[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 [www.gpo.gov]
[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, https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf.
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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, https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf.
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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, 
https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf.
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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), https://www.ncua.gov/files/publications/guides-manuals/NCUAHowYourAcctInsured.pdf.
    \7\ See FDIC, Your Insured Deposits, at 3 (Jan. 2020), https://www.fdic.gov/resources/deposit-insurance/brochures/documents/your-insured-deposits-english.pdf.
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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), https://www.fdic.gov/news/board-matters/2022/2022-05-17-notice-dis-a-fr.pdf.
    \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, https://files.consumerfinance.gov/f/documents/cfpb_supervision-and-examination-manual.pdf.
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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

[[Page 35868]]

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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