[Federal Register Volume 85, Number 38 (Wednesday, February 26, 2020)]
[Proposed Rules]
[Pages 10997-11000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03689]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 328

RIN 3064-ZA14


Request for Information on FDIC Sign and Advertising Requirements 
and Potential Technological Solutions

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice and request for comment.

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SUMMARY: The FDIC is seeking input regarding potential modernization of 
its sign and advertising rules to reflect that deposit-taking via 
physical branch, digital, and mobile banking channels continues to 
evolve since the FDIC last significantly updated its rules in 2006. As 
banks adjust their business models to innovate and remain competitive, 
the FDIC is considering how to revise and clarify its sign and 
advertising rules related to FDIC deposit insurance. The FDIC is 
issuing this Request for Information (RFI) to inform FDIC efforts to 
align the policy objectives of its rules and keep pace with how today's 
banks offer deposit products and services and how consumers connect 
with banks, including through evolving channels. The FDIC is also 
seeking input on how to address potential misrepresentations by 
nonbanks about deposit insurance. In addition, the FDIC requests 
information about how technological or other solutions could be 
leveraged to help consumers better distinguish FDIC-insured banks and 
savings associations from entities that are not insured by the FDIC 
(nonbanks), particularly across web and digital channels.

DATES: Comments must be received by March 19, 2020.

ADDRESSES: You may submit comments, identified by RIN 3064-ZA14, by any 
of the following methods:
     Agency Website: https://www.fdic.gov/regulations/laws/federal/. Follow the instructions for submitting comments on the Agency 
website.
     Email: [email protected]. Include RIN 3064-ZA14 in the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, 
Washington, DC 20429.
     Hand Delivery/Courier: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street NW, building 
(located on F Street) on business days between 7:00 a.m. and 5:00 p.m., 
EST.
    All comments received must include the agency name and RIN for this 
rulemaking.
    Public Inspection: All comments received will be posted without 
change to https://www.fdic.gov/regulations/laws/federal/--including any 
personal information provided--for public inspection. Paper copies of 
public comments may be ordered from the FDIC Public Information Center, 
3501 North Fairfax Drive, Room E-1002, Arlington, VA 22226 by telephone 
at (877) 275-3342 or (703) 562-2200.

FOR FURTHER INFORMATION CONTACT: David Friedman, Senior Policy Analyst, 
Division of Depositor and Consumer Protection, (202) 898-7168, 
[email protected]; Edward Hof, Senior Consumer Affairs Specialist, 
Division of Depositor and Consumer Protection, (202) 898-7213, 
[email protected]; or Richard M. Schwartz, Counsel, Legal Division, (202) 
898-7424, [email protected].

SUPPLEMENTARY INFORMATION: The FDIC is an independent federal agency 
with a mission of maintaining stability and public confidence in the 
nation's financial system by insuring bank deposits, examining and 
supervising financial institutions for safety and soundness and 
consumer protection, making large and complex financial institutions 
resolvable, and managing

[[Page 10998]]

receiverships. Today, there are more than five thousand FDIC-insured 
banks and savings associations in the United States. The FDIC insures 
money deposited in FDIC-insured banks and savings associations, and 
FDIC deposit insurance is backed by the full faith and credit of the 
United States.

FDIC Official Sign and Advertising Statement Requirements

    The FDIC's official sign and advertising statement regulations (12 
CFR part 328) require banks to continuously display the FDIC sign where 
insured deposits are usually and normally received in the bank's 
principal place of business and at all of its branches and to use an 
official advertising statement, such as ``Member FDIC,'' when 
advertising deposit products and services. Sign and advertising 
statements requirements are set forth in the Banking Act of 1935. The 
last major changes to the regulations were made in 2006 \1\ and the 
rules do not reflect evolving banking channels and operations.
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    \1\ 71 FR 40440 (July 17, 2006).
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Technology and Innovation

    The FDIC has begun a number of initiatives focused on innovation 
and technology. For example, the FDIC established the FDIC Tech Lab 
(``FDiTech'') to foster innovation in the financial services sector, 
while simultaneously protecting consumers, markets, and the Deposit 
Insurance Fund. FDiTech is working to lay the foundation for the next 
chapter of banking by encouraging innovation that meets consumer 
demand, promotes community banking, reduces compliance burdens, and 
modernizes the FDIC's supervision of banks.
    Technology has advanced the business of banking in many ways, 
including how and where depositors interface with banks and savings 
associations when making deposits. The internet, through online and 
mobile banking, smart phone applications (``apps''), digital wallets, 
and other tools, has had a profound effect on the way banking and 
deposit-taking is conducted. Some banks have no physical branches. 
Remote deposit capture for depositing checks, introduced in the early 
2000s, has become a common feature of many banking apps. In addition, 
some banks have moved away from the traditional branch/bank teller 
models to electronically-staffed kiosks and pop-up facilities and 
teller-less cafes where deposits can be accepted on tablets. In 
addition, some consumers ``deposit'' funds with prepaid account 
providers and technologically-focused financial companies 
(``fintechs''), some of which are not themselves FDIC-insured banks.\2\
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    \2\ Some uninsured companies enter into deposit arrangements 
with FDIC-insured banks, which may, under some circumstances, result 
in ``pass-through'' deposit insurance being applied per customer. 
See generally, 12 CFR part 330.
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    Given these banking industry developments, the FDIC is seeking 
information on its sign and advertising requirements to align with how 
banks offer products through various deposit-taking channels and how 
consumers interface with banks.

Potential Consumer Confusion/Misleading Advertisements

    Consumers may have difficulty distinguishing FDIC-insured banks and 
savings associations from other entities when they look for deposit 
products online. The types of potentially confusing, and sometimes 
misleading, situations consumers may encounter can generally be put 
into two broad categories: (1) Legitimate third-party business 
relationships with banks or savings associations; or (2) 
misrepresentations by certain non-FDIC insured entities.
    The first circumstance relates to certain nonbanks (such as 
fintechs or prepaid account providers) that establish legitimate 
business relationships with FDIC-insured banks and savings 
associations. In marketing their services, some nonbanks create 
websites that prominently display the FDIC logo. Consumers contact the 
FDIC about such websites, at times under the impression that these 
websites belong to FDIC-insured banks or savings associations. These 
nonbank entities typically are not claiming to be banks. Instead, the 
representation is that they will deposit customer funds at one or more 
FDIC-insured banks or savings associations, and obtain deposit 
insurance for customers.
    At times, this sort of representation is explicit and clear. 
However, in other situations, a nonbank may highlight the FDIC logo to 
communicate safety of funds, while omitting or minimizing significant 
details about deposit insurance coverage.\3\ This type of marketing may 
lead to consumer confusion about whether funds are insured.
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    \3\ For example, a determination as to the amount of the 
deposits held by a failed bank or savings association that may be 
covered will depend on certain regulatory requirements having been 
met.
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    In the second type of situation, entities establish websites and 
falsely claim to be ``Member FDIC.'' These websites commonly advertise 
above market interest rates and, by including the FDIC logo or in some 
other way claiming to be an FDIC-insured bank or savings association, 
they seek to convey legitimacy. More often than not, these entities are 
not themselves insured banks or do not have a relationship with an 
insured bank and do not offer accounts insured by the FDIC. In 2019, 
the FDIC requested that internet service providers take down over 65 
such websites. Consumers who do not realize these websites are 
fraudulent may divulge personally identifiable information (``PII'') or 
transfer money, often by wire. In some cases, the amount of money can 
be significant, and the consumer often cannot recover his/her funds. To 
assist consumers, the FDIC maintains a database (BankFind \4\) that 
consumers can use to determine whether an entity is an FDIC-insured 
bank or savings association. In addition, FDIC staff responds to 
consumers who ask whether an entity is an FDIC-insured bank or savings 
association.
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    \4\ https://research2.fdic.gov/bankfind/.
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Request for Comment

    Given the significant changes in the marketplace, technological 
developments, and rapidly evolving consumer behaviors, the FDIC is 
issuing this RFI to seek public input regarding modernizing the FDIC's 
official sign and advertising rules (12 CFR part 328) to reflect the 
continued evolution of physical branch, digital, and mobile banking 
channels. The FDIC is also seeking input about how it might address 
misrepresentations in this area. In addition, this RFI is requesting 
information about how technological and other solutions could be 
leveraged to allow consumers to better distinguish FDIC-insured banks 
or savings associations from nonbanks across digital and mobile 
channels.
    The FDIC encourages comments from all interested parties, including 
but not limited to insured banks and savings associations, technology 
companies and fintechs, other financial institutions or companies, 
depositors and financial consumers (of both FDIC-insured and uninsured 
institutions), consumer groups, researchers, trade associations, and 
other members of the financial services industry. In particular, the 
FDIC requests input on the following topics and questions:

Official Sign

    The Federal Deposit Insurance Act (``FDI Act'') requires that 
insured depository institutions display a sign relating to the 
insurance of deposits at each place of business maintained by

[[Page 10999]]

that institution in accordance with regulations issued by the FDIC.\5\ 
The implementing regulation, 12 CFR 328.2(a), specifies that the sign 
be displayed continuously at each station or window where insured 
deposits are usually and normally received in the depository 
institution's principal place of business and at all of its 
branches.\6\ The official sign must be 7 x 3 with 
black lettering on a gold background.\7\ The official sign is 
permitted--but not required--to be displayed in other locations \8\ and 
on or at ``Remote Service Facilities.'' \9\ In lieu of the official 
sign, banks may vary the sign subject to the minimum standards set for 
the sign.\10\ Non-English equivalent signs must be approved by the 
FDIC.
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    \5\ See 12 U.S.C. 1828(a)(1)(A).
    \6\ Part 328 does not apply to uninsured offices or branches of 
insured depository institutions located outside the United States. 
12 CFR 328.0.
    \7\ 12 CFR 328.1(a).
    \8\ 12 CFR 328.2(a)(1)(i).
    \9\ 12 CFR 328.2(a)(1)(ii). ``Remote Service Facilities'' are 
defined as including ``any automated teller machine, cash dispensing 
machine, point-of-sale terminal, or other remote electronic facility 
where deposits are received.''
    \10\ 12 CFR 328.2(a)(2).
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    The FDIC seeks comments on all aspects of the sign regulation, 
including the following specific questions:
    1. Should the rule continue to require the sign be a minimum size 
and a specific color? Is this needed to ensure consumers understand 
``deposit insurance?''
    2. Should the rule continue to link the placement of the sign to 
each teller station or window where insured deposits are usually and 
normally received?
    3. Should the rule take into account changes in places where 
deposits are ``usually and normally received'' by banks? How?
    4. Should the FDIC's current approach of allowing for permissive or 
optional placement and use of signage be broadened? How?
    5. Does the rule's definition of ``Remote Service Facility'' 
appropriately reflect current banking practices? For example, should 
the list of facilities (any automated teller machine, cash dispensing 
machine, point-of-sale terminal, or other remote electronic facility 
where deposits are received) be broadened? If so, what other 
``facilities'' should be included?
    6. Are FDIC-insured institutions currently displaying a digital 
representation of the FDIC sign or logo on their websites/mobile apps 
at account opening? If not, should they do so?
    7. Are FDIC-insured institutions currently displaying a digital 
representation of the FDIC sign or logo on their websites/mobile apps 
each time a consumer deposits funds? If not, should they do so?
    8. Are alternative means of displaying an official FDIC sign, 
beyond a two-dimensional placard, appropriate in places such as cafes 
and through digital means? How might this be implemented for different 
delivery channels (e.g., brick-and-mortar, website, app-based)?
    9. As noted above, the current regulation requires that the 
official FDIC sign be displayed continuously at each station or window 
where insured deposits are usually and normally received in the 
depository institution's principal place of business and at all of its 
branches. Should the rule continue to require that the sign be 
displayed continuously, or should it allow for digital displays or 
representations that are not continuously displayed?
    10. To what extent do the existing rules enable consumers to 
distinguish between FDIC-insured institutions and uninsured entities? 
Are there data, surveys, and studies on this issue?

Official Advertising Statement

    The current rule requires bank advertisements \11\ that promote 
deposit products and services or promote non-specific banking products 
and services offered by the institution to state that the bank is a 
``Member of the Federal Deposit Insurance Corporation,'' ``Member of 
FDIC,'' or ``Member FDIC,'' or that the bank use the FDIC's symbol 
(taken from the official sign).\12\ The advertising statement seeks to 
enable consumers to recognize FDIC-insured deposit products, as 
contrasted with non-deposit investment products that are not insured. 
Size, print legibility and proportions are prescribed.\13\ Insured and 
uninsured (foreign) branches must be identified.\14\
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    \11\ ``Advertisement'' is defined as ``a commercial message, in 
any medium, that is designed to attract public attention or 
patronage to a product or business.'' 12 CFR 328.3(a).
    \12\ 12 CFR 328.3(c)(1).
    \13\ 12 CFR 328.3(b)(2).
    \14\ 12 CFR 328.3(c)(2).
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    Insured depository institutions may not include the official 
advertising statement or other statements that imply Federal deposit 
insurance in any advertisement relating solely to ``non-deposit 
products'' or ``hybrid products.'' \15\ With ``mixed'' advertisements 
for both insured deposit products and uninsured or hybrid products, the 
official advertising statement must be segregated within the ad.\16\ 
``Hybrid product'' means ``a product or service that has both deposit 
product features and non-deposit product features.'' \17\ ``Non-deposit 
products'' are defined to include ``insurance products, annuities, 
mutual funds and securities'' but not credit products.\18\
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    \15\ 12 CFR 328.3(e)(2) and (e)(3).
    \16\ 12 CFR 328.3(e)(4).
    \17\ 12 CFR 328.3(e)(1)(ii).
    \18\ 12 CFR 328.3(e)(1)(i).
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    The FDIC seeks comments on all aspects of the official advertising 
statement regulation, including the following specific questions:
    11. Can the regulation be better clarified regarding which types of 
advertising require the inclusion of the official advertising 
statement? Should some forms of advertising currently subject to the 
requirement be made exempt? Are there newer forms of advertising that 
do not now but should include the official advertising statement?
    12. How do banks currently provide the advertising statement when 
promoting deposit products through non-traditional channels?
    13. If a bank is identified in a nonbank's promotion or 
advertisement for a deposit product or service, should the advertising 
statement be required, or conversely, should it be prohibited given 
that the deposit product or service is from an uninsured entity?

Misrepresentations

    The rule seeks to ensure that only insured banks and savings 
associations use the FDIC sign and advertising statement so consumers 
can have confidence when deposit accounts are advertised as insured. It 
is illegal to misuse the FDIC name or make false representations 
regarding deposit insurance.\19\ Moreover, under the FDI Act, the FDIC 
has the authority to issue cease and desist orders and impose civil 
money penalties against any person who: (1) Falsely represents or 
implies that any deposit liability is insured by the FDIC by use of the 
FDIC name or symbol; or (2) otherwise knowingly misrepresents that any 
deposit liability is insured (or the extent of such insurance), if such 
deposit liability is not so insured.\20\
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    \19\ 18 U.S.C. 709 (may not, without authorization, use ``the 
words ``Federal Deposit'', ``Federal Deposit Insurance'', or 
``Federal Deposit Insurance Corporation'' as the name of a business 
or advertise or otherwise falsely represent that deposits are FDIC 
insured).
    \20\ See 12 U.S.C. 1828(a)(4)(C)-(D).
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    The FDIC has not issued specific regulations regarding false 
representations related to FDIC insurance. The FDIC seeks information 
regarding misrepresentations in this

[[Page 11000]]

area, including the following specific questions:
    14. Are there examples of potential risks related to 
misrepresentations involving FDIC deposit insurance coverage that the 
FDIC should address, including those related to deposit products 
through use of the internet or other emerging technologies?
    15. What changes can be made to the FDIC sign and advertising 
statement requirements that could deal with preventing 
misrepresentations regarding FDIC deposit insurance?
    16. Are there ways that certain nonbanks should be able to 
advertise or otherwise represent a legitimate business relationship 
with an FDIC-insured institution that would be clear to consumers and 
consistent with the provision on misrepresentation?
    17. In allowing the use of their name or mark, should banks be 
responsible for ensuring the proper use of the FDIC's logo, advertising 
and representations by nonbanks with whom the banks do business?

Technological Solutions

    The FDIC regularly receives reports of fraudulent communications 
made to consumers that appear to be from FDIC-insured entities, but 
actually originate from fraudsters. These types of scams may involve a 
variety of electronic communication channels, including emails, 
websites, text messages, and social media posts. Some scam messages 
might ask the recipient to ``confirm'' or ``update'' confidential 
personal financial information, such as bank account numbers, Social 
Security numbers, dates of birth and other valuable details. Other 
scams might ask for payments or deposits to be sent, for example, by 
money order, Automated Clearing House (``ACH'') credit, wire transfer 
service, peer-to-peer payment service, gift cards, or digital currency. 
Banks also face risks that fraudsters may be using their names and 
brands to perpetrate such frauds.
    The FDIC is exploring whether technological or other solutions 
might enable consumers to validate when they are interacting with a 
FDIC-insured financial institution, and not a fraudster, when visiting 
websites and using apps on mobile devices. The FDIC seeks comments on 
how technology might be utilized to allow consumers to distinguish 
FDIC-insured banks and savings association from nonbanks across various 
web and digital channels, including the following specific questions:
    18. Do consumers look for the FDIC name or logo when using 
financial institution websites and apps to confirm the validity of 
insured institutions' authenticity? Do they look for the logo when 
deciding to open new deposit accounts? During every interaction?
    19. What technological options or other approaches could be 
utilized to allow consumers to distinguish FDIC-insured banks and 
savings associations from nonbanks across web and digital channels? 
What are the benefits and drawbacks of each approach? Is it necessary 
or desirable for the FDIC to try to ``solve'' this by rule, or can 
private sector initiatives better address this issue?
    20. If the FDIC develops a technological solution to allow 
consumers to distinguish FDIC-insured banks and savings associations 
from nonbanks across web and digital channels, what challenges would 
institutions have in implementing such solutions? How would any 
solution work with third parties that have established legitimate 
business relationships with banks or savings associations?
    21. If the FDIC develops a technological solution to allow 
consumers to distinguish FDIC-insured banks and savings associations 
from nonbanks across web and digital channels, should its use be 
limited to FDIC-insured banks, or should third parties that market or 
facilitate access to deposit products (e.g., prepaid program managers, 
fintechs) be permitted or required to use such a logo in certain 
circumstances?

Federal Deposit Insurance Corporation.

    Dated at Washington, DC, on February 20, 2020.
Annmarie H. Boyd,
Assistant Executive Secretary.
[FR Doc. 2020-03689 Filed 2-25-20; 8:45 am]
BILLING CODE 6714-01-P