Rule2022-12728
Consumer Financial Protection Circular 2022-02: Deceptive Representations Involving the FDIC's Name or Logo or Deposit Insurance
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 14, 2022
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (Bureau or CFPB) has issued Consumer Financial Protection Circular 2022-02, titled, "Deceptive representations Involving the FDIC's Name or Logo or Deposit Insurance." In this circular, the Bureau responds to the question, "When do representations involving the name or logo of the Federal Deposit Insurance Corporation (FDIC) or about deposit insurance constitute a deceptive act or practice in violation of the Consumer Financial Protection Act (CFPA)? "
Full Text
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<title>Federal Register, Volume 87 Issue 114 (Tuesday, June 14, 2022)</title>
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[Federal Register Volume 87, Number 114 (Tuesday, June 14, 2022)]
[Rules and Regulations]
[Pages 35866-35868]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-12728]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Chapter X
Consumer Financial Protection Circular 2022-02: Deceptive
Representations Involving the FDIC's Name or Logo or Deposit Insurance
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Consumer financial protection circular.
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SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) has
issued Consumer Financial Protection Circular 2022-02, titled,
``Deceptive representations Involving the FDIC's Name or Logo or
Deposit Insurance.'' In this circular, the Bureau responds to the
question, ``When do representations involving the name or logo of the
Federal Deposit Insurance Corporation (FDIC) or about deposit insurance
constitute a deceptive act or practice in violation of the Consumer
Financial Protection Act (CFPA)? ''
DATES: The Bureau released this circular on its website on May 17,
2022.
ADDRESSES: Enforcers, and the broader public, can provide feedback and
comments to <a href="/cdn-cgi/l/email-protection#95d6fce7f6e0f9f4e7e6d5f6f3e5f7bbf2fae3"><span class="__cf_email__" data-cfemail="82c1ebf0e1f7eee3f0f1c2e1e4f2e0ace5edf4">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Brad Lipton, Senior Counsel, Legal
Division, at (202) 435-7700. If you require this document in an
alternative electronic format, please contact
<a href="/cdn-cgi/l/email-protection#793a3f293b26381a1a1c0a0a101b1015100d00391a1f091b571e160f"><span class="__cf_email__" data-cfemail="4b080d1b09140a28282e383822292227223f320b282d3b29652c243d">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Question Presented
When do representations involving the name or logo of the Federal
Deposit Insurance Corporation (FDIC) or about deposit insurance
constitute a deceptive act or practice in violation of the Consumer
Financial Protection Act (CFPA)?
Response
Covered persons or service providers likely violate the CFPA's
prohibition on deception if they misuse the name or logo of the FDIC or
engage in false advertising or make misrepresentations to consumers
about deposit insurance, regardless of whether such conduct (including
the misrepresentation of insured status) is engaged in knowingly.
Representations about deposit insurance may be particularly relevant
with respect to new financial products or services, especially those
involving new technologies such as digital assets, including crypto-
assets.
Analysis
The Bureau administers a number of laws and regulations relating to
the offering or providing of deposit accounts, including these
provisions: \1\
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\1\ See 12 U.S.C. 5481(12), (14), 5511.
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<bullet> The Truth in Savings Act and its implementing regulation
(Regulation DD), which enable consumers to make informed decisions
about their accounts at depository institutions through the use of
uniform disclosures; \2\
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\2\ See 12 U.S.C. 4301-4313; 12 CFR pt. 1030; CFPB Exam
Handbook, at TISA 1, <a href="https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf</a>.
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<bullet> The Electronic Fund Transfer Act and its implementing
regulation (Regulation E), which protect consumers engaging in
electronic fund transfers and remittance transfers; \3\
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\3\ See 15 U.S.C. 1693-1693r; 12 CFR pt. 1005; CFPB Exam
Handbook, at EFTA 1, <a href="https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf</a>.
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<bullet> Portions of the Federal Deposit Insurance Act (FDI Act)
and its implementing regulations, which require depository institutions
lacking Federal deposit insurance to make certain disclosures; \4\
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\4\ See 12 U.S.C. 1831t(b)-(f); 12 CFR pt. 1009.
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<bullet> The CFPA, which, among other things, prohibits unfair,
deceptive, or abusive acts or practices.\5\
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\5\ See 12 U.S.C. 5531, 5536; CFPB Exam Handbook, at UDAAP 1,
<a href="https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf</a>.
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Deposit insurance has long been a means to promote confidence in
the banking system. The most common form of deposit insurance is
administered by the Federal Deposit Insurance Corporation (FDIC).\6\
The FDIC insures deposits at FDIC-insured banks and savings
associations up to the maximum deposit insurance amount, currently
$250,000, per depositor, per FDIC-insured bank, for each account
ownership category.\7\
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\6\ Additionally, accounts at federally insured credit unions
are insured through the National Credit Union Share Insurance Fund
(NCUSIF). See NCUA, How Your Accounts are Federally Insured (Feb.
2018), <a href="https://www.ncua.gov/files/publications/guides-manuals/NCUAHowYourAcctInsured.pdf">https://www.ncua.gov/files/publications/guides-manuals/NCUAHowYourAcctInsured.pdf</a>.
\7\ See FDIC, Your Insured Deposits, at 3 (Jan. 2020), <a href="https://www.fdic.gov/resources/deposit-insurance/brochures/documents/your-insured-deposits-english.pdf">https://www.fdic.gov/resources/deposit-insurance/brochures/documents/your-insured-deposits-english.pdf</a>.
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Representations about deposit insurance may be particularly
relevant with respect to new financial products or services, especially
those involving new technologies such as digital assets, including
crypto assets. New technologies may yield significant benefits for
consumers, workers, and small businesses. Nonetheless, especially with
respect to new
[[Page 35867]]
technologies, some market participants may seek to entice consumers to
use their products or services by deceptively advertising that
uninsured products or services are FDIC-insured. These
misrepresentations disadvantage financial institutions that truthfully
market FDIC-insured accounts to consumers. Such misrepresentations also
harm consumers, who may find that their assets are not insured in a
time of financial distress.
The CFPB is issuing this circular to emphasize that covered persons
and service providers are required to comply with the CFPA with respect
to representations to consumers involving the name or logo of the FDIC
and representations about deposit insurance. The CFPB is issuing this
circular in connection with the FDIC's adoption of a regulation on
related subject matter involving section 18(a)(4) of the FDI Act, 12
U.S.C. 1828(a)(4).\8\ Thus, the circular is particularly focused on
misrepresentations to consumers about FDIC insurance. This circular
describes certain misrepresentations to consumers that can violate the
CFPA's prohibition on deceptive acts or practices in connection with a
transaction with a consumer for a consumer financial product or
service, or the offering of a consumer financial product or service.\9\
This circular notes that misrepresentations to consumers may violate
the CFPA regardless of whether they are made knowingly.
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\8\ See FDIC, Final Rule on False Advertising, Misrepresentation
of Insured Status, and Misuse of the FDIC's Name or Logo (adopted
May 17, 2022), <a href="https://www.fdic.gov/news/board-matters/2022/2022-05-17-notice-dis-a-fr.pdf">https://www.fdic.gov/news/board-matters/2022/2022-05-17-notice-dis-a-fr.pdf</a>.
\9\ This Circular does not constitute an interpretation of
section 18(a)(4) of the FDI Act, rules adopted thereunder, or the
authorities of the FDIC.
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Section 18(a)(4) of the FDI Act, 12 U.S.C. 1828(a)(4), prohibits
any person from engaging in false advertising or misusing the name or
logo of the FDIC to represent or imply that uninsured deposits are
FDIC-insured and from making knowing misrepresentations about the
extent or manner of deposit insurance provided to any deposits.\10\
Under the CFPA, covered persons and service providers are prohibited
from committing or engaging in an unfair, deceptive, or abusive act or
practice in connection with the offering or provision of a consumer
financial product or service.\11\ A covered person includes any person
that engages in offering or providing financial products or services
for use by consumers primarily for personal, family, or household
purposes.\12\ Financial products or services are defined to include,
for example, engaging in deposit-taking activities, transmitting or
exchanging funds, or otherwise acting as a custodian of funds or any
financial instrument for use by or on behalf of a consumer, as well as
(subject to certain exceptions) selling, providing, or issuing stored
value or payment instruments.\13\
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\10\ Specifically, FDI Act section 18(a)(4)(A) prohibits any
person from representing or implying that any deposit liability,
obligation, certificate, or share is insured or guaranteed by the
FDIC if such deposit liability, obligation, certificate, or share is
not insured or guaranteed by the FDIC (i) by using the terms
``Federal Deposit,'' ``Federal Deposit Insurance,'' ``Federal
Deposit Insurance Corporation,'' any combination of such terms, or
the abbreviation ``FDIC'' as part of the business name or firm name
of any person, including any corporation, partnership, business
trust, association, or other business entity; or (ii) by using such
terms or any other terms, sign, or symbol as part of an
advertisement, solicitation, or other document. 12 U.S.C.
1828(a)(4)(A). FDI Act section 18(a)(4)(B) prohibits any person from
knowingly misrepresenting (i) that any deposit liability,
obligation, certificate, or share is insured by the FDIC if such
deposit liability, obligation, certificate, or share is not so
insured; or (ii) the extent to which or the manner in which any
deposit liability, obligation, certificate, or share is insured by
the FDIC if such deposit liability, obligation, certificate, or
share is not so insured to the extent or in the manner represented.
12 U.S.C. 1828(a)(4)(B).
\11\ 12 U.S.C. 5531, 5536.
\12\ 12 U.S.C. 5481(5), (6).
\13\ 12 U.S.C. 5481(15)(A)(iv), (v); see also 12 U.S.C. 5481(8).
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Material misrepresentations are ``deceptive'' practices in
violation of the CFPA.\14\ Like FDI Act section 18(a)(4)(A), which
prohibits any false advertising or misuse of the name or logo of the
FDIC, but unlike under FDI Act section 18(a)(4)(B), which prohibits
knowing misrepresentations regarding the extent or manner that deposits
are insured, a misrepresentation to consumers may violate the CFPA's
prohibition on deception regardless of whether the misrepresentation
was made knowingly.\15\ Additionally, disclaimers may not cure
otherwise deceptive messages or practices.
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\14\ See, e.g., CFPB v. Gordon, 819 F.3d 1179, 1192-93 (9th Cir.
2016).
\15\ See, e.g., FTC v. Verity Int'l, Ltd., 443 F.3d 48, 63 (2d
Cir. 2006) (``The deception need not be made with intent to deceive.
. . .''); FTC v. Bay Area Bus. Council, Inc., 423 F.3d 627, 635 (7th
Cir. 2005) (``The FTC is not, however, required to prove intent to
deceive.''); FTC v. Freecom Communications, Inc., 401 F.3d 1192,
1204 n.7 (10th Cir. 2005) (``Unlike the elements of common law
fraud, the FTC need not prove scienter, reliance, or injury to
establish a [section] 5 violation.'').
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Covered persons or service providers likely violate the CFPA's
prohibition on deception if they misuse the name or logo of the FDIC or
engage in false advertising or make misrepresentations to consumers
about deposit insurance, regardless of whether such conduct (including
the misrepresentation of insured status) is engaged in knowingly.
Representations made by covered persons or service providers about FDIC
insurance will typically be material.\16\ Accordingly, for example, if
a person engages in or purports to engage in deposit-taking activity by
accepting (or offering to accept) funds for use by consumers, and that
person misrepresents that such funds are insured by the FDIC, that
person likely violates the CFPA's prohibition on deception, even if the
misrepresentation was not made knowingly. Similarly deceptive are
claims that consumer financial products or services are ``regulated''
by the FDIC or ``insured'' or ``eligible for'' FDIC insurance if those
claims expressly or implicitly indicate that the product is FDIC-
insured when that is not in fact the case. In particular, firms
offering or providing digital assets, including crypto assets, may be
particularly prone to making such deceptive claims to consumers about
FDIC deposit insurance coverage.
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\16\ Certain categories of information are presumed to be
material. In general, information about the central characteristics
of a consumer financial product or service--such as costs, benefits,
or restrictions on the use or availability--is presumed to be
material. Express claims made with respect to a consumer financial
product or service are presumed material. Implied claims are
presumed to be material when evidence shows that the institution
intended to make the claim (even though intent to deceive is not
necessary for deception to exist). Omissions will be presumed to be
material when the financial institution knew or should have known
that the consumer needed the omitted information to evaluate the
product or service. See CFPB Exam Handbook, at UDAAP 7, <a href="https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf</a>.
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About Consumer Financial Protection Circulars
Consumer Financial Protection Circulars are issued to all parties
with authority to enforce Federal consumer financial law. The CFPB is
the principal Federal regulator responsible for administering Federal
consumer financial law, see 12 U.S.C. 5511, including the Consumer
Financial Protection Act's prohibition on unfair, deceptive, and
abusive acts or practices, 12 U.S.C. 5536(a)(1)(B), and 18 other
``enumerated consumer laws,'' 12 U.S.C. 5481(12). However, these laws
are also enforced by State attorneys general and State regulators, 12
U.S.C. 5552, and prudential regulators including the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency,
the Board of Governors of the Federal Reserve System, and the National
Credit Union Administration. See, e.g., 12 U.S.C. 5516(d), 5581(c)(2)
(exclusive enforcement authority for banks and credit unions with $10
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billion or less in assets). Some Federal consumer financial laws are
also enforceable by other Federal agencies, including the Department of
Justice and the Federal Trade Commission, the Farm Credit
Administration, the Department of Transportation, and the Department of
Agriculture. In addition, some of these laws provide for private
enforcement.
Consumer Financial Protection Circulars are intended to promote
consistency in approach across the various enforcement agencies and
parties, pursuant to the CFPB's statutory objective to ensure Federal
consumer financial law is enforced consistently. 12 U.S.C. 5511(b)(4).
Consumer Financial Protection Circulars are also intended to
provide transparency to partner agencies regarding the CFPB's intended
approach when cooperating in enforcement actions. See, e.g., 12 U.S.C.
5552(b) (consultation with CFPB by State attorneys general and
regulators); 12 U.S.C. 5562(a) (joint investigatory work between CFPB
and other agencies).
Consumer Financial Protection Circulars are general statements of
policy under the Administrative Procedure Act. 5 U.S.C. 553(b). They
provide background information about applicable law, articulate
considerations relevant to the Bureau's exercise of its authorities,
and, in the interest of maintaining consistency, advise other parties
with authority to enforce Federal consumer financial law. They do not
restrict the Bureau's exercise of its authorities, impose any legal
requirements on external parties, or create or confer any rights on
external parties that could be enforceable in any administrative or
civil proceeding. The CFPB Director is instructing CFPB staff as
described herein, and the CFPB will then make final decisions on
individual matters based on an assessment of the factual record,
applicable law, and factors relevant to prosecutorial discretion.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-12728 Filed 6-13-22; 8:45 am]
BILLING CODE 4810-AM-P
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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.