WASHINGTON, D.C.— Shayna Olesiuk, Director of Banking Policy, issued the following statement on the Federal Deposit Insurance Corporation (FDIC) proposed rule that lowers the standards that banks must follow related to claiming or suggesting FDIC insurance coverage.
“Tens of millions – if not hundreds of millions – of dollars are being lost by bank customers who were led to believe that their money was insured by the FDIC when it was not. In just one case involving a fintech company called Synapse, customers are still missing $60 million to $90 million. Unfortunately, there are already too many examples of companies misleading customers, as we have detailed here.
“FDIC is supposed to take swift and strong action to prevent this type of consumer harm and to protect the integrity of the universally recognized protection of FDIC insurance. That has been the case for nearly 100 years: the FDIC has been the gold standard for protecting depositors’ savings, the banking industry, and the economy from crashes and other catastrophes. The sign ‘FDIC Insured’ is immediately recognized by all Americans as a guarantee of trust, confidence, and protection. You could literally take the FDIC promise to protect bank customers’ money to the bank, knowing your money was protected and insured.
“Not anymore. The FDIC’s latest deregulatory proposal undermines its gold standard, reputation, and integrity with weaker rules that will make it harder to stop fraudsters and others from misleadingly, if not falsely claiming or suggesting, that money is protected by FDIC insurance. As digital platforms, such as websites and mobile devices, and automated teller machines (ATMs) proliferate, so do such false and misleading claims designed to trick people into believing their money is protected by the FDIC when it is not. Shockingly, this proposal to weaken these protections basically kills a strong depositor protection rule enacted by the FDIC in December 2020 to prevent these abuses.
“Rather than protecting depositors, banks and its own reputation, the FDIC is now green-lighting scammers and fraudsters by failing to hold banks accountable for implementing the most basic and necessary consumer protection rules. The new proposal stacks the deck against consumers with additional changes that will incentivize scammers to take advantage of the rule, which will enable them to take advantage of unsuspecting depositors and others.
“That’s just wrong. The gold standard of the promise ‘FDIC Insured’ has to be protected because all Americans deserve to know when their money will be protected and when it will not. The FDIC’s proposal will irresponsibly undermine that gold standard and leave bank customers at the mercy of scammers who will enrich themselves by misleadingly claiming FDIC insurance.”
For more details on the FDIC’s proposal, see Better Markets’ Fact Sheet here.
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
