Under federal and state laws, all federally chartered depository institutions and the vast majority of state-chartered institutions are required to have federal deposit insurance. The federal deposit insurance funds were established to restore and maintain depositors’ confidence in the banking system by providing a government guarantee of deposits. This guarantee insures that a person’s money on deposit with an insured institution, within certain limits, would be safe and helps negate the need for depositors having to assess the financial condition of their financial institution. FDIC administers the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). Deposit accounts maintained at banks and thrifts generally are federally insured, regardless of who charters the institution. Similarly, credit unions that are federally chartered must be federally insured by the National Credit Union Share Insurance Fund (NCUSIF), which is administered by NCUA. Almost all (98 percent) credit unions are federally insured. As of December 2002, 9,688 credit unions were federally insured, with about 81 million members and $483 billion in deposits. However, in our survey of the 50 state regulators, we found that not all states require federal deposit insurance for credit unions they charter. As of December 2002, 212 credit unions—about 2 percent of all credit unions—chose to purchase private deposit insurance. These privately insured credit unions are located in eight states and had about 1.1 million members with deposits totaling about $10.8 billion, as of December 2002— a little over 1 percent of all credit union members and 2 percent of all credit union deposits. We identified nine additional states that could permit credit unions to purchase private deposit insurance through our survey of 50 state regulators and subsequent discussions with state regulators. Figure 1 illustrates the states that permit or could permit private deposit insurance as of March 2003 and the number of privately insured credit unions as of December 2002. The number of privately insured credit unions and private deposit insurers has declined significantly since 1990. In 1990, 1,462 credit unions in 23 states purchased private deposit insurance from 10 different nonfederal, private insurers. At that time, deposits at these credit unions totaled $18.6 billion—73 percent more than the total of privately insured deposits as of December 2002. Shortly after the failure of Rhode Island Share and Depositors Indemnity Corporation (RISDIC), a private deposit insurer in Rhode Island in 1991, almost half of all privately insured credit unions converted to federal deposit insurance voluntarily or by state mandate. As a result of the conversions from private to federal deposit insurance, most private deposit insurers have gone out of business due to the loss of their membership since 1990 and only one company—ASI—currently offers private primary deposit insurance. ASI has a statutory charter granted by the State of Ohio. ASI is licensed by the Ohio Superintendent of Insurance and is subject to oversight by that department and Ohio’s Superintendent of Credit Unions. Unlike federal deposit insurance, which is backed by the full faith and credit of the United States, ASI’s insurance fund is not backed by the full faith and credit of any governmental entity. Also, in contrast to federal deposit insurance, which covers up to $100,000 in an insured account, the coverage amount provided by ASI is subject to a $250,000 statutory cap in Ohio law. Depository institutions lacking federal deposit insurance—privately insured credit unions—do not directly present a risk to the respective federal deposit insurance funds and do not pay for participation in those funds. Accordingly, they are not subject to supervision by the agencies that administer those funds. The Federal Credit Union Act contains criteria for credit unions applying for federal deposit insurance from NCUA and requires NCUA to consider a list of factors before approving an application to become federally insured. For example, NCUA must assess the credit union’s financial condition, the adequacy of reserves, the fitness of management, and the convenience and needs of the members to be served by the institution. To continue to be eligible for federal deposit insurance, credit unions must continue to comply with NCUA regulations for measures of net worth, prompt corrective action requirements, and rules governing investment and deposit activities. Section 43 imposes requirements on depository institutions lacking federal deposit insurance and private deposit insurers and assigns FTC with the responsibility for enforcing compliance with these provisions. Specifically, section 43 requires depository institutions lacking federal deposit insurance to Include conspicuously on all periodic account statements, signature cards, passbooks, certificates of deposits, or similar instruments evidencing a deposit, a notice that the institution is not federally insured and that if the institution fails, the federal government does not guarantee that depositors will get back their money; Include conspicuously in all advertising and where deposits are normally received a notice that the institution is not federally insured; and Obtain a written acknowledgement from depositors that the institution is not federally insured and that if the institution fails, the federal government does not guarantee that the depositor will get back their money. In addition, section 43 prohibits institutions lacking federal deposit insurance from engaging in interstate commerce unless the appropriate supervisor of the institution’s charter state has determined that the institution meets all eligibility requirements for federal deposit insurance. This prohibition is referred to as the “shut-down” provision. With respect to private deposit insurers, section 43 requires each insurer to Obtain an annual audit from an independent auditor using generally accepted auditing standards that includes a determination of whether the private deposit insurer follows generally accepted accounting principles and has set aside sufficient reserves for losses; and Distribute copies of the audit report to each depository institution it insures and to the appropriate supervisory agency of each state in which such an institution receives deposits, within specified time frames. With respect to FTC, section 43 Requires the Commission to prescribe “the manner and content of disclosure required under the section” in order to “ensure that current and prospective customers understand the risks involved in forgoing federal deposit insurance;” Assigns to FTC the responsibility to enforce compliance with the section under the Federal Trade Commission Act (FTC Act); Authorizes FTC to determine that an institution not chartered as a depository institution nonetheless is subject to the section, referred to as the look-alike provision; and Authorizes FTC, in consultation with FDIC, to exempt an institution from the shut-down provision. Since being charged with the responsibility to enforce and implement these requirements, FTC has requested Congress to prohibit it from enforcing these provisions. In response, FTC’s appropriation language, since 1993, has contained provisions prohibiting it from using funds to implement these provisions. FTC has authority to enforce a variety of federal antitrust and consumer protection laws. According to FTC, it works to enhance the smooth operation of the marketplace by eliminating acts or practices that are unfair or deceptive, and its efforts have been directed toward stopping actions that threaten consumers’ opportunities to exercise informed choice. The FTC Act charges FTC with responsibility for preventing the use of unfair methods of competition and unfair or deceptive acts or practices. That act, however, provides that FTC’s powers generally do not extend to depository institutions—banks, thrifts, and federal credit unions—which typically are beyond FTC’s authority. In addition, one section of the FTC Act has been interpreted to mean that FTC does not have jurisdiction over nonprofit corporations. Consistent with its appropriations authority prohibiting FTC from enforcing section 43, FTC has not implemented regulations or orders to prescribe the manner and content of required disclosures; to date, FTC has not brought any enforcement cases as a result of the identification of noncompliance with the disclosure, shut-down, and annual audit provisions. As part of this review, we also ascertained whether other laws or rules impose requirements similar to those of section 43. We found that NCUA and state regulators have imposed disclosure and audit requirements on state-chartered credit unions and private deposit insurers that, while not comparable to section 43 requirements, help achieve the objectives of section 43. For example, NCUA imposes notification requirements on federally insured credit unions seeking to convert to private deposit insurance. NCUA requires these credit unions to notify their members, in a disclosure, that if the conversion were approved, the federal government would not insure deposits. Specifically, under the Federal Credit Union Act, if a federally insured credit union terminates federal deposit insurance or converts to nonfederal (private) insurance, the institution must give its members “prompt and reasonable notice” that the institution has ceased to be federally insured. NCUA rules implement these provisions by prescribing language to be used in (1) the notices of the credit union’s proposal to terminate federal deposit insurance or convert to nonfederal (private) insurance, (2) an acknowledgement on the voting ballot of the member’s understanding that federal deposit insurance will terminate, and (3) the notice of the termination or conversion. Under NCUA’s rules, the prescribed language is to include a statement apprising members that their accounts no longer would be federally insured. Other language to be included on the notice of a proposal to convert to private deposit insurance and on the related voting ballot is to state that NCUA’s insurance is backed by the full faith and credit of the United States and that the private deposit insurance is not backed by the full faith and credit of the United States. While NCUA’s disclosure requirements provide some assurance that current members of credit unions converting to private deposit insurance are notified of the lack of federal deposit insurance coverage, these NCUA regulations do not apply to institutions that never were federally insured. In addition, disclosures contained in NCUA’s required notifications are not as extensive as disclosures required under section 43. NCUA disclosure pertains to a specific event (termination of insurance or conversion to private deposit insurance) and is provided only to those individuals who are members of the credit union at the time of the event.