions in the network. Shared 
branching arrangements typically involve hundreds of

[[Page 31684]]

institutions, both federally and non-federally insured.\15\ Three such 
networks exist nationwide involving approximately 3,700 locations.\16\ 
The vast majority of institutions in these networks have federal 
deposit insurance.\17\
---------------------------------------------------------------------------

    \15\ For a general discussion of shared branching networks, see 
comments from American Share Insurance ( 540033-00003).
    \16\ Id.
    \17\ Id.
---------------------------------------------------------------------------

    Many commenters raised concern that the FTC will require federally 
insured institutions in shared branching networks to post FDICIA 
disclosures on behalf of each of the non-federally ensured entities in 
those networks. Both federally and non-federally insured institutions 
argued that such a requirement would be unreasonable. Federally insured 
institutions warned that disclosures at their facilities would confuse 
consumers and may even lead some to believe their institutions lack 
federal insurance.\18\ Non-federally insured institutions argued that 
such a requirement may limit or prevent their participation in these 
networks because federally insured institutions may refuse to post such 
disclosures.\19\
---------------------------------------------------------------------------

    \18\ See, e.g., Honda Federal Credit Union ( 540033-
00004); International Harvester Employee Credit Union ( 
540033-00028).
    \19\ See, e.g., AurGroup Financial Credit Union ( 
540033-00011), Christian Community Credit Union ( 540033-
00015); Cincinnati Central Credit Union ( 540033-00025); 
Firefighters Community Credit Union ( 540033-00009).
---------------------------------------------------------------------------

    American Share Insurance (ASI), a private insurer for depository 
institutions, agreed that such disclosures would confuse consumers and 
also argued that Congress did not intend to require disclosures at such 
locations.\20\ ASI argued that deposit locations at institutions in a 
shared branching network are analogous to deposits at ATM's (which, in 
some cases, do allow deposits from other institutions). It then 
reasoned that, because Congress exempted ATM's from FDICIA's disclosure 
requirements, participants in shared branching networks should receive 
similar treatment.\21\ ASI also stated that Congress intended FDICIA's 
requirements to match National Credit Union Administration (NCUA) 
regulations which require disclosures only at facilities owned or 
controlled by the regulated institution.\22\
---------------------------------------------------------------------------

    \20\ ASI ( 540033-00003).
    \21\ See 12 U.S.C. 1831t(b)(2)(A).
    \22\ Id. The NCUA regulations for federally insured institutions 
require posting ``at each station or window where insured account 
funds or deposits are normally received in its principal place of 
business and in all its branches . . . .'' See 12 C.F.R. 740.4(c) 
(emphasis added). In comparison, FDICIA states that the disclosure 
should appear ``at each station or window where deposits are 
normally received, its principal place of business and all its 
branches where it accepts deposits or opens accounts (excluding 
automated teller machines or point of sale terminals), and on its 
main Internet page.'' See 12 U.S.C. 1831t(b)(2)(a).
---------------------------------------------------------------------------

    Several other commenters also suggested that the Commission rely on 
recent disclosure requirements issued by the NCUA for such networks in 
lieu of imposing a separate disclosure requirement.\23\ Recently, NCUA 
addressed the signage requirements for institutions participating in 
shared branching networks (74 FR 9347 (March 4, 2009)). For federally 
insured institutions and facilities operated by a non-credit union 
entity, the new rules require a general disclosure that not all 
institutions in the network are federally insured.\24\ Commenters 
argued that the NCUA disclosure provides a clear explanation to 
consumers and that any FTC disclosure could cause confusion.
---------------------------------------------------------------------------

    \23\ 74 FR 9347 (March 4, 2009) (NCUA regulations). See, e.g., 
Atlantic Regional Federal Credit Union ( 540033-00030); 
Coast Hills Federal Credit Union ( 540033-00013); Mazuma 
Credit Union ( 540033-00027); and ASI ( 540033-
00003).
    \24\ NCUA's disclosure reads: ``This credit union participates 
in a shared branch network with other credit unions and accepts 
share deposits for members of those other credit unions. While this 
credit union is federally insured, not all of these other credit 
unions are federally insured. If you need information on the 
insurance status of your credit union, please contact your credit 
union directly.'' 12 C.F.R. 740.4(c)(1).
---------------------------------------------------------------------------

    Discussion: Under the statute, disclosures must appear at ``each 
station or window where deposits are normally received'' (emphasis 
added).\25\ By its plain language, the law does not limit such 
locations to those owned or controlled by the institution. At the same 
time, the law does not require disclosures at every station or window 
that could conceivably receive a deposit. Instead, the law covers 
locations that ``normally'' receive deposits, which the Commission 
interprets to include locations that operate as the functional 
equivalent of stations or windows at the institution's own facilities. 
Whether a location ``normally'' receives deposits for a non-federally 
insured institution likely depends on factors such as the volume of 
deposits, the frequency of deposits, the signage at the receiving 
institution, and whether the receiving institution is in the same city 
as the non-federally insured institution.\26\
---------------------------------------------------------------------------

    \25\ 12 U.S.C. 1831t(b)(2)(a).
    \26\ The record does not identify, nor is the Commission aware 
of, any federally insured institutions in a shared branching network 
that constitute locations where the deposits of non-federally 
insured institutions are ``normally'' received.
---------------------------------------------------------------------------

    Service centers present a different issue than shared networks. 
Specifically, these entities are independent facilities operated on 
behalf of specific institutions that share costs and ownership.\27\ 
Therefore, it seems likely that these facilities ``normally'' receive 
deposits for participating non-federally insured institutions. 
Accordingly, absent circumstances demonstrating that a particular 
shared center does not ``normally'' receive deposits (as discussed 
above) for a non-federally insured institution, the required 
disclosures should appear at the service center to ensure the 
institution complies with FDICIA.
---------------------------------------------------------------------------

    \27\ See ASI ( 540033-00003).
---------------------------------------------------------------------------

B. Timing for Signed Acknowledgments

    Issue: FDICIA requires institutions without federal deposit 
insurance to obtain signed statements from their depositors 
acknowledging that the institution does not have federal deposit 
insurance. The law, however, allows institutions under certain 
circumstances to provide notices to depositors in lieu of obtaining 
signed acknowledgments.\28\ Specifically, for depositors who joined the 
institution before October 13, 2006 (i.e., ``current'' depositors), an 
institution either must obtain a signed acknowledgement, or make two 
attempts to obtain such a signed acknowledgement through notices to 
depositors. Under the statute, institutions must transmit the first of 
these notices to current depositors not later than three months after 
October 13, 2006, and the second not less than thirty days, but not 
more than three months, after the first.
---------------------------------------------------------------------------

    \28\ The acknowledgments and notices must indicate that the 
institution is not federally insured and that the federal government 
does not guarantee that depositors will recover their money if the 
institution fails. See 12 U.S.C. 1831t(b)(2).
---------------------------------------------------------------------------

    Comment: The Credit Union National Association (CUNA) \29\ urged 
the FTC to change the threshold date from October 13, 2006 to the date 
the Commission's rule becomes effective. It reasoned that the 2006 date 
is now impossible to meet.
---------------------------------------------------------------------------

    \29\ CUNA ( 540033-00022).
---------------------------------------------------------------------------

    Discussion: Congress set the October 13, 2006 date and the 
Commission has no discretion to change it. Importantly, the FSRRA 
amendments were immediately enforceable upon enactment. Therefore, the 
date was binding on covered institutions at that time. Complaints about 
retroactive application of the law, therefore, are misplaced. If an 
institution has not already sent notices to persons who were depositors 
as of October 13, 2006 pursuant to the statute, the law requires it to 
obtain a signed acknowledgment from that depositor before accepting a

[[Page 31685]]

deposit. The Commission cannot alter this mandate.
    Finally, in issuing the FSRRA amendments, the Commission notes that 
Congress used the term ``current depositor'' to cover depositors 
obtained on or before October 13, 2006. As that date becomes more 
remote, the term ``current depositor'' may cause confusion because some 
may incorrectly assume the term applies to depositors obtained more 
recently than 2006. To address this concern, the Commission has changed 
the title of Section 320.5(c) to ``Depositors Obtained On Or Before 
October 13, 2006'' instead of ``Current Depositors.''

IV. Summary of Final Rule

    Generally, the final rule incorporates the language of the statute, 
in many cases repeating the law's language verbatim. Like the statute, 
the final rule addresses disclosure requirements for periodic 
statements and account records, advertising, and locations that receive 
deposits; signed acknowledgment requirements; and an exception to these 
requirements for certain depository institutions. The final rule is 
identical in substance to that published in the supplemental 
notice.\30\ The following summarizes the final rule's basic provisions.
---------------------------------------------------------------------------

    \30\ The final rule contains non-substantive editorial changes 
in Sections 320.2, 320.3, 320.4(a) & (b), and 320.5(a), (b), & (c).
---------------------------------------------------------------------------

A. Scope of the Final Rule

    Section 320.1 of the rule indicates that the FTC's new requirements 
apply to depository institutions (e.g., banks, savings association, and 
credit unions) that do not have federal deposit insurance. Consistent 
with Section 43(f)(3)(B) of the FDIA, a depository institution lacks 
federal deposit insurance if it is neither an insured depository 
institution as defined in the FDIA (12 U.S.C. 1813(c)(2)), nor an 
insured credit union as defined in Section 101 of the FCUA, 12 U.S.C. 
1752. Most banks and savings associations must have federal deposit 
insurance under state or federal law.\31\ Accordingly, the rule applies 
apply to only a small number of state-chartered banks and savings 
associations.\32\
---------------------------------------------------------------------------

    \31\ See, e.g., 12 U.S.C. 222 (national banks); Cal. Fin. Code 
5606(a) (California savings associations); and 12 U.S.C. 3104(c)(1) 
(state and federal branches of foreign banks receiving deposits of 
less than $100,000).
    \32\ Consistent with the statute, the rule applies to non-
federally insured credit unions in any State, the District of 
Columbia, the several territories and possessions of the United 
States, the Panama Canal Zone, and the Commonwealth of Puerto Rico 
(see 12 U.S.C. 1781). The Commission understands that many credit 
unions in Puerto Rico do not have federal deposit insurance but, 
instead, operate under a Puerto Rican government-backed deposit 
insurance system. Section 43 imposes disclosure requirements 
specifically on institutions that do not have federal deposit 
insurance and does not exempt institutions operating under non-
federal insurance systems. Accordingly, Puerto Rico credit unions 
are subject to the rule's requirements.
---------------------------------------------------------------------------

B. Disclosures in Periodic Statements

    Consistent with the statute (12 U.S.C. Sec.  1831t(b)(1)), Section 
320.3 requires covered depository institutions to conspicuously 
disclose in all periodic statements and account records that the 
institution is not federally insured, and that, if the institution 
fails, the federal government does not guarantee that depositors will 
recoup their money. Section 320.3 offers model language that depository 
institutions may use to satisfy this requirement. The Commission will 
evaluate whether disclosures are conspicuous according to well-
established FTC law.\33\
---------------------------------------------------------------------------

    \33\ See, e.g., Thompson Medical Co., 104 F.T.C. 648, 797-98 
(1984); The Kroger Co., 98 F.T.C. 639, 760 (1981).
---------------------------------------------------------------------------

C. Disclosures in Advertising

    Under Section 320.4, covered depository institutions must disclose 
in advertising consistent with 12 U.S.C. Sec.  1831t(b)(2) that the 
institution is not federally insured.\34\ As dictated by the statute 
(12 U.S.C. Sec.  1831t(b)(2)(B)), the rule also contains specific 
exemptions to this advertising disclosure requirement. In particular, 
the required short disclosure (that the institution is not federally 
insured) need not appear in a sign, document, or other item that has 
the institution's name but no information about the institution's 
products or services or information otherwise promoting the 
institution. Consistent with the law, the rule also exempts from the 
disclosure requirement, ``[s]mall utilitarian items [e.g., common pens 
and key chains] that do not mention deposit products or insurance if 
inclusion of the notice would be impractical.''
---------------------------------------------------------------------------

    \34\ For the purposes of the rule, advertising includes, but is 
not limited to, advertising in print, electronic, Internet, or 
broadcast media.
---------------------------------------------------------------------------

D. Disclosures at Deposit Locations

    Section 320.4 requires covered institutions to clearly and 
conspicuously disclose that the institution is not federally insured 
``at each station or window place where deposits are normally received, 
its principal place of business and all branches where it accepts 
deposits or opens accounts (excluding automated teller machines or 
point of sale terminals), and on its main Internet page . . . .'' This 
section tracks the language in 12 U.S.C. 1831t(b)(2)(A).

E. Disclosure Acknowledgment

    Sections 320.5 and 320.6 require covered institutions to obtain 
signed acknowledgments of the fact that the institution is not 
federally insured from new depositors. The rule language tracks the 12 
U.S.C. 1831t(b)(3) requirements. For certain customers (e.g., those 
obtained through a merger), the rule, consistent with the statute, 
provides an alternative notice requirement which allows institutions to 
send notifications attempting to obtain signed acknowledgments no later 
than 45 days after the merger or conversion to customers in lieu of 
obtaining signatures.

F. Exception for Certain Depository Institutions

    Section 43(d) of the FDIA (``Exceptions for institutions not 
receiving retail deposits'') provides the Commission with discretion to 
except certain institutions from the disclosure requirements. 
Specifically, the FDIA allows the Commission to exempt depository 
institutions that do not receive initial deposits of less than ``an 
amount equal to the standard maximum insurance amount'' from 
individuals who are citizens or residents of the United States.\35\ 
That amount is currently $250,000. The Commission's 2005 proposed rule 
and the 2009 supplemental notice contained such an exception.\36\ The 
Commission reasoned that customers of institutions that handle only 
large initial deposits are sufficiently sophisticated that they do not 
need disclosures. Some commenters supported the proposed exemption 
while others raised concerns.\37\ For example, the Office of the 
Comptroller of the Currency (OCC) urged the Commission to expand the 
proposed exception to include uninsured national trust banks and 
federal and state branches of foreign banks altogether because these 
institutions do not accept retail deposits.\38\ NAFCU, on the other

[[Page 31686]]

hand, opposed the provision arguing that some customers with initial 
deposits over the standard maximum insurance amount at federal credit 
unions do not understand how their funds are insured.\39\ In its 
supplemental notice, the Commission continued to propose the exception 
and sought further comment on the issue. The Commission received none.
---------------------------------------------------------------------------

    \35\ 12 U.S.C. 1821(a)(1).
    \36\ See 70 FR 12823, 12825 (Mar. 16, 2005) and 74 FR 10843, 
10846 (Mar. 13, 2009). The statute indicates that the FTC should not 
consider ``money received in connection with any draft or similar 
instrument issued to transmit money'' to be a deposit for the 
purposes of this exemption. In 2006, Congress amended the exception 
language by changing the threshold from ``$100,000'' to ``an amount 
equal to the standard maximum deposit insurance amount.'' Public Law 
109-173 (Feb. 26, 2006).
    \37\ The National Association of Federal Credit Unions (NAFCU) 
( 515567-00121) and the Greater Cincinnati Credit Union 
( 515567-00081) opposed the proposed exception. The Navy 
Federal Credit Union ( 515567-00083) supported the proposed 
exception.
    \38\ OCC (515567-00201).
    \39\ NAFCU ( 515567-00121).
---------------------------------------------------------------------------

    The final rule contains the exception. The Commission continues to 
believe that customers who make large deposits ($250,000 or more) at 
institutions that refuse initial deposits under $250,000 do not need 
the FDICIA disclosures because they are sufficiently sophisticated and 
likely understand the institution's deposit insurance status. The rule 
also defines ``standard maximum insurance amount'' to mean the maximum 
amount of deposit insurance as determined under Section 11(a)(1) of the 
FDIA (12 U.S.C. 1821(a)(1)).
    This exception addresses one of the two issues raised by the OCC. 
Specifically, the OCC expressed concern about the application of FDICIA 
disclosure requirements to uninsured national trust banks even though 
they do not accept deposits. Because these institutions accept no 
deposits, they by definition do not accept initial deposits of under 
$250,000, and are therefore, exempt from the rule's requirements. The 
OCC also expressed concern that the rule would cover federal and state 
branches of foreign banks. While Congress has already granted these 
institutions an exemption from federal deposit insurance requirements 
(12 U.S.C. 3104(c)), FDICIA contains no such exception from its 
disclosure requirements. Therefore, if such institutions accept initial 
deposits of less than $250,000, they have to comply with the rule's 
disclosure requirements.
    Finally, the Commission notes that NAFCU raised concerns about 
persons making large initial deposits at credit unions and not 
receiving the disclosures. The record did not identify any credit 
unions serving individuals (i.e., natural persons) that only receive 
initial deposits of more than $250,000.\40\ Any credit unions receiving 
initial deposits under $250,000 must make the disclosures even if some 
depositors happen to open accounts with $250,000 or more. Accordingly, 
the Commission does not expect that the exception will apply to any 
credit unions.
---------------------------------------------------------------------------

    \40\ In addition, the record did not identify any credit unions 
that only receive initial deposits of more than $100,000. Although 
there are approximately two dozen ``corporate'' credit unions which 
serve only other credit unions and may have such initial deposit 
policies, these institutions already have federal deposit insurance 
and thus would not fall under the FDICIA disclosure requirements. 
See, e.g., (http://www.ncua.gov/DataServices/FindCU.aspx) (National 
Credit Union Administration database).
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    The disclosures and written acknowledgment statements do not 
constitute a ``collection of information'' under the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3520) because they are a ``public 
disclosure of information originally supplied by the government to the 
recipient for the purpose of disclosure to the public'' as indicated in 
Office of Management and Budget regulations.\41\
---------------------------------------------------------------------------

    \41\ 5 CFR 1320.3(c)(2).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, requires 
that the Commission provide an Initial Regulatory Flexibility Analysis 
(IRFA) with a proposed rule and a Final Regulatory Flexibility Analysis 
(FRFA), if any, with the final rule, unless the Commission certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. See 5 U.S.C. 603-605. The 
Commission published an IRFA pursuant to the RFA in its March 16, 2005 
proposed rule notice (70 FR 12823).
    The Commission does not anticipate that the final rule will have a 
significant economic impact on a substantial number of small entities. 
The Commission recognizes that many of the affected depository 
institutions may qualify as small businesses under the relevant 
threshold ( i.e., assets that do not exceed $150 million) and that the 
economic impact of the rule on a particular small entity could be 
significant. Overall, however, the rule likely will not have a 
significant economic impact on a substantial number of small entities. 
The Commission staff estimates that these requirements apply to fewer 
than 400 credit unions, banks, and savings associations. These 
depository institutions have been required to make the applicable 
disclosures for more than ten years under Section 43 of the FDIA. In 
addition, the Commission expects that most covered entities make 
disclosures about their deposit insurance as a matter of course. The 
Commission does not expect that the disclosures specified in the rule 
will have a significant impact on these entities. Accordingly, this 
document serves as notice to the Small Business Administration of the 
agency's certification of no effect. Although the Commission certifies 
under the RFA that the rule in this notice will not have a significant 
impact on a substantial number of small entities, the Commission has 
determined, nonetheless, to publish a FRFA to explain the impact of the 
rule on small entities as follows:

A. Statement of the need for, and objectives of, the amendments

    The Federal Trade Commission is charged with enforcing the 
requirements of 12 U.S.C. 1831t(b) and prescribing the manner and 
content of disclosures required by the law.

B. Issues raised by comments in response to the Initial Regulatory 
Flexibility Analysis

    Public comments raised various issues about the impacts of the 
initial proposed rule. However, as detailed in the supplemental notice, 
the FSRRA amendments addressed these concerns. Section III of this 
notice discusses in detail the issues raised in response to the 
supplemental notice.

C. Estimate of the number of small entities to which the amendments 
will apply

    As described above, the rule applies to depository institutions 
lacking federal deposit insurance, including state-chartered credit 
unions, banks, and savings associations, many of which may be small 
entities. According to the GAO, in 2003 there were 212 credit unions in 
the 50 states that chose to use private deposit insurance instead of 
federal insurance. The Commission estimates that this number is smaller 
now. The Commission estimates that, in addition to this number, there 
are approximately 150 credit unions in Puerto Rico that do not have 
federal deposit insurance. In addition, the Commission estimates that 
there are fewer than 20 banks and savings associations that would be 
covered by the rule. The Commission assumes that few of these 
depository institutions have assets exceeding $150 million.

D. Projected reporting, recordkeeping, and other compliance 
requirements

    The law requires affected institutions to comply regardless of the 
existence of an FTC rule. Nevertheless, the Commission recognizes that 
the law, and thus the FTC rule, involves some costs for affected 
depository institutions. Most of these costs are in the form of 
printing costs for account statements, signature cards, and other 
printed material requiring the disclosures. It is unlikely that

[[Page 31687]]

compliance involves any significant costs associated with legal, other 
professional, or training costs to determine the nature of the 
disclosure because the rule provides the information required to be 
disclosed to the public. The Commission does not expect that the 
disclosure requirements impose significant incremental costs for 
websites or other advertising. Adding the required disclosure to 
various materials imposes on the depository institutions some printing 
costs and perhaps minimal initial design or layout costs. A precise 
estimate of such costs is difficult to determine without data regarding 
the required volume of such materials.

E. Alternatives

    The amendments closely track the prescriptive requirements of the 
statute, and thus leave little room for significant alternatives to 
decrease the burden on regulated entities. In addition, the statutory 
requirements reflected in this final rule already apply to the affected 
entities. Accordingly, alternatives such as extending the effective 
date of the rule would have no effect on burden.

List of Subjects in 16 CFR Part 320

    Credit unions, Depository institutions, Federal Deposit Insurance 
Act, Federal Trade Commission Act, and Federal deposit insurance.

0
For the reasons stated in the preamble, the Federal Trade Commission 
adds Part 320 to 16 CFR chapter I, subchapter C as set forth below:

PART 320--DISCLOSURE REQUIREMENTS FOR DEPOSITORY INSTITUTIONS 
LACKING FEDERAL DEPOSIT INSURANCE

320.1 Scope.
320.2 Definitions.
320.3 Disclosures in periodic statements and account records.
320.4 Disclosures in advertising and on the premises.
320.5 Disclosure acknowledgment.
320.6 Exception for certain depository institutions.
320.7 Enforcement.

    Authority: 12 U.S.C. 1831t; 15 U.S.C. 41 et seq


Sec.  320.1  Scope.

    This part applies to all depository institutions lacking federal 
deposit insurance. It requires the disclosure of certain insurance-
related information in periodic statements, account records, locations 
where deposits are normally received, and advertising. This part also 
requires such depository institutions to obtain a written 
acknowledgment from depositors regarding the institution's lack of 
federal deposit insurance.


Sec.  320.2  Definitions.

    (a) Depository institution means any bank or savings association as 
defined under 12 U.S.C. 1813, or any credit union organized and 
operated according to the laws of any State, the District of Columbia, 
the several territories and possessions of the United States, the 
Panama Canal Zone, or the Commonwealth of Puerto Rico, which laws 
provide for the organization of credit unions similar in principle and 
objectives to federal credit unions.
    (b) Lacking federal deposit insurance means the depository 
institution is neither an insured depository institution as defined in 
12 U.S.C. 1813(c)(2), nor an insured credit union as defined in Section 
101 of the Federal Credit Union Act, 12 U.S.C. 1752.
    (c) Standard maximum deposit insurance amount means the maximum 
amount of deposit insurance as determined under Section 11(a)(1) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)).


Sec.  320.3  Disclosures in periodic statements and account records.

    Depository institutions lacking federal deposit insurance must 
include a notice disclosing clearly and conspicuously that the 
institution is not federally insured, and that if the institution 
fails, the Federal Government does not guarantee that depositors will 
get back their money, in all periodic statements of account, on each 
signature card, and on each passbook, certificate of deposit, or share 
certificate. For example, a notice would comply with the requirement if 
it conspicuously stated: ``[Institution's name] is not federally 
insured. If it fails, the Federal Government does not guarantee that 
you will get your money back.'' The disclosures required by this 
section must be clear and conspicuous and presented in a simple and 
easy to understand format, type size, and manner.


Sec.  320.4  Disclosures in advertising and on the premises.

    (a) Required disclosures. Each depository institution lacking 
federal deposit insurance must include a clear and conspicuous notice 
disclosing that the institution is not federally insured:
    (1) At each station or window where deposits are normally received, 
its principal place of business and all its branches where it accepts 
deposits or opens accounts (excluding automated teller machines or 
point of sale terminals), and on its main Internet page; and
    (2) In all advertisements except as provided in paragraph (c) of 
this section.
    (b) Format and type size. The disclosures required by this section 
must be clear and conspicuous and presented in a simple and easy to 
understand format, type size, and manner.
    (c) Exceptions. The following need not include a notice that the 
institution is not federally insured:
    (1) Any sign, document, or other item that contains the name of the 
depository institution, its logo, or its contact information, but only 
if the sign, document, or item does not include any information about 
the institution's products or services or information otherwise 
promoting the institution; and
    (2) Small utilitarian items that do not mention deposit products or 
insurance, if inclusion of the notice would be impractical.


Sec.  320.5  Disclosure acknowledgment.

    (a) New depositors obtained other than through a conversion or 
merger. With respect to any depositor who was not a depositor at the 
depository institution on or before October 13, 2006, and who is not a 
depositor as described in paragraph (b) of this section, a depository 
institution lacking federal deposit insurance may receive a deposit for 
the account of such depositor only if the institution has obtained the 
depositor's signed written acknowledgement that:
    (1) The institution is not federally insured; and
    (2) If the institution fails, the Federal Government does not 
guarantee that the depositor will get back the depositor's money.
    (b) New depositors obtained through a conversion or merger. With 
respect to a depositor at a federally insured depository institution 
that converts to, or merges into, a depository institution lacking 
federal insurance after October 13, 2006, a depository institution 
lacking federal deposit insurance may receive a deposit for the account 
of such depositor only if:
    (1) The institution has obtained the depositor's signed written 
acknowledgement described in paragraph (a) of this section; or
    (2) The institution makes an attempt, sent by mail no later than 45 
days after the effective date of the conversion or merger, to obtain 
the acknowledgment. In making such an attempt, the institution must 
transmit to each depositor who has not signed and returned a written 
acknowledgement described in paragraph (a) of this section:

[[Page 31688]]

    (i) A conspicuous card containing the information described in 
paragraphs (a)(1) and (a)(2) of this section, and a line for the 
signature of the depositor; and
    (ii) Accompanying materials requesting the depositor to sign the 
card, and return the signed card to the institution.
    (c) Depositors obtained on or before October 13, 2006. Any 
depository institution lacking federal deposit insurance may receive 
any deposit after October 13, 2006, for the account of a depositor who 
was a depositor on or before that date only if:
    (1) The depositor has signed a written acknowledgement described in 
paragraph (a) of this section; or
    (2) The institution has transmitted to the depositor:
    (i) A conspicuous card containing the information described in 
paragraphs (a)(1) and (a)(2) of this section, and a line for the 
signature of the depositor; and
    (ii) Accompanying materials requesting that the depositor sign the 
card, and return the signed card to the institution.
    Note to paragraph (c): The institution must have made the 
transmission described in paragraph (c)(2) of this section via mail not 
later than three months after October 13, 2006. The institution must 
have made a second identical transmission via mail not less than 30 
days, and not more than three months, after the first transmission to 
the depositor in accordance with paragraph (c)(2) of this section, if 
the institution has not, by the date of such mailing, received from the 
depositor a card referred to in paragraph (c)(1) of this section which 
has been signed by the depositor.
    (d) Format and type size. The disclosures required by this section 
must be clear and conspicuous and presented in a simple and easy to 
understand format, type size, and manner.


Sec.  320.6  Exception for certain depository institutions.

    The requirements of this part do not apply to any depository 
institution lacking federal deposit insurance and located within the 
United States that does not receive initial deposits of less than an 
amount equal to the standard maximum deposit insurance amount from 
individuals who are citizens or residents of the United States, other 
than money received in connection with any draft or similar instrument 
issued to transmit money.


Sec.  320.7  Enforcement.

    Compliance with the requirements of this part shall be enforced 
under the Federal Trade Commission Act, 15 U.S.C. 41 et seq.
    By direction of the Commission.

Donald S. Clark
Secretary
[FR Doc. 2010-13085 Filed 6-3-10: 10:48 am]
[Billing Code: 6750-0-1-S]