Rule2022-10903
False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC's Name or Logo
Primary source
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Published
June 2, 2022
Effective
July 5, 2022
Issuing agencies
Federal Deposit Insurance Corporation
Abstract
The Federal Deposit Insurance Corporation is adopting a final rule to implement section 18(a)(4) of the Federal Deposit Insurance Act. The final rule establishes the process by which the Federal Deposit Insurance Corporation will identify and investigate conduct that may violate section 18(a)(4) of the Federal Deposit Insurance Act, the standards under which such conduct will be evaluated, and the procedures which the Federal Deposit Insurance Corporation will follow when formally and informally enforcing the provisions of section 18(a)(4) of the Federal Deposit Insurance Act.
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<title>Federal Register, Volume 87 Issue 106 (Thursday, June 2, 2022)</title>
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[Federal Register Volume 87, Number 106 (Thursday, June 2, 2022)]
[Rules and Regulations]
[Pages 33415-33423]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10903]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 87, No. 106 / Thursday, June 2, 2022 / Rules
and Regulations
[[Page 33415]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 328
RIN 3064-AF71
False Advertising, Misrepresentation of Insured Status, and
Misuse of the FDIC's Name or Logo
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Final rule.
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SUMMARY: The Federal Deposit Insurance Corporation is adopting a final
rule to implement section 18(a)(4) of the Federal Deposit Insurance
Act. The final rule establishes the process by which the Federal
Deposit Insurance Corporation will identify and investigate conduct
that may violate section 18(a)(4) of the Federal Deposit Insurance Act,
the standards under which such conduct will be evaluated, and the
procedures which the Federal Deposit Insurance Corporation will follow
when formally and informally enforcing the provisions of section
18(a)(4) of the Federal Deposit Insurance Act.
DATES: The rule is effective on July 5, 2022.
FOR FURTHER INFORMATION CONTACT: Richard M. Schwartz, Counsel, Legal
Division, 202-898-7424, <a href="/cdn-cgi/l/email-protection#304259435358475142444a70767479731e575f46"><span class="__cf_email__" data-cfemail="72001b01111a05130006083234363b315c151d04">[email protected]</span></a>; Michael P. Farrell,
Counsel, Legal Division, 202-898-3853, <a href="/cdn-cgi/l/email-protection#9ff2f9feededfaf3f3dfd9dbd6dcb1f8f0e9"><span class="__cf_email__" data-cfemail="224f44435050474e4e6264666b610c454d54">[email protected]</span></a>, Federal
Deposit Insurance Corporation, 550 17th Street NW, Washington, DC
20429.
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
Section 18(a)(4) of the Federal Deposit Insurance Act, 12 U.S.C.
1828(a)(4), (Section 18(a)(4)) prohibits any person from misusing the
name or logo of the Federal Deposit Insurance Corporation (FDIC) or
from engaging in false advertising or making knowing misrepresentations
about deposit insurance. The FDIC has observed an increasing number of
instances where financial services providers or other entities or
individuals have misused the FDIC's name or logo or have made false or
misleading representations about deposit insurance. To provide
transparency into how the FDIC will address these and similar concerns,
the FDIC is adopting regulations to further clarify its procedures for
identifying, investigating, and where necessary taking formal and
informal action to address potential violations of Section 18(a)(4).
The regulations also establish a point-of-contact for receiving
complaints and inquiries about potential misrepresentations regarding
deposit insurance. Although the FDIC is not required to promulgate
regulations to implement section 18(a)(4), the FDIC nonetheless
believes that the final rule establishes a more transparent process
that will benefit all parties and promotes stability and confidence in
FDIC deposit insurance and the nation's financial system.
II. Background
The FDIC has steadfastly and proactively sought to protect
consumers \1\ by limiting the use of the FDIC's name, seal, and logo to
insured depository institutions (IDIs) and preventing false and
misleading representations about the manner and extent of FDIC deposit
insurance (deposit insurance). Section 18(a)(4) of the Federal Deposit
Insurance Act (FDI Act), 12 U.S.C. 1828(a)(4) (Section 18(a)(4)),
prohibits any person from engaging in false advertising by misusing the
name or logo of the FDIC or from making knowing misrepresentations
about the existence of or the extent or manner of deposit insurance.\2\
Section 18(a)(4) provides the FDIC independent authority to investigate
and take administrative enforcement actions, including the power to
issue cease and desist orders and impose civil money penalties, against
any person who misuses the FDIC name or logo or makes
misrepresentations about deposit insurance.\3\
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\1\ As used in this regulation, the term ``consumer'' is broadly
defined to encompass all current and potential depositors, including
natural persons, organizations, corporate entities, and governmental
bodies.
\2\ Under Federal law, it is also criminal offense to misuse the
FDIC name or make false representations regarding deposit insurance.
See 18 U.S.C. 709.
\3\ 12 U.S.C. 1828(a)(4)(C)-(D).
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Although the FDIC has broad statutory authority in this area, the
FDIC has never issued specific regulations regarding false
representations related to deposit insurance or the misuse of the
FDIC's name or logo. Recently, the FDIC has observed an increasing
number of instances where financial service providers or other entities
or individuals have misused the FDIC's name or logo or have made false
or misleading representations about deposit insurance. Therefore, the
FDIC adopts the following rule, which provides certain procedures the
FDIC will follow for identifying, investigating, and taking formal and
informal action to address potential violations of Section 18(a)(4).
The rule also provides for an established point-of-contact responsible
for receiving complaints about potential violations of Section 18(a)(4)
and responding to inquiries about deposit insurance coverage
representations.
III. Requests for Information, The Proposed Rule, and Comments Received
Requests for Information
On February 26, 2020, the FDIC published a Request for Information
(2020 RFI) related to potential modernization of its signage and
advertising rules set out in part 328 of the FDIC regulations.\4\ Some
of the questions in the 2020 RFI related to the deposit insurance
misrepresentations addressed in this final rule. The comment period for
the 2020 RFI was extended on March 13, 2020,\5\ but efforts to modify
the rules under part 328 of the FDIC regulations were postponed in
light of the COVID-19 national emergency. Subsequently, the FDIC
published a new Request for Information in the Federal Register on
April 9, 2021 (2021 RFI) which focused on soliciting information on the
FDIC's advertising requirements applicable to IDIs and related topics,
and removed specific questions relating to misrepresentations and
misuse.\6\
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\4\ 85 FR 10997 (Feb. 26, 2020).
\5\ 85 FR 14678 (Mar. 13, 2020).
\6\ 86 FR 18528 (April 9, 2021).
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The Proposed Rule
On May 10, 2021, the FDIC published a notice of proposed rulemaking
(NPR)
[[Page 33416]]
to implement Section 18(a)(4).\7\ The NPR proposed a regulation
redesignating the existing regulations in part 328 as subpart A to part
328 and establishing a new subpart B to part 328, entitled ``False
Advertising, Misrepresentation of Insured Status, and Misuse of the
FDIC's Name or Logo.'' The proposed subpart described certain
procedures by which the FDIC would identify and investigate conduct
that may violate Section 18(a)(4), the standards under which such
conduct would be evaluated, and the procedures which the FDIC would
follow when formally and informally enforcing the provisions of Section
18(a)(4).
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\7\ 86 FR 24770 (May 10, 2021).
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Comments on the Proposed Rule
A. Overview
The FDIC issued the NPR on May 10, 2021, with a 60-day comment
period. In the NPR, the FDIC also stated that it would consider any
relevant comments submitted in response to the 2021 RFI. The FDIC
received nineteen comments in response to the NPR.\8\ Commenters
included trade associations, insured depository institutions, advocacy
groups, and other interested parties. All of the commenters expressed
support for the proposed rule. Some noted that they have seen similar
trends of misuse in the industry that the proposal is meant to combat.
Several commenters applauded the FDIC's efforts to prevent false and
misleading statements regarding deposit insurance and promote public
confidence in FDIC-insured institutions. Additionally, commenters
stated that the proposal sufficiently identifies situations that
present potential risks related to false or misleading representations
regarding deposit insurance coverage and the misuse of the FDIC's name
or logo. Further, commenters stated that the proposed informal and
formal enforcement processes were adequate. Additionally, the FDIC
received two comments in response to the 2021 RFI that contained
comments relevant to this rulemaking, one from a trade association and
one from an IDI. These comments generally echoed the FDIC's concerns
about consumers' ability to understand whether and how funds placed
with non-IDIs are insured.
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\8\ Of the comments received, some comments were identical.
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B. Requests for Clarification
Many commenters requested certain changes to clarify specific
elements of the proposed rule. For example, a number of commenters
asked that the FDIC clarify that IDIs have the authority to submit
complaints of possible violations. Other commenters requested that the
FDIC define certain terms in the proposed rule. For example, in regard
to 12 CFR 308.147, one commenter requested the FDIC to clarify the
meaning of the phrase ``a known IAP'' of an IDI.\9\
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\9\ The draft regulation defined the term ``IAP'' to mean an
``institution-affiliated party'' under section 3(u) of the FDI Act,
12 U.S.C. 1813(u). As discussed more fully below, the term ``known
IAP'' was not defined in the proposed regulation.
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Additionally, in reviewing the comments, the FDIC noted that
commenters used differing terms to refer to those impacted by potential
misrepresentations. Some commenters referred to these as ``consumers.''
Others referred to them as ``consumers or depositors.'' Others used the
terms, ``depositors or prospective depositors.'' Finally, one commenter
noted that ``individuals . . . local governments, charitable
organizations, corporations,'' and others could be impacted.
C. Suggested Alternatives
Commenters also suggested the FDIC take additional actions beyond
the proposal. For example, commenters suggested the FDIC adopt a ``one-
click rule'' for social media and internet advertising,\10\ adopt
standard disclosure language, create a closed database accessible to
IDIs that lists IAPs who have violated these regulations, and adopt a
voluntary public register of FDIC-insured products. Additionally, one
commenter suggested the FDIC implement an information sharing mechanism
designed to notify states of any formal or informal actions taken
against an individual or entity in their jurisdiction. Additionally,
some comments submitted in response to the NPR and the 2021 RFI
suggested that the FDIC mandate that non-IDIs make certain affirmative
statements regarding deposit insurance, including affirmative
statements that non-insured products are not insured and statements
explaining how and when deposits placed with IDIs by third parties are
insured.
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\10\ The ``one-click'' rule is found in the official
interpretation to Regulation Z and Regulation DD and deals with how
certain advertising disclosures may be provided. See 12 CFR part
1026, supp. I, Comment 16(c)(1)-2, and 12 CFR part 1030, supp. I,
Comment 8(a)-9. Generally, under these regulations, when a
triggering term is mentioned in an advertisement, additional
disclosures may be required. In the case of electronic
advertisements, these regulations allow the additional disclosures
to be located on a separate web page, so long as the triggering term
is accompanied by a link that directly takes the consumer to the
additional information.
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D. Section 328.102(b)(3)(ii)
The FDIC received ten comments related to proposed Sec.
328.102(b)(3)(ii), which provided that, if a non-bank entity makes
claims regarding the insured-status of its products, the failure to
identify the name(s) of the IDI(s) which would be receiving deposits
would be a material omission in violation of the rule. The commenters,
mostly trade associations, recommended that the FDIC clarify the
provision because they argued it could constrain the dissemination of
information by and about so-called ``deposit placement networks.'' \11\
They explained that a deposit network may involve many IDIs, making it
difficult to name the specific IDI(s) in the network that will receive
a deposit until the deposit is placed. The commenters urged the FDIC to
modify or remove this requirement in the final rule.
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\11\ The term ``Deposit Placement Network'' is a defined term
under section 29(g) of the FDI Act (12 U.S.C. 1831f(g)) in relation
to brokered deposits. Although the commenters used the term
``deposit placement networks'' in their comment letters, their
comments appeared intended to apply more broadly to any deposit
network administered by a non-bank entity (referred to here as a
``deposit network sponsor'') that, through a network of IDIs with
which it has business relationships, arranges or facilitates the
placement of deposits. To distinguish these broader networks from
``Deposit Placement Networks,'' as described in section 29(g) of the
FDI Act, the FDIC will refer to the former as merely ``deposit
networks.''
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E. Hybrid Products
Two commenters requested that the FDIC clarify the advertising and
marketing requirements applicable to non-deposit and hybrid products.
One commenter asked in particular how the proposed rule and the 2020
RFI would work together, and how the FDIC will consider and investigate
complaints and statements regarding hybrid products.
Responses to Comments
With respect to requests that the FDIC clarify that IDIs can submit
complaints under the proposed rule, the FDIC reviewed the language of
proposed Sec. 328.103, which allows any ``person'' to submit
complaints, and the definition of ``person'' under proposed Sec.
328.101, which specifically includes Regulated Institutions like IDIs.
The FDIC believes these provisions make it sufficiently clear that IDIs
can submit complaints, and therefore is not making any changes to these
sections of the proposed rule.
Similarly, the FDIC does not believe it is necessary to amend the
proposed rule to further define the phrase ``known IAP'' as it is used
in proposed Sec. 328.104. The FDIC interprets this phrase to mean any
person who is actually known to the
[[Page 33417]]
FDIC to be an IAP, as defined under 12 U.S.C. 1813(u), either because
the FDIC is aware that the person is a director, officer, employee or
controlling shareholder of an IDI, or because the FDIC has already made
a determination that the person is an IAP. The FDIC believes that this
interpretation is consistent with the plain language of the phrase
``known IAP.''
Based upon the comments received, the FDIC recognizes the need to
define a single term to describe those that may be adversely impacted
by violations of Section 18(a)(4). To provide clarification, the FDIC
has added a defined term, ``Consumer,'' to include all current or
potential depositors, including natural persons, organizations,
corporate entities, and governmental bodies.\12\
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\12\ As noted in the NPR, the standards governing this rule were
adapted in part from those applicable to deception under Section 5
of the Federal Trade Commission Act, 5 U.S.C. 45 (Section 5). The
FDIC recognizes that, in some but not all cases, Section 18(a)(4)'s
prohibitions only apply to ``knowing'' misrepresentations, while
Section 5 more broadly prohibits any material misrepresentations in
commerce without regard to the advertising party's intent or
knowledge. Regardless of any difference this presents, the FDIC
believes that Section 5, which prohibits unfair or deceptive acts or
practices in commerce offers a valuable framework for evaluating
misrepresentations under Section 18(a)(4). Accordingly, the FDIC has
looked to the standards governing deception under Section 5 to
inform its understanding of what constitutes a misrepresentation
that violates Section 18(a)(4). Similarly, the FDIC believes that
Section 5 is useful in defining who Section 18(a)(4) protects, and
Federal courts have concluded that the protections offered by
Section 5 extend broadly to ``consumers,'' including natural
persons, businesses, and not-for profit organizations. See, e.g.,
FTC v. IFC Credit Corp., 543 F.Supp.2d 925, 934 (N.D.Ill. 2008). The
FDIC believes similarly broad protection is appropriate here and
consistent with the statute.
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With regard to the suggestion that the FDIC implement standard
disclosures and a ``one-click'' rule for social media and internet
advertising, the FDIC does not believe it is advisable to adopt these
suggestions in light of the pace of technological change in these
areas. The FDIC believes any formats prescribed at this time could
quickly become obsolete or even counterproductive as technology
continues to evolve. Accordingly, the FDIC believes the proposed rule
as currently drafted, which sets forth standard-based requirements as
opposed to prescribing specific formats, is more appropriate.
With regard to the suggestion that the FDIC create a database of
IAPs who have potentially violated the proposed rule, the FDIC believes
that such a database could risk reputational harm to individuals who
have not yet been found to have engaged in a violation. Further, to the
extent the FDIC pursues formal enforcement action under the proposed
rule, a public notice of charges or order will be issued. The FDIC
believes that the publication of such notices and orders would be
generally sufficient to provide IDIs with information about any
individual who the FDIC believes has violated section 18(a)(4) or the
implementing regulation.
With regard to the suggestion of a voluntary register of FDIC-
insured products, the FDIC does not believe such a register would be
advisable. The voluntary nature of such a register would limit its
usefulness. Moreover, the FDIC resources that would be required to
maintain such a register would likely be significant and outweigh any
benefit it may have.
With regard to the proposal that the FDIC institute an information
sharing system with state authorities, the FDIC does not believe any
changes to the proposed rule are necessary. Proposed Sec. 328.105
authorizes the FDIC to notify other authorities (including state
regulators) of conduct that may fall within their jurisdiction. The
FDIC recognizes the importance of working with other state and Federal
agencies to address false, misleading, or otherwise deceptive
representations regarding deposit insurance. Conduct that violates
Section 18(a)(4) may also violate other statutory schemes, including
but not limited to Section 5 of the Federal Trade Commission Act (FTC
Act), 5 U.S.C. 45, (Section 5) and Section 1031 of the Dodd-Frank Act,
12 U.S.C. 5531 (Section 1031). Indeed, other laws or regulations may
encompass broader conduct than that reached by Section 18(a)(4). For
example, certain of Section 18(a)(4)'s prohibitions apply only to
knowing misrepresentations, while several other statutes prohibiting
deception do not require that misrepresentations be made knowingly.
Nothing contained in this regulation should be read to limit the
authority of any state or Federal agency or individual under any other
law, including but not limited to the Consumer Financial Protection
Bureau, the Federal Trade Commission, the Federal Reserve Board of
Governors, the U.S. Department of Justice, state Attorneys General, and
the FDIC itself.\13\
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\13\ For example, to the extent a misrepresentation about
deposit insurance was made by an IDI or IAP, the FDIC would also be
able to pursue the matter under section 8 of the FDI Act, 12 U.S.C.
1818, as well as Section 18(a)(4).
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Based upon the facts and circumstances presented in individual
cases, the FDIC anticipates that it will work with other agencies to
address misrepresentations regarding deposit insurance when
appropriate. The FDIC believes the referral authority currently
contained in Sec. 328.105 adequately provides for such cooperation.
However, to further clarify, conduct that violates Section 18(a)(4) may
at times violate other statutory schemes as well. As such, the FDIC is
adding a new Sec. 328.109 to expressly reiterate that the FDIC's
authority under Section 18(a)(4) does not bar any other action
authorized by law, by the FDIC or any other agency. While this
reservation of authority to the FDIC and other agencies and individuals
is provided in the plain language of Section 18(a)(4), the FDIC
believes it is helpful to reference it in the final rule to avoid any
confusion on this point.
Finally, in response to the suggestions that the FDIC require non-
IDIs to make certain affirmative statements related to deposit
insurance, the FDIC made revisions to the proposed Sec.
328.102(b)(3)(ii), discussed below. The FDIC is not precluded from
imposing additional requirements to ensure appropriate use of its
official sign and advertisement language if the facts and circumstances
warrant such action.
With respect to the comments regarding the language of proposed
Sec. 328.102(b)(3)(ii), the FDIC's aim in the proposed rule was to
address situations in which non-bank entities were making
unsubstantiated claims about the availability of deposit insurance
without directly or indirectly identifying the IDIs with which these
entities were ostensibly doing business. In such cases, consumers and
the FDIC are unable to effectively evaluate the accuracy of such claims
by non-bank entities. Moreover, even if the non-bank entity actually
placed deposits at one or more IDIs, information identifying the IDI(s)
at which such funds were being placed is vital to understanding the
extent and manner of deposit insurance provided. Omission of this
information could impact the insurability of the deposited funds to the
consumer's detriment.\14\
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\14\ For example, assume an individual consumer had $50,000 on
deposit at Bank A. If the consumer saw an advertisement by a non-
bank entity that promised full FDIC deposit insurance on large
certificates of deposit (CDs), and the consumer obtained a $250,000
CD from the non-bank entity, the consumer would not necessarily
receive the full value of the promised deposit insurance if the non-
bank entity placed the consumer's funds at Bank A. Assuming these
deposits, totaling $300,000, were held in the same capacity at Bank
A, they would only be insured for up to $250,000.
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Commenters have pointed out that it may not always be possible to
identify with specificity the IDI(s) that will receive funds placed
through a deposit network until those funds are actually
[[Page 33418]]
deposited at the IDI(s).\15\ Nonetheless, the FDIC continues to believe
that in order for a non-bank entity to avoid the prohibition under
Section 18(a)(4) against making misrepresentations about deposit
insurance, a non-bank entity cannot advertise that its products are or
will be FDIC-insured without providing consumers with sufficient
information to adequately understand the extent and manner of deposit
insurance provided. Such information allows consumers to verify
representations about deposit insurance directly with IDIs and also
allows consumers to avoid a situation where their total combined
deposits at a particular IDI may exceed the maximum deposit insurance
amount. Accordingly, the FDIC is amending proposed Sec.
328.102(b)(3)(ii) and has created a new Sec. 328.102(b)(5) to
accommodate and address these competing concerns.\16\
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\15\ For example, if a customer places a deposit through a
deposit network, the deposit network may be unable to tell the
consumer in advance whether the entirety of the deposit will be
placed at a single institution or whether it might be divided and
placed at multiple institutions.
\16\ The Sec. 328.102(b)(5) that was included in the NPR has
likewise been redesignated as Sec. 328.102(b)(6).
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Rather than requiring non-bank entities that are advertising FDIC-
insured deposits to identify the specific IDI(s) that will receive a
consumer's deposit, the FDIC is adopting a final rule that will require
such non-bank entities to identify the IDI(s) with which the non-bank
entities have existing direct or indirect business relationships and
into which consumers' deposits may be placed.\17\ The use of the word
``may'' does not allow non-bank entities to satisfy this requirement by
merely identifying IDIs with which such non-bank entities might one day
do business. The final rule provides that such non-bank entities must
identify the IDIs with which such an entity has an existing direct or
indirect business relationship for the placement of deposits and into
which consumers' deposits may be placed.\18\ To the extent that a non-
bank entity places deposits through a deposit network, it may satisfy
this requirement by identifying the deposit network and each IDI in the
deposit network or by providing a hyperlink to a current list of all
the IDIs that are part of such a network.\19\ The FDIC believes that
the final rule provides sufficient flexibility for non-bank entities,
which as a result of relationships with deposit network sponsors may
not be able to directly identify the IDI(s) that will receive
consumers' deposits, while still providing consumers with access to
adequate information about the extent and manner of deposit insurance
provided.
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\17\ A non-bank entity may have an indirect relationship with an
IDI if it places deposits through a deposit network.
\18\ As an example, a non-bank entity may identify such IDIs by
providing consumers with a link to a current list on its website of
the IDIs with which it has existing business relationships for the
placement of deposits.
\19\ A non-bank entity may satisfy this requirement by providing
a link to a list it maintains. Alternatively, if the deposit network
maintains a current list of IDIs with which the deposit network has
existing business relationships on the deposit network sponsor's
public website, the non-bank entity may provide consumers with a
link to such a list on the deposit network's website.
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With respect to comments requesting clarification relating to
advertisements for hybrid products, the FDIC does not believe that any
change to the proposed rule is necessary. The proposed rule prohibits
misrepresentations about deposit insurance in advertising related to
hybrid products. The proposed rule adopts the definition of hybrid
products contained in subpart A, and its prohibitions related to
advertising of hybrid products are consistent with the requirements of
subpart A. To the extent that there are any future amendments to
subpart A that impact the proposed rule's provisions related to hybrid
products, the FDIC will address them at that time.
IV. The Final Rule
For the reasons stated above, the final rule adopts the proposed
rule with certain limited changes. The FDIC is amending Sec. 328.101
to add a definition for the term ``Consumer,'' to identify those
intended to be protected under the regulation. The FDIC is also
amending Sec. 328.102(b)(3)(ii), adding a new Sec. 328.102(b)(5), and
redesignating Sec. 328.102(b)(5) as Sec. 328.102(b)(6) in order to
clarify how marketing related to deposit networks can comply with the
regulation.
Additionally, the FDIC is adding a new Sec. 328.109 to make clear
that, in accordance with the plain language of Section 18(a), the
existence of the FDIC's authority to pursue enforcement actions under
this subpart does not impact the authority of any other state or
Federal agency or individual to pursue any other action authorized by
any law. The FDIC is also making a minor, technical amendment to Sec.
328.107 to provide clarity regarding the General Counsel's delegated
authority to initiate and prosecute formal enforcement actions under
the final rule.
Finally, the FDIC is redesignating the existing regulations in part
328 as subpart A to part 328, entitled ``Advertisement of Membership,''
and is establishing a new subpart B to part 328, entitled ``False
Advertising, Misrepresentation of Insured Status, and Misuse of the
FDIC's Name or Logo'' containing the new regulations described herein.
Finally, the FDIC is making technical amendments to Sec. 328.3,
limiting the applicability of definitions in that section to subpart A
of part 328, and not to part 328, generally.
V. Expected Effects
The final rule will primarily affect non-bank entities and
individuals who are potentially misusing the FDIC's name or logo or are
making misrepresentations about deposit insurance. The FDIC currently
insures 4,960 depository institutions \20\ that could also be affected;
however in practice, the final rule will primarily affect non-bank
entities and private individuals. Since the adoption of Section
18(a)(4) in 2008, the FDIC has issued only one formal enforcement order
against a non-bank entity for misuse of the FDIC's name or logo or for
misrepresentations or false advertising in relation to deposit
insurance. However, between January 1, 2019, and December 31, 2020, the
FDIC reached informal resolutions regarding the potential misuse of the
FDIC's name or logo and/or misrepresentations relation to deposit
insurance in at least 165 instances.\21\ Based on this experience, the
FDIC estimates that the final rule will apply to relatively few formal
enforcement actions and conservatively estimates that it will affect
fewer than 165 informal resolutions with non-bank entities and
individuals each year.
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\20\ Call Report data, June 30, 2021.
\21\ See FDIC 2019 Annual Report, p. 38; FDIC 2020 Annual
Report, p. 47.
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As discussed previously, the final rule will clarify the FDIC's
procedures for evaluating potential violations of Section 18(a)(4). The
final rule will generally be consistent with existing practices used by
the FDIC with respect to these matters. Further the rule will not
affect the application of related criminal prohibitions under 18 U.S.C.
709. Therefore, the FDIC believes that the final rule is unlikely to
have any significant effect on formal and informal enforcement of the
Section 18(a)(4) prohibitions.
The final rule could pose some indirect disclosure costs on non-
depository entities. The rule's description of ``material omission''
provides that a statement that a product is insured or guaranteed by
the FDIC violates the rule if non-depository entities who make
representations about
[[Page 33419]]
deposit insurance fail to directly or indirectly identify the IDIs into
which consumers' deposits may be placed. As described above, a non-bank
entity may comply with this provision by publicly disclosing the
name(s) of all IDI(s) with which the entity has existing direct or
indirect business relationships for the placement of deposits and into
which consumers' deposits may be placed. If the non-bank entity places
deposits through a deposit network, it may publicly disclose the
name(s) of the IDIs that are part of the deposit network. Such a list
could be provided in writing or through a hyperlink to a website
containing this information. Such a website could be maintained by the
non-bank entity or the deposit network. In turn, the rule could result
in deposit networks making publicly available lists of the IDIs with
which they have existing business relationships for the placement of
deposits, to the degree those entities are not already doing so. In
either case, the FDIC believes that any such costs are likely to be
relatively small.
The FDIC believes that the final rule will benefit FDIC-insured
institutions and members of the public by further clarifying what
constitutes a violation of Section 18(a)(4), by creating a process by
which institutions and members of the public can report suspected
instances of false advertising, misuse, or misrepresentation regarding
deposit insurance, and by establishing clear procedures by which the
FDIC will investigate and, where necessary, formally and informally
resolve potential violations of Section 18(a)(4). Specifically, the
added transparency on the FDIC's processes for investigating potential
instances of misuse or misrepresentation and, if needed, resolution are
expected to benefit the parties involved by establishing a common
understanding of those processes.
VI. Alternatives
The FDIC has considered alternatives to the rule but believes that
adopting subpart B to part 328 represents the most appropriate option.
As discussed previously, Section 18(a)(4) establishes prohibitions
against the misuse of the FDIC's name or logo and prohibits
misrepresentations and false advertising in relation to deposit
insurance. The FDIC considered the status quo alternative of not
adopting a regulation. However, the FDIC believes that the final rule
is the most appropriate action because it provides clarity for the
public regarding what constitutes misuse of FDIC name or logo or
misrepresentation with respect to FDIC insurance, how the FDIC will
identify and investigate suspected instances of misuse or
misrepresentation, and the process by which the FDIC will pursue formal
or informal resolution of instances of misuse or misrepresentation.
VII. Administrative Law Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), requires that, in connection
with a notice of final rulemaking, an agency prepare and make available
for public comment a final regulatory flexibility analysis that
describes the impact of the final rule on small entities.\22\ However,
a regulatory flexibility analysis is not required if the agency
certifies that the rule will not have a significant economic impact on
a substantial number of small entities and publishes its certification
and a short explanatory statement in the Federal Register together with
the rule. The Small Business Administration (SBA) has defined ``small
entities'' to include banking organizations with total assets of less
than or equal to $750 million.\23\ Generally, the FDIC considers a
significant effect to be a quantified effect in excess of 5 percent of
total annual salaries and benefits per institution, or 2.5 percent of
total noninterest expenses. The FDIC believes that effects in excess of
these thresholds typically represent significant effects for FDIC-
supervised institutions. For the reasons provided below, the FDIC
certifies that the rule will not have a significant economic impact on
a substantial number of small entities. Accordingly, a regulatory
flexibility analysis is not required.
---------------------------------------------------------------------------
\22\ 5 U.S.C. 601, et seq.
\23\ The SBA defines a small banking organization as having $750
million or less in assets, where ``a financial institution's assets
are determined by averaging the assets reported on its four
quarterly financial statements for the preceding year.'' See 13 CFR
121.201 (as amended by 87 FR18627, effective May 2, 2022). ``SBA
counts the receipts, employees, or other measure of size of the
concern whose size is at issue and all of its domestic and foreign
affiliates.'' See 13 CFR 121.103. Following these regulations, the
FDIC uses a covered entity's affiliated and acquired assets,
averaged over the preceding four quarters, to determine whether the
FDIC-supervised institution is ``small'' for the purposes of RFA.
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As of June 30, 2021, the FDIC insured 4,960 depository
institutions, of which 3,374 are considered small banking organizations
for the purposes of RFA.\24\ Potential instances of misuse of the FDIC
name or logo, or misrepresentations about deposit insurance, by IDIs
are usually addressed under the normal supervisory authority of the
appropriate Federal financial regulator; therefore although the final
rule could affect IDIs, in practice the rule would primarily affect
non-bank entities and private individuals. Private individuals are not
considered ``small entities'' under the RFA.\25\
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\24\ FDIC Call Report data, June 30, 2021.
\25\ How to Comply with the Regulatory Flexibility Act, August
2017, The U.S. Small Business Administration, Office of Advocacy,
<a href="https://cdn.advocacy.sba.gov/wp-content/uploads/2019/06/21110349/How-to-Comply-with-the-RFA.pdf">https://cdn.advocacy.sba.gov/wp-content/uploads/2019/06/21110349/How-to-Comply-with-the-RFA.pdf</a>.
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Based on the information above, the FDIC certifies that the rule
would not have a significant economic impact on a substantial number of
small entities.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) states that no agency may
conduct or sponsor, nor is the respondent required to respond to, an
information collection unless it displays a currently valid Office of
Management and Budget (OMB) control number.\26\ The FDIC's OMB control
number for its ``Customer Assistance Forms'' information collection is
3064-0134. The final rule does not revise this existing information
collection pursuant to the PRA and consequently, no submission in
connection with this OMB control number will be made to the OMB for
review. However, Sec. 328.102(b)(5) of the final rule imposes third-
party disclosure requirements which will be addressed in a separate
Federal Register document. In particular, Sec. 328.102(b)(5) of the
final rule imposes disclosure requirements for non-bank entities that
make certain types of statements regarding deposit insurance. Under the
PRA, no person shall be subject to penalty for failing to comply with a
collection of information if the collection of information is not
approved by the OMB. Consequently, the FDIC will not subject anyone to
penalties for violations of Sec. 328.102(b)(5) related to such third-
party disclosures until the information collection request is approved
by the OMB.
---------------------------------------------------------------------------
\26\ 4 U.S.C. 3501-3521.
---------------------------------------------------------------------------
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act 48 requires the Federal
banking agencies to use plain language in all proposed and final
rulemakings published in the Federal Register after January 1, 2000.
The FDIC invited comment regarding the use of plain language, but did
not receive any comments on this topic.
D. The Congressional Review Act
For purposes of Congressional Review Act, the OMB makes a
determination as to whether a final rule constitutes a
[[Page 33420]]
``major'' rule. If a rule is deemed a ``major rule'' by the OMB, the
Congressional Review Act generally provides that the rule may not take
effect until at least 60 days following its publication. The
Congressional Review Act defines a ``major rule'' as any rule that the
Administrator of the Office of Information and Regulatory Affairs of
the OMB finds has resulted in or is likely to result in--(A) an annual
effect on the economy of $100,000,000 or more; (B) a major increase in
costs or prices for consumers, individual industries, Federal, State,
or Local government agencies or geographic regions, or (C) significant
adverse effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based enterprises to
compete with foreign-based enterprises in domestic and export markets.
The OMB has determined that the final rule is not a major rule for
purposes of the Congressional Review Act.
As required by the Congressional Review Act, the FDIC will submit
the final rule and other appropriate reports to Congress and the
Government Accountability Office for review.
E. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\27\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
insured depository institutions (IDIs), each Federal banking agency
must consider, consistent with principles of safety and soundness and
the public interest, any administrative burdens that such regulations
would place on depository institutions, including small depository
institutions, and customers of depository institutions, as well as the
benefits of such regulations. In addition, section 302(b) of RCDRIA
requires new regulations and amendments to regulations that impose
additional reporting, disclosures, or other new requirements on IDIs
generally to take effect on the first day of a calendar quarter that
begins on or after the date on which the regulations are published in
final form.\28\ The FDIC has determined that the final rule would not
impose any additional reporting, disclosure, or other new requirements
on IDIs, and thus the requirements of the RCDRIA do not apply.
---------------------------------------------------------------------------
\27\ 12 U.S.C. 4802(a).
\28\ Id.
---------------------------------------------------------------------------
List of Subjects in 12 CFR Part 328
Advertising, Bank deposit insurance, Savings associations, Signs
and symbols.
Authority and Issuance
For the reasons stated in the preamble, the Federal Deposit
Insurance Corporation amends 12 CFR part 328 as follows:
PART 328--ADVERTISEMENT OF MEMBERSHIP, FALSE ADVERTISING,
MISREPRESENTATION OF INSURED STATUS, AND MISUSE OF THE FDIC'S NAME
OR LOGO
0
1. Revise the authority citation for part 328 to read as follows:
Authority: 12 U.S.C. 1818, 1819 (Tenth), 1820(c), 1828(a).
0
2. Revise the heading for part 328 to read as set forth above.
0
3. Designate Sec. Sec. 328.0 through 328.4 as subpart A and add a
heading for subpart A to read as follows:
Subpart A--Advertisement of Membership
0
4. Amend Sec. 328.3 by revising paragraphs (a) and (e)(1)(i) and (ii)
to read as follows:
Sec. 328.3 Official advertising statement requirements.
(a) Advertisement defined. The term ``advertisement,'' as used in
this subpart, shall mean a commercial message, in any medium, that is
designed to attract public attention or patronage to a product or
business.
* * * * *
(e) * * *
(1) * * *
(i) Non-deposit product. As used in this subpart, the term ``non-
deposit product'' shall include, but is not limited to, insurance
products, annuities, mutual funds, and securities. For purposes of this
definition, a credit product is not a non-deposit product.
(ii) Hybrid product. As used in this subpart, the term ``hybrid
product'' shall mean a product or service that has both deposit product
features and non-deposit product features. A sweep account is an
example of a hybrid product.
* * * * *
Sec. Sec. 328.5 through 328.99 [Reserved]
0
5. Add reserved Sec. Sec. 328.5 through 328.99.
0
6. Add subpart B to read as follows:
Subpart B--False Advertising, Misrepresentation of Insured Status, and
Misuse of the FDIC's Name or Logo
Sec.
328.100 Scope.
328.101 Definitions.
328.102 Prohibition.
328.103 Inquiries and complaints.
328.104 Investigations of potential violations.
328.105 Referral to appropriate authority.
328.106 Informal resolution.
328.107 Formal enforcement actions.
328.108 Appeals process.
328.109 Other actions preserved.
Subpart B--False Advertising, Misrepresentation of Insured Status,
and Misuse of the FDIC's Name or Logo
Sec. 328.100 Scope.
This subpart applies to any person who:
(a) Falsely represents, expressly or by implication, that any
deposit liability, obligation, certificate, or share is FDIC-insured by
using the FDIC's name or logo;
(b) Knowingly misrepresents, expressly or by implication, that any
deposit liability, obligation, certificate, or share is insured by the
FDIC if such an item is not so insured;
(c) Knowingly misrepresents, expressly or by implication, the
extent to which or the manner in which any deposit liability,
obligation, certificate, or share is insured by the FDIC, if such an
item is not insured to the extent or manner represented; or
(d) Aids or abets another in any of the foregoing listed in
paragraphs (a) through (c) of this section.
Sec. 328.101 Definitions.
For purposes of this subpart:
Advertisement means a commercial message, in any medium, that is
designed to attract public attention or patronage to a product,
business, or service.
Appropriate Federal Banking Agency has the meaning set forth in
section 3(q) of the FDI Act (12 U.S.C. 1813(q)).
Consumer means any current or potential depositor, including
natural persons, organizations, corporate entities, and governmental
bodies.
FDI Act means the Federal Deposit Insurance Act, 12 U.S.C. 1811 et
seq.
FDIC means the Federal Deposit Insurance Corporation.
FDIC-Associated Images means the Seal of the FDIC, alone or within
the letter C of the term FDIC; the Official Sign and Symbol of the
FDIC, as set forth in Sec. 328.1; the Official Advertising Statement,
as set forth in Sec. 328.3(b); any similar images; and any other signs
and
[[Page 33421]]
symbols that may represent or imply that any deposit, liability,
obligation certificate, or share is insured or guaranteed in whole or
in part by the FDIC.
FDIC-Associated Terms means the abbreviation ``FDIC,'' and the
following words or phrases: ``Federal Deposit Insurance Corporation,''
``Federal Deposit,'' ``Federal Deposit Insurance,'' ``FDIC-insured,''
``FDIC insurance,'' ``insured by FDIC,'' ``member FDIC;'' any similar
words or phrases; or any other terms that may represent or imply that
any deposit, liability, obligation certificate, or share is insured or
guaranteed by the FDIC.
Federal Banking Agency has the meaning set forth in section 3(z) of
the FDI Act, 12 U.S.C. 1813(z).
General Counsel means the General Counsel of the FDIC or his or her
designee.
Hybrid Product has the same meaning as set forth under Sec.
328.3(e)(1)(ii).
Institution-Affiliated Party (IAP) has the same meaning as set
forth under section 3(u) of the FDI Act, 12 U.S.C. 1813(u).
Insured Deposit has the same meaning as set forth under section
3(m) of the FDI Act, 12 U.S.C. 1813(m).
Insured Depository Institution has the same meaning as set forth
under section 3(c)(2) of the FDI Act, 12 U.S.C. 1813(c)(2).
Non-Deposit Product has the same meaning as set forth under Sec.
328.3(e)(1)(i).
Person means a natural person, sole proprietor, partnership,
corporation, unincorporated association, trust, joint venture, pool,
syndicate, agency or other entity, association, or organization,
including a ``Regulated Institution'' as defined in this section.
Regulated Institution means any institution for which the FDIC, the
Office of the Comptroller of the Currency, or the Board of Governors of
the Federal Reserve System is the ``appropriate Federal banking
agency'' under section 3(q) of the FDI Act, 12 U.S.C. 1813(q).
Third-Party Publisher means any party that publishes, places,
distributes, or circulates advertising or marketing materials,
regardless of the platform or media used for distribution, containing
FDIC-Associated Images, FDIC-Associated Terms, or other claims
regarding FDIC insurance or guarantees. Third-Party Publishers include,
but are not limited to: Publishers and distributors of written, visual,
or print advertising; broadcasters of video or audio advertisements;
telemarketers; internet or web-based distributors, including internet
service providers, and email marketers; and direct mail marketers and
distributors.
Uninsured Financial Product means any Non-Deposit Product, Hybrid-
Product, investment, security, obligation, certificate, share, or
financial product other than an ``Insured Deposit'' as defined in this
section.
Sec. 328.102 Prohibition.
(a) Use of the FDIC name or logo. (1) No person may represent or
imply that any Uninsured Financial Product is insured or guaranteed by
the FDIC by using FDIC-Associated Terms as part of any business name or
firm name of any person.
(2) No person may represent or imply that any Uninsured Financial
Product is insured or guaranteed by the FDIC by using FDIC-Associated
Terms or by using FDIC-Associated Images as part of an Advertisement,
solicitation, or other publication or dissemination.
(3) This section applies, but is not limited, to:
(i) An Advertisement for any Uninsured Financial Product that
features or includes one or more FDIC-Associated Terms or FDIC-
Associated Images, without a clear, conspicuous, and prominent
disclaimer that the products being offered are not FDIC insured or
guaranteed.
(ii) An Advertisement for any Uninsured Financial Product that may
be backed or guaranteed by an entity other that the FDIC, but features
or includes one or more FDIC-Associated Terms or FDIC-Associated
Images, without a clear, conspicuous, prominent, and accurate
explanation as to the actual nature and source of the guarantee.
(iii) An Advertisement for any Non-Deposit Product or Hybrid
Product by a Regulated Institution that includes any statement or
symbol which implies or suggests the existence of deposit insurance
relating to the Non-Deposit Product or Hybrid Product.
(iv) Publication or dissemination of information, regardless of the
media or platform, that suggests or implies that the party making the
representation is an FDIC-insured institution if this is not in fact
true.
(v) Publication or dissemination of information, regardless of the
media or platform, that suggests or implies that the party making the
representation is associated with an FDIC-insured institution if the
nature of the association is not clearly, conspicuously, prominently,
and accurately described.
(vi) Publication or dissemination of information, regardless of the
media or platform, that suggests or implies that the party making the
representation is the FDIC or any office, division, or subdivision
thereof, if this is not in fact true.
(vii) Publication or dissemination of information, regardless of
the media or platform, that suggests or implies that the party making
the representation is associated with the FDIC or any office, division,
or subdivision thereof, if the nature of the association is not
clearly, conspicuously, prominently, and accurately described.
(b) False or misleading representations regarding FDIC insurance.
(1) No person may knowingly make false or misleading representations
about deposit insurance, including:
(i) That any deposit liability, obligation, certificate, or share
is insured under this subpart if such a deposit is not so insured;
(ii) The extent to which any deposit liability, obligation,
certificate, or share is insured under this subpart if such item is not
insured to the extent represented; or
(iii) The manner in which any deposit liability, obligation,
certificate, or share is insured under this subpart if such item is not
insured in the manner represented.
(2) For the purposes of this section, a statement is deemed to be a
statement regarding deposit insurance, if it:
(i) Includes any FDIC-Associated Images or FDIC-Associated Terms;
(ii) Makes any representation, suggestion, or implication about the
existence of FDIC insurance or the extent or manner of coverage; or
(iii) Makes any representation, suggestion, or implication about
the existence, extent, or effectiveness of any guarantee by FDIC in the
event of financial distress by Insured Depository Institutions, whether
a specific Insured Depository Institution or Insured Depository
Institutions generally, including but not limited to bank failure,
insolvency, or receivership of such institutions.
(3) For the purposes of this section, a statement regarding deposit
insurance violates this section, if:
(i) The statement contains any material representations which would
have the tendency or capacity to mislead a reasonable consumer,
regardless of whether any such consumer was actually misled; or
(ii) The statement omits material information that would be
necessary to prevent a reasonable consumer from being misled,
regardless of whether any such consumer was actually misled.
(4) Without limitation, a false or misleading representation is
deemed to
[[Page 33422]]
be material if it states, suggests, or implies that:
(i) Uninsured Financial Products are insured or guaranteed by the
FDIC;
(ii) Insured Deposits (whether generally or at a particular
Regulated Institution) are not insured or guaranteed by the FDIC;
(iii) The amount of deposit insurance coverage is different
(whether greater or less) than actually provided under the FDI Act;
(iv) The circumstances under which deposit insurance may be paid
are different than actually provided under the FDI Act;
(v) The requirements to qualify for deposit insurance, or the
process by which deposit insurance would be paid, are different from
what is provided under the FDI Act and its implementing regulations in
this chapter, including false or misleading claims related to actions
required of consumers to qualify for or obtain such insurance; or
(vi) Regulated Institutions may convert Insured Deposits into
another form of liability that is not insured, such as unsecured debt
or equity.
(5) Without limitation, a statement regarding deposit insurance
will be deemed to omit material information if the absence of such
information could lead a reasonable consumer to believe any of the
material misrepresentations set forth in paragraph (b)(4) of this
section or could otherwise result in a reasonable consumer being unable
to understand the extent or manner of deposit insurance provided. For
example, if a statement is made by a person other than an Insured
Depository Institution that represents or implies that an advertised
product is insured or guaranteed by the FDIC, it will be deemed to be a
material omission to fail to identify the Insured Depository
Institution(s) with which the representing party has a direct or
indirect business relationship for the placement of deposits and into
which the consumer's deposits may be placed.
(6) Without limitation, a representation is deemed to have been
knowingly made if the person making the representation:
(i) Has made false or misleading representations regarding deposit
insurance;
(ii) Has been advised by the FDIC in an advisory letter, as
provided in Sec. 328.106(a), or has been advised by another
governmental or regulatory authority, including, but not limited to,
another Federal banking agency, the Federal Trade Commission, the U.S.
Department of Justice, or a state bank supervisor, that such
representations are false or misleading; and
(iii) Thereafter, continues to make these, or substantially-
similar, representations.
Sec. 328.103 Inquiries and complaints.
Should any person have reason to believe that anyone is or may be
acting in violation of section 18(a) of the FDI Act (12 U.S.C. 1828(a))
or this subpart, or have questions regarding the accuracy of deposit-
related representations, such individuals may contact the FDIC at the
FDIC Information and Support Center, <a href="http://ask.fdic.gov/fdicinformationandsupportcenter/s/">http://ask.fdic.gov/fdicinformationandsupportcenter/s/</a>, or by telephone at 1-877-275-3342
(1-877-ASK-FDIC).
Sec. 328.104 Investigations of potential violations.
(a) The General Counsel has delegated authority to investigate
potential violations of section 18(a) of the FDI Act (12 U.S.C.
1828(a)) and this subpart.
(b) Such investigations will be conducted as prescribed under
section 10(c) of the FDI Act (12 U.S.C. 1820(c)) and subpart K of part
308 of this chapter (12 CFR 308.144 through 308.150). Notwithstanding
the general confidentiality provisions of 12 CFR 308.147, in cases that
may pose a risk of imminent harm to consumers, the FDIC may disclose or
confirm the existence of an investigation that does not involve an
Insured Depository Institution or a known IAP thereof. Such disclosure
must not disclose any information obtained or uncovered during the
course of the investigation.
Sec. 328.105 Referral to appropriate authority.
(a) If, in connection with the receipt of an inquiry or complaint,
or during the course of an investigation, informal resolution, or
formal enforcement under this subpart:
(1) The FDIC becomes aware of conduct by a Regulated Institution
for which another Federal banking agency is the appropriate Federal
banking agency or an Institution-Affiliated Party of such an
institution, that appears to violate section 18(a) of the FDI Act (12
U.S.C. 1828(a)), the FDIC may recommend that the appropriate Federal
banking agency take appropriate enforcement action. If the appropriate
Federal banking agency does not take the recommended action within 30
days, the FDIC may pursue any and all remedies available under section
18(a) or the FDI Act (12 U.S.C. 1828(a)) and this subpart;
(2) The FDIC becomes aware of conduct that the FDIC has reason to
believe violates a civil law or regulations within the jurisdiction of
another regulatory authority, the FDIC may take steps to notify the
appropriate authority; and
(3) The FDIC becomes aware of conduct that the FDIC has reason to
believe violates 18 U.S.C. 709, the FDIC may notify FDIC's Office of
Inspector General for referral to the appropriate criminal law
enforcement authority.
(b) To the extent that any records are provided to a regulatory or
criminal law enforcement authority, as set forth in paragraph (a) of
this section, the provision of such records will be made in accordance
with the requirements of part 309 of this chapter. Where such records
were obtained during the course of an investigation, informal
resolution, or formal enforcement action, the General Counsel will be
considered the Director of the FDIC's Division having primary authority
over records so obtained.
Sec. 328.106 Informal resolution.
(a) If the FDIC has reason to believe that any person may be
misusing an FDIC-Associated Image or FDIC-Associated Term or otherwise
violating Sec. 328.102(a), or may be making false or misleading
representations regarding deposit insurance in violation of Sec.
328.102(b), the FDIC may issue an advisory letter to such a person and/
or any person who aids or abets another in such conduct, including any
Third-Party Publisher. Generally, such an advisory letter will:
(1) Alert the recipient of advisory letter of the basis for the
FDIC's concerns;
(2) Request that the person and/or Third-Party Publisher:
(i) Take reasonable steps to prevent any violations of section
18(a) of the FDI Act (12 U.S.C. 1828(a)) and this subpart;
(ii) Commit in writing to refrain from such violations in the
future; and
(iii) Notify the FDIC in writing that the identified concerns have
been fully addressed and remediated; and
(2) Offer the person or Third-Party Publisher the opportunity to
provide additional information, documentation, or justifications to
substantiate the representations made or otherwise refute the FDIC's
expressed concerns.
(b) Except in cases where the FDIC has reason to believe that
consumers or Insured Depository Institutions may suffer harm arising
from continued violations, recipients of advisory letters described in
paragraph (a) of this section will be provided not less than fifteen
(15) days to provide the requested commitment, explanation, or
justification.
(c) Where a recipient of an advisory letter described in paragraph
(a) of this
[[Page 33423]]
section provides the FDIC with the requested written commitments within
the timeframe specified in the letter, and where any required
remediation has been verified by FDIC staff, the FDIC will generally
take no further administrative enforcement against such a party under
Sec. 328.107.
(d) Where a recipient of an advisory letter described in paragraph
(a) of this section fails to respond to the letter, fails to make the
requested commitments, or fails to provide additional information,
documentation, or justifications that the FDIC, in its discretion,
finds adequate to substantiate the representations made or otherwise
refute the concerns set forth in the advisory letter, the FDIC may
pursue all remedies set forth in this subpart.
(e) Nothing in this section will prevent the FDIC from commencing a
formal enforcement action under Sec. 328.107 at any time before or
after the issuance of an advisory letter under this section if:
(1) The FDIC has reason to believe that consumers or Insured
Depository Institutions may suffer harm arising from continued
violations; or
(2) The person to whom such an advisory letter would be sent has
previously received a similar advisory letter from the FDIC under
paragraph (a) of this section.
Sec. 328.107 Formal enforcement actions.
(a) Enforcement authority. For the purpose of enforcing the
requirements of section 18(a)(4) of the FDI Act (12 U.S.C. 1818(a)(4))
and this subpart, the General Counsel has delegated authority to bring
administrative enforcement actions against any person under sections
8(b), (c), (d), and (i) of the FDI Act (12 U.S.C. 1818(b), 1818(c),
1818(d), and 1818(i)). In the case of conduct by a Regulated
Institution for which another Federal banking agency is the appropriate
Federal banking agency or an institution-affiliated party of such an
institution, the General Counsel may not bring an enforcement action
under this subpart unless the FDIC has provided the appropriate Federal
banking agency with notice as set forth in Sec. 328.105(a)(1) and the
appropriate Federal banking agency failed to take the recommended
action.
(b) Venue. Unless the person who is the subject of the enforcement
action consents to a different location, the venue for an
administrative action commenced under section 18(a)(4) of the FDI Act
(12 U.S.C. 1818(a)(4)), will be as follows:
(1) In a case where the person who is the subject of the action is
an Insured Depository Institution or an IAP of an Insured Depository
Institution, in the Federal judicial district or territory in which the
home office of the Insured Depository Institution is located.
(2) In a case where the person who is the subject of the action is
not an Insured Depository Institution or an IAP of an Insured
Depository Institution, the Federal judicial district or territory
where the person who is the subject of the action resides, if the
subject resides in the United States. If the subject of the action does
not reside in the United States, the venue will be where the subject of
the action conducts business or the Federal judicial district for the
District of Columbia.
(3) For the purposes of paragraph (b)(1) of this section, a natural
person is deemed to reside in the Federal judicial district where the
natural person is domiciled. A person other than a natural person is
deemed to reside in the Federal judicial district where it is
headquartered or has its principal place of business.
(c) Rules of practice and procedure. All actions brought and
maintained under this section will be subject to the FDIC's Rules of
Practice and Procedure in subparts A through C of part 308 of this
chapter (12 CFR 308.1 through 308.109).
Sec. 328.108 Appeals process.
(a) A person who is the subject of a final order issued after an
administrative action commenced pursuant to this subpart may obtain
judicial review of such order in accordance with the procedures set
forth in section 8(h)(2) of the FDI Act (12 U.S.C. 1818(h)(2)).
(b) Petitions for review under this section may be filed in the
court of appeals for the circuit where the hearing was held or the
United States Court of Appeals for the District of Columbia Circuit.
Sec. 328.109 Other actions preserved.
No provision of this subpart shall be construed as barring any
action otherwise available, under the laws or regulations of the United
States or any state, to any Federal or state agency or person.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on May 17, 2022.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2022-10903 Filed 6-1-22; 8:45 am]
BILLING CODE 6714-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on June 2, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.