Washington, D.C. – Shayna Olesiuk, Director of Banking Policy, issued the following statement in connection with a comment letter to the Federal Deposit Insurance Corporation (FDIC) on its proposed rule requiring improved recordkeeping for custodial accounts held by FDIC-insured banks.

“The FDIC’s Proposal is a response to a massive rip-off of tens of thousands of ordinary Americans, exposed by the April 2024 bankruptcy of Synapse Financial Technologies, Inc. This is not merely a technical recordkeeping issue; banks have a legal and moral duty to keep track of, and safeguard, the funds of depositors, many of whom live from paycheck to paycheck. The proposed requirements are vital because many consumers are just one unexpected expense away from life-changing harm. We strongly support the Proposal which would strengthen the requirements for banks to protect depositors’ money.

“In the case of Synapse, victims placed funds with fintech partners of Synapse—funds that they were led to believe would be held in safe, secure, FDIC-insured bank accounts. Instead, these victims have heard the worst sentence a banker can utter to a depositor: ‘I am sorry, but we have no record of your deposits.’ Losses to these victims have been devastating, measuring for some individuals in the hundreds of thousands of dollars.

“The FDIC’s regulations do not require banks to ascertain the identities or account balances of the underlying individual depositors in pooled accounts placed by fintechs. Its regulations are limited to describing how the FDIC will make insurance determinations if a bank fails. Yet the Synapse bankruptcy makes clear that with the failure of a deposit-placing fintech, the account records of individual depositors may be in disarray or nonexistent. With millions of Americans entrusting funds every day to banking apps operating by unregulated fintechs, this situation is outrageous and must be corrected.

“We commend the FDIC for proposing bank recordkeeping for some custodial accounts. At the same time, the Proposal’s requirements apply to such a limited set of accounts that it leaves the door open for future Synapse-like debacles that would continue to devastate the lives of Main Street Americans. We recommend that the FDIC strengthen the Proposal by removing exemptions it proposed for certain accounts—exemptions that if left in place, will leave the savings of many Americans unprotected.”

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