Disclosures for Non-Federally Insured Depository Institutions Under the Federal Deposit Insurance Corporation Improvement Act (FDICIA), 31682-31688 [2010-13085]

Download as PDF 31682 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations be accessed through the BIS Web site at www.bis.doc.gov. * * * * * PART 774—[AMENDED] 19. The authority citation for part 774 continues to read as follows: ■ Authority: 50 U.S.C. app. 2401 et seq.; 50 U.S.C. 1701 et seq.; 10 U.S.C. 7420; 10 U.S.C. 7430(e); 22 U.S.C. 287c, 22 U.S.C. 3201 et seq., 22 U.S.C. 6004; 30 U.S.C. 185(s), 185(u); 42 U.S.C. 2139a; 42 U.S.C. 6212; 43 U.S.C. 1354; 46 U.S.C. app. 466c; 50 U.S.C. app. 5; 22 U.S.C. 7201 et seq.; 22 U.S.C. 7210; E.O. 13026, 61 FR 58767, 3 CFR, 1996 Comp., p. 228; E.O. 13222, 66 FR 44025, 3 CFR, 2001 Comp., p. 783; Notice of August 13, 2009 (74 Fed. Reg. 41,325 (August 14, 2009)). 20. In Supplement No. 1 to part 774, Category 2, Export Control Classification Number 2B001, revise the ‘‘Controls’’ paragraph of the ‘‘License Requirements’’ section to read as follows: ■ Supplement No. 1 to Part 774—The Commerce Control List * * * * * 2B001 Machine tools and any combination thereof, for removing (or cutting) metals, ceramics or ‘‘composites’’, which, according to the manufacturer’s technical specifications, can be equipped with electronic devices for ‘‘numerical control’’; and specially designed components as follows (see List of Items Controlled). License Requirements Reason for Control: NS, NP, AT Control(s) Country chart NS applies to entire entry ................................................................................................................................................................. NP applies to 2B001.a, .b, .c, and .d, EXCEPT: (1) turning machines under 2B001.a with a capacity no greater than 35 mm diameter; (2) bar machines (Swissturn), limited to machining only bar feed through, if maximum bar diameter is equal to or less than 42 mm and there is no capability of mounting chucks. (Machines may have drilling and/or milling capabilities for machining parts with diameters less than 42 mm); or (3) milling machines under 2B001.b.with x-axis travel greater than two meters and overall ‘‘positioning accuracy’’ on the x-axis more (worse) than 0.030 mm.. AT applies to entire entry ................................................................................................................................................................. * * * * * FEDERAL TRADE COMMISSION 21. In Supplement No. 1 to part 774, Category 4, the Technical Note on ‘‘Adjusted Peak Performance’’ (‘‘APP’’) that appears at the end of Category 4, revise the definition of ‘‘APP’’ that appears under the heading ‘‘Abbreviations Used in This Technical Note’’ to read as follows: ■ * * * * Category 4—Computers * * * * * Technical Note on ‘‘Adjusted Peak Performance’’ (‘‘APP’’) * * * * * Abbreviations Used in This Technical Note * * * * * APP is expressed in Weighted TeraFLOPS (WT) in units of 1012 adjusted floating point operations per second. * * * * * Dated: May 24, 2010. Kevin J. Wolf, Assistant Secretary for Export Administration. [FR Doc. 2010–13243 Filed 6–3–10; 8:45 am] erowe on DSK5CLS3C1PROD with RULES BILLING CODE 3510–33–P VerDate Mar<15>2010 14:03 Jun 03, 2010 Jkt 220001 RIN 3084-AA99 Disclosures for Non-Federally Insured Depository Institutions Under the Federal Deposit Insurance Corporation Improvement Act (FDICIA) AGENCY: Federal Trade Commission (FTC or Commission). ACTION: Final rule. Supplement No. 1 to Part 774—The Commerce Control List * 16 CFR Part 320 SUMMARY: The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) directs the Commission to prescribe the manner and content of certain mandatory disclosures for depository institutions that lack federal deposit insurance. On March 13, 2009, the Commission published a supplemental notice of proposed rulemaking seeking comment on disclosure rules for such institutions. After reviewing comments received in response, the Commission now publishes a final rule. DATES: This final rule will become effective on July 6, 2010. ADDRESSES: Copies of this document are available from: Public Reference Branch, Room 130, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. The complete record of this proceeding is also available at that address. Relevant portions of the proceeding, including this document, are available at (https:// www.ftc.gov). FOR FURTHER INFORMATION CONTACT: Hampton Newsome, (202) 326-2889, Attorney, Division of Enforcement, Bureau of Consumer Protection, Federal PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 NS Column 1. NP Column 1. AT Column 1. Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580. SUPPLEMENTARY INFORMATION: I. Introduction In 1991, as part of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), Congress directed the Commission to prescribe certain disclosures for depository institutions lacking federal deposit insurance. Congress then prohibited the FTC from spending resources on FDICIA’s disclosure requirements until 2003. After Congress lifted that ban, the Commission published proposed disclosures consistent with FDICIA’s statutory directives (70 FR 12823 (March 16, 2005)). Many commenters raised concerns with the proposal.1 Thereafter, Congress passed the Financial Services Regulatory Relief Act of 2006 (FSRRA) (Pub. L. 109-351) amending FDICIA. The FSRRA amendments addressed almost all of the concerns raised by commenters about the FTC’s proposed rule. The Commission published a supplemental notice on March 13, 2009 (74 FR 10843) seeking comments on a proposal consistent with the FSRRA amendments. The Commission has reviewed the comments received in response and now publishes a final rule. II. Background Under existing law, all federally chartered and most state-chartered depository institutions must have federal deposit insurance. Federal deposit insurance funds currently guarantee all deposits at federally 1 See (https://www.ftc.gov/os/comments/FDICIA/ index.shtm). E:\FR\FM\04JNR1.SGM 04JNR1 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations erowe on DSK5CLS3C1PROD with RULES insured institutions up to and including $250,000 per depositor.2 Federally insured banks and credit unions must display signs disclosing this guarantee at each station or window where insured deposits are normally received in the depository institution’s principal place of business and in all its branches.3 Although the vast majority of depository institutions have federal deposit insurance, there are some exceptions. For example, the Puerto Rican government provides deposit insurance for non-federal credit unions located in Puerto Rico. In addition, approximately 170 state-chartered credit unions in approximately nine states do not have federal deposit insurance, and seek to protect their customers through private deposit insurance.4 In response to incidents affecting the safety of deposits at certain financial institutions lacking federal deposit insurance, Congress amended the Federal Deposit Insurance Act (FDIA) in 1991 by adding Section 43 (12 U.S.C. 1831t), which imposes several requirements on non-federally insured institutions5 and private deposit insurers.6 In general, Section 43(b), as amended by FSRRA, mandates that depository institutions lacking federal 2 On October 3, 2008, the enactment of the Emergency Economic Stabilization Act of 2008 (Pub. L. No. 110-343) raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor. The Helping Families Save Their Homes Act of 2009 (Pub. L. No. 111-22) extended the $250,000 coverage until December 31, 2013. 3 See 12 CFR Part 328 and 12 CFR Part 740. 4 A 2003 U.S. Government Accountability Office (GAO) report indicated that eight states had credit unions that purchased private deposit insurance in lieu of federal insurance. An additional nine states allowed private deposit insurance but did not have any privately insured credit unions. All other states required credit unions to have federal deposit insurance. ‘‘Federal Deposit Insurance Act: FTC Best Among Candidates to Enforce Consumer Protection Provisions,’’ GAO-03-971 (Aug. 2003), 67. The Commission understands that there are a small number of state banks and savings associations that do not have federal deposit insurance. 5 ‘‘Depository institutions’’ lacking federal insurance include credit unions, banks, and savings associations that are not either: a) insured depository institutions as defined under the FDIA; or b) insured credit unions as defined in Section 101 of the Federal Credit Union Act (FCUA) (12 U.S.C. 1752). The FDIA defines ‘‘insured depository institution’’ as any bank or savings association the deposits of which are insured by the FDIC pursuant to this chapter (12 U.S.C. 1813(c)). The FCUA defines ‘‘insured credit union’’ to mean ‘‘any credit union the member accounts of which are insured by the National Credit Union Administration’’ (12 U.S.C. 1752). 6 Congress passed these amendments as part of FDICIA. See Pub. L. No. 102-242, 105 Stat. 2236 (1991) (Section 151 of FDICIA, Subtitle F of Title 1, S. 543). Section 43 was initially designated as Section 40 of the FDIA. See also S. Rep. No. 167, 102 Cong., 1st Sess., at 61 (1992). VerDate Mar<15>2010 14:03 Jun 03, 2010 Jkt 220001 deposit insurance provide certain disclosures to consumers.7 Specifically, in all periodic statements, signature cards, passbooks, and share certificates, the institution must disclose that it does not have federal deposit insurance and that, if the institution fails, the federal government does not guarantee that depositors will receive their money back (hereinafter ‘‘required long disclosure’’).8 Moreover, in most advertising and at deposit windows, principal places of business, and branches, the institution must disclose that it is not federally insured (hereinafter ‘‘required short disclosure’’).9 For many years after FDICIA’s passage, Congress prohibited the Commission from using FTC resources to enforce the law’s requirements. In 2003, Congress lifted this prohibition for certain provisions of FDICIA, including the disclosure provisions of Section 43.10 Subsequently, the Commission published a Notice of Proposed Rulemaking (NPRM) seeking comments on its proposed implementation of Section 43 (70 FR 12823 (March 16, 2005)). In response, the Commission received numerous comments raising serious concerns with the proposal.11 In October 2006, Congress substantially addressed the commenter concerns directly by amending Section 43 as part of FSRRA. These new amendments rendered significant portions of the Commission’s proposed Rule obsolete. In particular, the new statutory provisions: (1) significantly altered Section 43(b)(3) (12 U.S.C. 1831t(b)(3)), which requires institutions to obtain signed acknowledgments from depositors related to the lack of federal deposit insurance; (2) established specific exemptions to the advertising disclosure requirements; (3) modified the requirements for disclosures on 7 The definition of ‘‘depository institution’’ in Section 43(f)(2) includes any entity that, as determined by the FTC, engages in the business of receiving deposits and could reasonably be mistaken for a depository institution by the entity’s current or prospective customers (i.e., ‘‘look-alike’’ institutions). The Commission has not identified any ‘‘look-alike’’ institutions to date and is not addressing the issue in this proceeding. If, in the future, the Commission or commenters identify ‘‘look-alike’’ institutions of concern that are not subject to existing legal requirements, the FTC will consider whether to develop requirements for such entities. 8 12 U.S.C. 1831t(b). 9 Id. 10 Making Appropriations for Agriculture, Rural Development, Food and Drug Administration, and Related Agencies, for the Fiscal Year Ending September 30, 2004, and for Other Purposes, H.R. Conf. Rep. No. 108-401, Cong., 1st Sess., at 88 (2003). 11 The Commission received 162 comments in response to the NPRM. See comments at (https:// www.ftc.gov/os/comments/FDICIA/index.shtm). PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 31683 periodic statements and account records and at depository locations; and (4) limited some of the FTC’s authority under the law and provided state regulators with specific enforcement authority.12 In response to the FSRRA amendments, the Commission published a supplemental notice of proposed rulemaking which discussed the FSRRA amendments in detail, proposed conforming rule changes in light of the FSRRA amendments, and sought comments on these changes. The Commission has reviewed the comments received in response13 and, as discussed in detail below, now issues its final rule. III. Comment Analysis The comments on the supplemental rule notice raised two substantive issues: 1) disclosure requirements for institutions participating in shared branching networks and service centers; and 2) the timing of signed acknowledgment requirements. A. Shared Branching Networks and Service Centers Background: Under FDICIA, nonfederally insured institutions must post required disclosures wherever ‘‘deposits are normally received.’’14 Such locations could include places that are not owned or controlled by the non-federally insured institution. For instance, the Commission indicated in its supplemental notice (74 FR at 10846) that disclosures should appear at credit union service centers (independent facilities that provide services for a group of institutions) to the extent such facilities contain stations where deposits of non-federally insured institutions ‘‘are normally received.’’ The statute does not define the term ‘‘normally received.’’ Issue and Comments: In response to the supplemental notice, many commenters raised concerns about whether the disclosure requirements apply to shared branching networks. Shared branching allows participating institutions to accept deposits and provide additional services for members of other institutions in the network. Shared branching arrangements typically involve hundreds of 12 The FSRRA amendments did not alter the basic content of the required disclosures. Section 43 continues to require depository institutions lacking federal deposit insurance affirmatively to disclose that fact to their depositors or members. (12 U.S.C. 1831t(b)). 13 The Commission received 29 comments in response to the supplemental notice. See comments at (https://www.ftc.gov/os/comments/ fdiciasupplement/index.shtm). 14 12 U.S.C. 1831t(b)(2). E:\FR\FM\04JNR1.SGM 04JNR1 31684 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations erowe on DSK5CLS3C1PROD with RULES institutions, both federally and nonfederally insured.15 Three such networks exist nationwide involving approximately 3,700 locations.16 The vast majority of institutions in these networks have federal deposit insurance.17 Many commenters raised concern that the FTC will require federally insured institutions in shared branching networks to post FDICIA disclosures on behalf of each of the non-federally ensured entities in those networks. Both federally and non-federally insured institutions argued that such a requirement would be unreasonable. Federally insured institutions warned that disclosures at their facilities would confuse consumers and may even lead some to believe their institutions lack federal insurance.18 Non-federally insured institutions argued that such a requirement may limit or prevent their participation in these networks because federally insured institutions may refuse to post such disclosures.19 American Share Insurance (ASI), a private insurer for depository institutions, agreed that such disclosures would confuse consumers and also argued that Congress did not intend to require disclosures at such locations.20 ASI argued that deposit locations at institutions in a shared branching network are analogous to deposits at ATM’s (which, in some cases, do allow deposits from other institutions). It then reasoned that, because Congress exempted ATM’s from FDICIA’s disclosure requirements, participants in shared branching networks should receive similar treatment.21 ASI also stated that Congress intended FDICIA’s requirements to match National Credit Union Administration (NCUA) regulations which require disclosures only at facilities owned or controlled by the regulated institution.22 15 For a general discussion of shared branching networks, see comments from American Share Insurance (# 540033-00003). 16 Id. 17 Id. 18 See, e.g., Honda Federal Credit Union (# 540033-00004); International Harvester Employee Credit Union (# 540033-00028). 19 See, e.g., AurGroup Financial Credit Union (# 540033-00011), Christian Community Credit Union (# 540033-00015); Cincinnati Central Credit Union (# 540033-00025); Firefighters Community Credit Union (# 540033-00009). 20 ASI (# 540033-00003). 21 See 12 U.S.C. 1831t(b)(2)(A). 22 Id. The NCUA regulations for federally insured institutions require posting ‘‘at each station or window where insured account funds or deposits are normally received in its principal place of business and in all its branches . . . .’’ See 12 C.F.R. 740.4(c) (emphasis added). In comparison, FDICIA states that the disclosure should appear ‘‘at each VerDate Mar<15>2010 14:03 Jun 03, 2010 Jkt 220001 Several other commenters also suggested that the Commission rely on recent disclosure requirements issued by the NCUA for such networks in lieu of imposing a separate disclosure requirement.23 Recently, NCUA addressed the signage requirements for institutions participating in shared branching networks (74 FR 9347 (March 4, 2009)). For federally insured institutions and facilities operated by a non-credit union entity, the new rules require a general disclosure that not all institutions in the network are federally insured.24 Commenters argued that the NCUA disclosure provides a clear explanation to consumers and that any FTC disclosure could cause confusion. Discussion: Under the statute, disclosures must appear at ‘‘each station or window where deposits are normally received’’ (emphasis added).25 By its plain language, the law does not limit such locations to those owned or controlled by the institution. At the same time, the law does not require disclosures at every station or window that could conceivably receive a deposit. Instead, the law covers locations that ‘‘normally’’ receive deposits, which the Commission interprets to include locations that operate as the functional equivalent of stations or windows at the institution’s own facilities. Whether a location ‘‘normally’’ receives deposits for a nonfederally insured institution likely depends on factors such as the volume of deposits, the frequency of deposits, the signage at the receiving institution, and whether the receiving institution is in the same city as the non-federally insured institution.26 Service centers present a different issue than shared networks. Specifically, these entities are station or window where deposits are normally received, its principal place of business and all its branches where it accepts deposits or opens accounts (excluding automated teller machines or point of sale terminals), and on its main Internet page.’’ See 12 U.S.C. 1831t(b)(2)(a). 23 74 FR 9347 (March 4, 2009) (NCUA regulations). See, e.g., Atlantic Regional Federal Credit Union (# 540033-00030); Coast Hills Federal Credit Union (# 540033-00013); Mazuma Credit Union (# 540033-00027); and ASI (# 540033-00003). 24 NCUA’s disclosure reads: ‘‘This credit union participates in a shared branch network with other credit unions and accepts share deposits for members of those other credit unions. While this credit union is federally insured, not all of these other credit unions are federally insured. If you need information on the insurance status of your credit union, please contact your credit union directly.’’ 12 C.F.R. 740.4(c)(1). 25 12 U.S.C. 1831t(b)(2)(a). 26 The record does not identify, nor is the Commission aware of, any federally insured institutions in a shared branching network that constitute locations where the deposits of nonfederally insured institutions are ‘‘normally’’ received. PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 independent facilities operated on behalf of specific institutions that share costs and ownership.27 Therefore, it seems likely that these facilities ‘‘normally’’ receive deposits for participating non-federally insured institutions. Accordingly, absent circumstances demonstrating that a particular shared center does not ‘‘normally’’ receive deposits (as discussed above) for a non-federally insured institution, the required disclosures should appear at the service center to ensure the institution complies with FDICIA. B. Timing for Signed Acknowledgments Issue: FDICIA requires institutions without federal deposit insurance to obtain signed statements from their depositors acknowledging that the institution does not have federal deposit insurance. The law, however, allows institutions under certain circumstances to provide notices to depositors in lieu of obtaining signed acknowledgments.28 Specifically, for depositors who joined the institution before October 13, 2006 (i.e., ‘‘current’’ depositors), an institution either must obtain a signed acknowledgement, or make two attempts to obtain such a signed acknowledgement through notices to depositors. Under the statute, institutions must transmit the first of these notices to current depositors not later than three months after October 13, 2006, and the second not less than thirty days, but not more than three months, after the first. Comment: The Credit Union National Association (CUNA) 29 urged the FTC to change the threshold date from October 13, 2006 to the date the Commission’s rule becomes effective. It reasoned that the 2006 date is now impossible to meet. Discussion: Congress set the October 13, 2006 date and the Commission has no discretion to change it. Importantly, the FSRRA amendments were immediately enforceable upon enactment. Therefore, the date was binding on covered institutions at that time. Complaints about retroactive application of the law, therefore, are misplaced. If an institution has not already sent notices to persons who were depositors as of October 13, 2006 pursuant to the statute, the law requires it to obtain a signed acknowledgment from that depositor before accepting a 27 See ASI (# 540033-00003). acknowledgments and notices must indicate that the institution is not federally insured and that the federal government does not guarantee that depositors will recover their money if the institution fails. See 12 U.S.C. 1831t(b)(2). 29 CUNA (# 540033-00022). 28 The E:\FR\FM\04JNR1.SGM 04JNR1 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations 31685 deposit. The Commission cannot alter this mandate. Finally, in issuing the FSRRA amendments, the Commission notes that Congress used the term ‘‘current depositor’’ to cover depositors obtained on or before October 13, 2006. As that date becomes more remote, the term ‘‘current depositor’’ may cause confusion because some may incorrectly assume the term applies to depositors obtained more recently than 2006. To address this concern, the Commission has changed the title of Section 320.5(c) to ‘‘Depositors Obtained On Or Before October 13, 2006’’ instead of ‘‘Current Depositors.’’ B. Disclosures in Periodic Statements E. Disclosure Acknowledgment Consistent with the statute (12 U.S.C. § 1831t(b)(1)), Section 320.3 requires covered depository institutions to conspicuously disclose in all periodic statements and account records that the institution is not federally insured, and that, if the institution fails, the federal government does not guarantee that depositors will recoup their money. Section 320.3 offers model language that depository institutions may use to satisfy this requirement. The Commission will evaluate whether disclosures are conspicuous according to well-established FTC law.33 IV. Summary of Final Rule Generally, the final rule incorporates the language of the statute, in many cases repeating the law’s language verbatim. Like the statute, the final rule addresses disclosure requirements for periodic statements and account records, advertising, and locations that receive deposits; signed acknowledgment requirements; and an exception to these requirements for certain depository institutions. The final rule is identical in substance to that published in the supplemental notice.30 The following summarizes the final rule’s basic provisions. C. Disclosures in Advertising Sections 320.5 and 320.6 require covered institutions to obtain signed acknowledgments of the fact that the institution is not federally insured from new depositors. The rule language tracks the 12 U.S.C. 1831t(b)(3) requirements. For certain customers (e.g., those obtained through a merger), the rule, consistent with the statute, provides an alternative notice requirement which allows institutions to send notifications attempting to obtain signed acknowledgments no later than 45 days after the merger or conversion to customers in lieu of obtaining signatures. erowe on DSK5CLS3C1PROD with RULES A. Scope of the Final Rule Section 320.1 of the rule indicates that the FTC’s new requirements apply to depository institutions (e.g., banks, savings association, and credit unions) that do not have federal deposit insurance. Consistent with Section 43(f)(3)(B) of the FDIA, a depository institution lacks federal deposit insurance if it is neither an insured depository institution as defined in the FDIA (12 U.S.C. 1813(c)(2)), nor an insured credit union as defined in Section 101 of the FCUA, 12 U.S.C. 1752. Most banks and savings associations must have federal deposit insurance under state or federal law.31 Accordingly, the rule applies apply to only a small number of state-chartered banks and savings associations.32 30 The final rule contains non-substantive editorial changes in Sections 320.2, 320.3, 320.4(a) & (b), and 320.5(a), (b), & (c). 31 See, e.g., 12 U.S.C. 222 (national banks); Cal. Fin. Code 5606(a) (California savings associations); and 12 U.S.C. 3104(c)(1) (state and federal branches of foreign banks receiving deposits of less than $100,000). 32 Consistent with the statute, the rule applies to non-federally insured credit unions in any State, the District of Columbia, the several territories and possessions of the United States, the Panama Canal Zone, and the Commonwealth of Puerto Rico (see 12 U.S.C. 1781). The Commission understands that many credit unions in Puerto Rico do not have federal deposit insurance but, instead, operate VerDate Mar<15>2010 14:03 Jun 03, 2010 Jkt 220001 Under Section 320.4, covered depository institutions must disclose in advertising consistent with 12 U.S.C. § 1831t(b)(2) that the institution is not federally insured.34 As dictated by the statute (12 U.S.C. § 1831t(b)(2)(B)), the rule also contains specific exemptions to this advertising disclosure requirement. In particular, the required short disclosure (that the institution is not federally insured) need not appear in a sign, document, or other item that has the institution’s name but no information about the institution’s products or services or information otherwise promoting the institution. Consistent with the law, the rule also exempts from the disclosure requirement, ‘‘[s]mall utilitarian items [e.g., common pens and key chains] that do not mention deposit products or insurance if inclusion of the notice would be impractical.’’ D. Disclosures at Deposit Locations Section 320.4 requires covered institutions to clearly and conspicuously disclose that the institution is not federally insured ‘‘at each station or window place where deposits are normally received, its principal place of business and all branches where it accepts deposits or opens accounts (excluding automated teller machines or point of sale terminals), and on its main Internet page . . . .’’ This section tracks the language in 12 U.S.C. 1831t(b)(2)(A). under a Puerto Rican government-backed deposit insurance system. Section 43 imposes disclosure requirements specifically on institutions that do not have federal deposit insurance and does not exempt institutions operating under non-federal insurance systems. Accordingly, Puerto Rico credit unions are subject to the rule’s requirements. 33 See, e.g., Thompson Medical Co., 104 F.T.C. 648, 797-98 (1984); The Kroger Co., 98 F.T.C. 639, 760 (1981). 34 For the purposes of the rule, advertising includes, but is not limited to, advertising in print, electronic, Internet, or broadcast media. PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 F. Exception for Certain Depository Institutions Section 43(d) of the FDIA (‘‘Exceptions for institutions not receiving retail deposits’’) provides the Commission with discretion to except certain institutions from the disclosure requirements. Specifically, the FDIA allows the Commission to exempt depository institutions that do not receive initial deposits of less than ‘‘an amount equal to the standard maximum insurance amount’’ from individuals who are citizens or residents of the United States.35 That amount is currently $250,000. The Commission’s 2005 proposed rule and the 2009 supplemental notice contained such an exception.36 The Commission reasoned that customers of institutions that handle only large initial deposits are sufficiently sophisticated that they do not need disclosures. Some commenters supported the proposed exemption while others raised concerns.37 For example, the Office of the Comptroller of the Currency (OCC) urged the Commission to expand the proposed exception to include uninsured national trust banks and federal and state branches of foreign banks altogether because these institutions do not accept retail deposits.38 NAFCU, on the other 35 12 U.S.C. 1821(a)(1). 70 FR 12823, 12825 (Mar. 16, 2005) and 74 FR 10843, 10846 (Mar. 13, 2009). The statute indicates that the FTC should not consider ‘‘money received in connection with any draft or similar instrument issued to transmit money’’ to be a deposit for the purposes of this exemption. In 2006, Congress amended the exception language by changing the threshold from ‘‘$100,000’’ to ‘‘an amount equal to the standard maximum deposit insurance amount.’’ Public Law 109-173 (Feb. 26, 2006). 37 The National Association of Federal Credit Unions (NAFCU) (# 515567-00121) and the Greater Cincinnati Credit Union (# 515567-00081) opposed the proposed exception. The Navy Federal Credit Union (# 515567-00083) supported the proposed exception. 38 OCC (#515567-00201). 36 See E:\FR\FM\04JNR1.SGM 04JNR1 31686 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations hand, opposed the provision arguing that some customers with initial deposits over the standard maximum insurance amount at federal credit unions do not understand how their funds are insured.39 In its supplemental notice, the Commission continued to propose the exception and sought further comment on the issue. The Commission received none. The final rule contains the exception. The Commission continues to believe that customers who make large deposits ($250,000 or more) at institutions that refuse initial deposits under $250,000 do not need the FDICIA disclosures because they are sufficiently sophisticated and likely understand the institution’s deposit insurance status. The rule also defines ‘‘standard maximum insurance amount’’ to mean the maximum amount of deposit insurance as determined under Section 11(a)(1) of the FDIA (12 U.S.C. 1821(a)(1)). This exception addresses one of the two issues raised by the OCC. Specifically, the OCC expressed concern about the application of FDICIA disclosure requirements to uninsured national trust banks even though they do not accept deposits. Because these institutions accept no deposits, they by definition do not accept initial deposits of under $250,000, and are therefore, exempt from the rule’s requirements. The OCC also expressed concern that the rule would cover federal and state branches of foreign banks. While Congress has already granted these institutions an exemption from federal deposit insurance requirements (12 U.S.C. 3104(c)), FDICIA contains no such exception from its disclosure requirements. Therefore, if such institutions accept initial deposits of less than $250,000, they have to comply with the rule’s disclosure requirements. Finally, the Commission notes that NAFCU raised concerns about persons making large initial deposits at credit unions and not receiving the disclosures. The record did not identify any credit unions serving individuals (i.e., natural persons) that only receive initial deposits of more than $250,000.40 Any credit unions receiving initial deposits under $250,000 must make the 39 NAFCU (# 515567-00121). addition, the record did not identify any credit unions that only receive initial deposits of more than $100,000. Although there are approximately two dozen ‘‘corporate’’ credit unions which serve only other credit unions and may have such initial deposit policies, these institutions already have federal deposit insurance and thus would not fall under the FDICIA disclosure requirements. See, e.g., (https://www.ncua.gov/ DataServices/FindCU.aspx) (National Credit Union Administration database). erowe on DSK5CLS3C1PROD with RULES 40 In VerDate Mar<15>2010 14:03 Jun 03, 2010 Jkt 220001 disclosures even if some depositors happen to open accounts with $250,000 or more. Accordingly, the Commission does not expect that the exception will apply to any credit unions. V. Paperwork Reduction Act The disclosures and written acknowledgment statements do not constitute a ‘‘collection of information’’ under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) because they are a ‘‘public disclosure of information originally supplied by the government to the recipient for the purpose of disclosure to the public’’ as indicated in Office of Management and Budget regulations.41 VI. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, requires that the Commission provide an Initial Regulatory Flexibility Analysis (IRFA) with a proposed rule and a Final Regulatory Flexibility Analysis (FRFA), if any, with the final rule, unless the Commission certifies that the rule will not have a significant economic impact on a substantial number of small entities. See 5 U.S.C. 603-605. The Commission published an IRFA pursuant to the RFA in its March 16, 2005 proposed rule notice (70 FR 12823). The Commission does not anticipate that the final rule will have a significant economic impact on a substantial number of small entities. The Commission recognizes that many of the affected depository institutions may qualify as small businesses under the relevant threshold ( i.e., assets that do not exceed $150 million) and that the economic impact of the rule on a particular small entity could be significant. Overall, however, the rule likely will not have a significant economic impact on a substantial number of small entities. The Commission staff estimates that these requirements apply to fewer than 400 credit unions, banks, and savings associations. These depository institutions have been required to make the applicable disclosures for more than ten years under Section 43 of the FDIA. In addition, the Commission expects that most covered entities make disclosures about their deposit insurance as a matter of course. The Commission does not expect that the disclosures specified in the rule will have a significant impact on these entities. Accordingly, this document serves as notice to the Small Business Administration of the agency’s 41 5 PO 00000 CFR 1320.3(c)(2). Frm 00024 Fmt 4700 Sfmt 4700 certification of no effect. Although the Commission certifies under the RFA that the rule in this notice will not have a significant impact on a substantial number of small entities, the Commission has determined, nonetheless, to publish a FRFA to explain the impact of the rule on small entities as follows: A. Statement of the need for, and objectives of, the amendments The Federal Trade Commission is charged with enforcing the requirements of 12 U.S.C. 1831t(b) and prescribing the manner and content of disclosures required by the law. B. Issues raised by comments in response to the Initial Regulatory Flexibility Analysis Public comments raised various issues about the impacts of the initial proposed rule. However, as detailed in the supplemental notice, the FSRRA amendments addressed these concerns. Section III of this notice discusses in detail the issues raised in response to the supplemental notice. C. Estimate of the number of small entities to which the amendments will apply As described above, the rule applies to depository institutions lacking federal deposit insurance, including statechartered credit unions, banks, and savings associations, many of which may be small entities. According to the GAO, in 2003 there were 212 credit unions in the 50 states that chose to use private deposit insurance instead of federal insurance. The Commission estimates that this number is smaller now. The Commission estimates that, in addition to this number, there are approximately 150 credit unions in Puerto Rico that do not have federal deposit insurance. In addition, the Commission estimates that there are fewer than 20 banks and savings associations that would be covered by the rule. The Commission assumes that few of these depository institutions have assets exceeding $150 million. D. Projected reporting, recordkeeping, and other compliance requirements The law requires affected institutions to comply regardless of the existence of an FTC rule. Nevertheless, the Commission recognizes that the law, and thus the FTC rule, involves some costs for affected depository institutions. Most of these costs are in the form of printing costs for account statements, signature cards, and other printed material requiring the disclosures. It is unlikely that E:\FR\FM\04JNR1.SGM 04JNR1 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations compliance involves any significant costs associated with legal, other professional, or training costs to determine the nature of the disclosure because the rule provides the information required to be disclosed to the public. The Commission does not expect that the disclosure requirements impose significant incremental costs for websites or other advertising. Adding the required disclosure to various materials imposes on the depository institutions some printing costs and perhaps minimal initial design or layout costs. A precise estimate of such costs is difficult to determine without data regarding the required volume of such materials. E. Alternatives The amendments closely track the prescriptive requirements of the statute, and thus leave little room for significant alternatives to decrease the burden on regulated entities. In addition, the statutory requirements reflected in this final rule already apply to the affected entities. Accordingly, alternatives such as extending the effective date of the rule would have no effect on burden. List of Subjects in 16 CFR Part 320 Credit unions, Depository institutions, Federal Deposit Insurance Act, Federal Trade Commission Act, and Federal deposit insurance. For the reasons stated in the preamble, the Federal Trade Commission adds Part 320 to 16 CFR chapter I, subchapter C as set forth below: ■ PART 320—DISCLOSURE REQUIREMENTS FOR DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE 320.1 Scope. 320.2 Definitions. 320.3 Disclosures in periodic statements and account records. 320.4 Disclosures in advertising and on the premises. 320.5 Disclosure acknowledgment. 320.6 Exception for certain depository institutions. 320.7 Enforcement. Authority: 12 U.S.C. 1831t; 15 U.S.C. 41 et seq erowe on DSK5CLS3C1PROD with RULES § 320.1 Scope. This part applies to all depository institutions lacking federal deposit insurance. It requires the disclosure of certain insurance-related information in periodic statements, account records, locations where deposits are normally received, and advertising. This part also requires such depository institutions to obtain a written acknowledgment from VerDate Mar<15>2010 14:03 Jun 03, 2010 Jkt 220001 depositors regarding the institution’s lack of federal deposit insurance. § 320.2 Definitions. (a) Depository institution means any bank or savings association as defined under 12 U.S.C. 1813, or any credit union organized and operated according to the laws of any State, the District of Columbia, the several territories and possessions of the United States, the Panama Canal Zone, or the Commonwealth of Puerto Rico, which laws provide for the organization of credit unions similar in principle and objectives to federal credit unions. (b) Lacking federal deposit insurance means the depository institution is neither an insured depository institution as defined in 12 U.S.C. 1813(c)(2), nor an insured credit union as defined in Section 101 of the Federal Credit Union Act, 12 U.S.C. 1752. (c) Standard maximum deposit insurance amount means the maximum amount of deposit insurance as determined under Section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)). § 320.3 Disclosures in periodic statements and account records. Depository institutions lacking federal deposit insurance must include a notice disclosing clearly and conspicuously 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, in all periodic statements of account, on each signature card, and on each passbook, certificate of deposit, or share certificate. For example, a notice would comply with the requirement if it conspicuously stated: ‘‘[Institution’s name] is not federally insured. If it fails, the Federal Government does not guarantee that you will get your money back.’’ The disclosures required by this section must be clear and conspicuous and presented in a simple and easy to understand format, type size, and manner. § 320.4 Disclosures in advertising and on the premises. (a) Required disclosures. Each depository institution lacking federal deposit insurance must include a clear and conspicuous notice disclosing that the institution is not federally insured: (1) At each station or window where deposits are normally received, its principal place of business and all its branches where it accepts deposits or opens accounts (excluding automated teller machines or point of sale terminals), and on its main Internet page; and PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 31687 (2) In all advertisements except as provided in paragraph (c) of this section. (b) Format and type size. The disclosures required by this section must be clear and conspicuous and presented in a simple and easy to understand format, type size, and manner. (c) Exceptions. The following need not include a notice that the institution is not federally insured: (1) Any sign, document, or other item that contains the name of the depository institution, its logo, or its contact information, but only if the sign, document, or item does not include any information about the institution’s products or services or information otherwise promoting the institution; and (2) Small utilitarian items that do not mention deposit products or insurance, if inclusion of the notice would be impractical. § 320.5 Disclosure acknowledgment. (a) New depositors obtained other than through a conversion or merger. With respect to any depositor who was not a depositor at the depository institution on or before October 13, 2006, and who is not a depositor as described in paragraph (b) of this section, a depository institution lacking federal deposit insurance may receive a deposit for the account of such depositor only if the institution has obtained the depositor’s signed written acknowledgement that: (1) The institution is not federally insured; and (2) If the institution fails, the Federal Government does not guarantee that the depositor will get back the depositor’s money. (b) New depositors obtained through a conversion or merger. With respect to a depositor at a federally insured depository institution that converts to, or merges into, a depository institution lacking federal insurance after October 13, 2006, a depository institution lacking federal deposit insurance may receive a deposit for the account of such depositor only if: (1) The institution has obtained the depositor’s signed written acknowledgement described in paragraph (a) of this section; or (2) The institution makes an attempt, sent by mail no later than 45 days after the effective date of the conversion or merger, to obtain the acknowledgment. In making such an attempt, the institution must transmit to each depositor who has not signed and returned a written acknowledgement described in paragraph (a) of this section: E:\FR\FM\04JNR1.SGM 04JNR1 31688 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Rules and Regulations (i) A conspicuous card containing the information described in paragraphs (a)(1) and (a)(2) of this section, and a line for the signature of the depositor; and (ii) Accompanying materials requesting the depositor to sign the card, and return the signed card to the institution. (c) Depositors obtained on or before October 13, 2006. Any depository institution lacking federal deposit insurance may receive any deposit after October 13, 2006, for the account of a depositor who was a depositor on or before that date only if: (1) The depositor has signed a written acknowledgement described in paragraph (a) of this section; or (2) The institution has transmitted to the depositor: (i) A conspicuous card containing the information described in paragraphs (a)(1) and (a)(2) of this section, and a line for the signature of the depositor; and (ii) Accompanying materials requesting that the depositor sign the card, and return the signed card to the institution. NOTE TO PARAGRAPH (C): The institution must have made the transmission described in paragraph (c)(2) of this section via mail not later than three months after October 13, 2006. The institution must have made a second identical transmission via mail not less than 30 days, and not more than three months, after the first transmission to the depositor in accordance with paragraph (c)(2) of this section, if the institution has not, by the date of such mailing, received from the depositor a card referred to in paragraph (c)(1) of this section which has been signed by the depositor. (d) Format and type size. The disclosures required by this section must be clear and conspicuous and presented in a simple and easy to understand format, type size, and manner. erowe on DSK5CLS3C1PROD with RULES § 320.6 Exception for certain depository institutions. The requirements of this part do not apply to any depository institution lacking federal deposit insurance and located within the United States that does not receive initial deposits of less than an amount equal to the standard maximum deposit insurance amount from individuals who are citizens or residents of the United States, other than money received in connection with any draft or similar instrument issued to transmit money. VerDate Mar<15>2010 14:03 Jun 03, 2010 Jkt 220001 § 320.7 Enforcement. Compliance with the requirements of this part shall be enforced under the Federal Trade Commission Act, 15 U.S.C. 41 et seq. By direction of the Commission. Donald S. Clark Secretary [FR Doc. 2010–13085 Filed 6–3–10: 10:48 am] [Billing Code: 6750–0–1–S] CONSUMER PRODUCT SAFETY COMMISSION [CPSC Docket No. CPSC–2009–0064] 16 CFR Part 1215 Third Party Testing for Certain Children’s Products; Infant Bath Seats: Requirements for Accreditation of Third Party Conformity AGENCY: Consumer Product Safety Commission. ACTION: Notice of Requirements. SUMMARY: The Consumer Product Safety Commission (CPSC or Commission) is issuing a notice of requirements that provides the criteria and process for Commission acceptance of accreditation of third party conformity assessment bodies for testing pursuant to specific CPSC regulations relating to infant bath seats. The Commission is issuing this notice of requirements pursuant to section 14(a)(3)(B)(vi) of the Consumer Product Safety Act (CPSA) (15 U.S.C. 2063(a)(3)(B)(vi)). DATES: Effective Date: The requirements for accreditation of third party conformity assessment bodies to assess conformity with 16 CFR part 1215 are effective upon publication of this notice in the Federal Register. Comments in response to this notice of requirements should be submitted by July 6, 2010. Comments on this notice should be captioned ‘‘Notice of Requirements for Accreditation of Third Party Conformity Assessment Bodies to Assess Conformity with Part 1215 of Title 16, Code of Federal Regulations.’’ ADDRESSES: You may submit comments, identified by Docket No. CPSC–2009– 0064 by any of the following methods: Electronic Submissions: Submit electronic comments in the following way: Federal eRulemaking Portal: https:// www.regulations.gov. Follow the instructions for submitting comments. To ensure timely processing of comments, the Commission is no longer accepting comments submitted by electronic mail (e-mail) except through https://www.regulations.gov. PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 Written Submissions: Submit written submissions in the following ways: Mail/Hand delivery/Courier (for paper, disk, or CD–ROM submissions) preferably in five copies, to: Office of the Secretary, Consumer Product Safety Commission, Room 820, 4330 East West Highway, Bethesda, MD 20814; telephone (301) 504–7923. Instructions: All submissions received must include the agency name and docket number for this notice. All comments received may be posted without change to https:// www.regulations.gov, including any personal information provided. Do not submit confidential business information, trade secret information, or other sensitive or protected information (such as a Social Security Number) electronically; if furnished at all, such information should be submitted in writing. Docket: For access to the docket to read background documents or comments received, go to https:// www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Robert ‘‘Jay’’ Howell, Assistant Executive Director for Hazard Identification and Reduction, U.S. Consumer Product Safety Commission, 4330 East West Highway, Bethesda, Maryland 20814; email rhowell@cpsc.gov. SUPPLEMENTARY INFORMATION: I. Introduction Section 14(a)(3)(B)(vi) of the CPSA, as added by section 102(a)(2) of the Consumer Product Safety Improvement Act of 2008 (CPSIA), Public Law 110– 314, directs the CPSC to publish a notice of requirements for accreditation of third party conformity assessment bodies to assess children’s products for conformity with ‘‘other children’s product safety rules.’’ Section 14(f)(1) of the CPSA defines ‘‘children’s product safety rule’’ as ‘‘a consumer product safety rule under [the CPSA] or similar rule, regulation, standard, or ban under any other Act enforced by the Commission, including a rule declaring a consumer product to be a banned hazardous product or substance.’’ Under section 14(a)(3)(A) of the CPSA, each manufacturer (including the importer) or private labeler of products subject to those regulations must have products that are manufactured more than 90 days after the Federal Register publication date of a notice of the requirements for accreditation, tested by a third party conformity assessment body accredited to do so, and must issue a certificate of compliance with the applicable regulations based on that testing. Section 14(a)(2) of the CPSA, as E:\FR\FM\04JNR1.SGM 04JNR1

Agencies

FEDERAL TRADE COMMISSION

[Federal Register Volume 75, Number 107 (Friday, June 4, 2010)]
[Rules and Regulations]
[Pages 31682-31688]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-13085]

=======================================================================
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FEDERAL TRADE COMMISSION

16 CFR Part 320

RIN 3084-AA99

Disclosures for Non-Federally Insured Depository Institutions
Under the Federal Deposit Insurance Corporation Improvement Act
(FDICIA)

AGENCY: Federal Trade Commission (FTC or Commission).

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA) directs the Commission to prescribe the manner and
content of certain mandatory disclosures for depository institutions
that lack federal deposit insurance. On March 13, 2009, the Commission
published a supplemental notice of proposed rulemaking seeking comment
on disclosure rules for such institutions. After reviewing comments
received in response, the Commission now publishes a final rule.

DATES: This final rule will become effective on July 6, 2010.

ADDRESSES: Copies of this document are available from: Public Reference
Branch, Room 130, Federal Trade Commission, 600 Pennsylvania Avenue,
NW, Washington, DC 20580. The complete record of this proceeding is
also available at that address. Relevant portions of the proceeding,
including this document, are available at (https://www.ftc.gov).

FOR FURTHER INFORMATION CONTACT: Hampton Newsome, (202) 326-2889,
Attorney, Division of Enforcement, Bureau of Consumer Protection,
Federal Trade Commission, 600 Pennsylvania Avenue, NW, Washington, DC
20580.

SUPPLEMENTARY INFORMATION:

I. Introduction

In 1991, as part of the Federal Deposit Insurance Corporation
Improvement Act (FDICIA), Congress directed the Commission to prescribe
certain disclosures for depository institutions lacking federal deposit
insurance. Congress then prohibited the FTC from spending resources on
FDICIA's disclosure requirements until 2003. After Congress lifted that
ban, the Commission published proposed disclosures consistent with
FDICIA's statutory directives (70 FR 12823 (March 16, 2005)). Many
commenters raised concerns with the proposal.\1\ Thereafter, Congress
passed the Financial Services Regulatory Relief Act of 2006 (FSRRA)
(Pub. L. 109-351) amending FDICIA. The FSRRA amendments addressed
almost all of the concerns raised by commenters about the FTC's
proposed rule. The Commission published a supplemental notice on March
13, 2009 (74 FR 10843) seeking comments on a proposal consistent with
the FSRRA amendments. The Commission has reviewed the comments received
in response and now publishes a final rule.
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\1\ See (https://www.ftc.gov/os/comments/FDICIA/index.shtm).
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II. Background

Under existing law, all federally chartered and most state-
chartered depository institutions must have federal deposit insurance.
Federal deposit insurance funds currently guarantee all deposits at
federally

[[Page 31683]]

insured institutions up to and including $250,000 per depositor.\2\
Federally insured banks and credit unions must display signs disclosing
this guarantee at each station or window where insured deposits are
normally received in the depository institution's principal place of
business and in all its branches.\3\
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\2\ On October 3, 2008, the enactment of the Emergency Economic
Stabilization Act of 2008 (Pub. L. No. 110-343) raised the basic
limit on federal deposit insurance coverage from $100,000 to
$250,000 per depositor. The Helping Families Save Their Homes Act of
2009 (Pub. L. No. 111-22) extended the $250,000 coverage until
December 31, 2013.
\3\ See 12 CFR Part 328 and 12 CFR Part 740.
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Although the vast majority of depository institutions have federal
deposit insurance, there are some exceptions. For example, the Puerto
Rican government provides deposit insurance for non-federal credit
unions located in Puerto Rico. In addition, approximately 170 state-
chartered credit unions in approximately nine states do not have
federal deposit insurance, and seek to protect their customers through
private deposit insurance.\4\
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\4\ A 2003 U.S. Government Accountability Office (GAO) report
indicated that eight states had credit unions that purchased private
deposit insurance in lieu of federal insurance. An additional nine
states allowed private deposit insurance but did not have any
privately insured credit unions. All other states required credit
unions to have federal deposit insurance. ``Federal Deposit
Insurance Act: FTC Best Among Candidates to Enforce Consumer
Protection Provisions,'' GAO-03-971 (Aug. 2003), 6-7. The Commission
understands that there are a small number of state banks and savings
associations that do not have federal deposit insurance.
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In response to incidents affecting the safety of deposits at
certain financial institutions lacking federal deposit insurance,
Congress amended the Federal Deposit Insurance Act (FDIA) in 1991 by
adding Section 43 (12 U.S.C. 1831t), which imposes several requirements
on non-federally insured institutions\5\ and private deposit
insurers.\6\ In general, Section 43(b), as amended by FSRRA, mandates
that depository institutions lacking federal deposit insurance provide
certain disclosures to consumers.\7\ Specifically, in all periodic
statements, signature cards, passbooks, and share certificates, the
institution must disclose that it does not have federal deposit
insurance and that, if the institution fails, the federal government
does not guarantee that depositors will receive their money back
(hereinafter ``required long disclosure'').\8\ Moreover, in most
advertising and at deposit windows, principal places of business, and
branches, the institution must disclose that it is not federally
insured (hereinafter ``required short disclosure'').\9\
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\5\ ``Depository institutions'' lacking federal insurance
include credit unions, banks, and savings associations that are not
either: a) insured depository institutions as defined under the
FDIA; or b) insured credit unions as defined in Section 101 of the
Federal Credit Union Act (FCUA) (12 U.S.C. 1752). The FDIA defines
``insured depository institution'' as any bank or savings
association the deposits of which are insured by the FDIC pursuant
to this chapter (12 U.S.C. 1813(c)). The FCUA defines ``insured
credit union'' to mean ``any credit union the member accounts of
which are insured by the National Credit Union Administration'' (12
U.S.C. 1752).
\6\ Congress passed these amendments as part of FDICIA. See Pub.
L. No. 102-242, 105 Stat. 2236 (1991) (Section 151 of FDICIA,
Subtitle F of Title 1, S. 543). Section 43 was initially designated
as Section 40 of the FDIA. See also S. Rep. No. 167, 102 Cong.,
1\st\ Sess., at 61 (1992).
\7\ The definition of ``depository institution'' in Section
43(f)(2) includes any entity that, as determined by the FTC, engages
in the business of receiving deposits and could reasonably be
mistaken for a depository institution by the entity's current or
prospective customers (i.e., ``look-alike'' institutions). The
Commission has not identified any ``look-alike'' institutions to
date and is not addressing the issue in this proceeding. If, in the
future, the Commission or commenters identify ``look-alike''
institutions of concern that are not subject to existing legal
requirements, the FTC will consider whether to develop requirements
for such entities.
\8\ 12 U.S.C. 1831t(b).
\9\ Id.
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For many years after FDICIA's passage, Congress prohibited the
Commission from using FTC resources to enforce the law's requirements.
In 2003, Congress lifted this prohibition for certain provisions of
FDICIA, including the disclosure provisions of Section 43.\10\
Subsequently, the Commission published a Notice of Proposed Rulemaking
(NPRM) seeking comments on its proposed implementation of Section 43
(70 FR 12823 (March 16, 2005)). In response, the Commission received
numerous comments raising serious concerns with the proposal.\11\
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\10\ Making Appropriations for Agriculture, Rural Development,
Food and Drug Administration, and Related Agencies, for the Fiscal
Year Ending September 30, 2004, and for Other Purposes, H.R. Conf.
Rep. No. 108-401, Cong., 1\st\ Sess., at 88 (2003).
\11\ The Commission received 162 comments in response to the
NPRM. See comments at (https://www.ftc.gov/os/comments/FDICIA/index.shtm).
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In October 2006, Congress substantially addressed the commenter
concerns directly by amending Section 43 as part of FSRRA. These new
amendments rendered significant portions of the Commission's proposed
Rule obsolete. In particular, the new statutory provisions: (1)
significantly altered Section 43(b)(3) (12 U.S.C. 1831t(b)(3)), which
requires institutions to obtain signed acknowledgments from depositors
related to the lack of federal deposit insurance; (2) established
specific exemptions to the advertising disclosure requirements; (3)
modified the requirements for disclosures on periodic statements and
account records and at depository locations; and (4) limited some of
the FTC's authority under the law and provided state regulators with
specific enforcement authority.\12\
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\12\ The FSRRA amendments did not alter the basic content of the
required disclosures. Section 43 continues to require depository
institutions lacking federal deposit insurance affirmatively to
disclose that fact to their depositors or members. (12 U.S.C.
1831t(b)).
---------------------------------------------------------------------------

In response to the FSRRA amendments, the Commission published a
supplemental notice of proposed rulemaking which discussed the FSRRA
amendments in detail, proposed conforming rule changes in light of the
FSRRA amendments, and sought comments on these changes. The Commission
has reviewed the comments received in response\13\ and, as discussed in
detail below, now issues its final rule.
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\13\ The Commission received 29 comments in response to the
supplemental notice. See comments at (https://www.ftc.gov/os/comments/fdiciasupplement/index.shtm).
---------------------------------------------------------------------------

III. Comment Analysis

The comments on the supplemental rule notice raised two substantive
issues: 1) disclosure requirements for institutions participating in
shared branching networks and service centers; and 2) the timing of
signed acknowledgment requirements.

A. Shared Branching Networks and Service Centers

Background: Under FDICIA, non-federally insured institutions must
post required disclosures wherever ``deposits are normally
received.''\14\ Such locations could include places that are not owned
or controlled by the non-federally insured institution. For instance,
the Commission indicated in its supplemental notice (74 FR at 10846)
that disclosures should appear at credit union service centers
(independent facilities that provide services for a group of
institutions) to the extent such facilities contain stations where
deposits of non-federally insured institutions ``are normally
received.'' The statute does not define the term ``normally received.''
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\14\ 12 U.S.C. 1831t(b)(2).
---------------------------------------------------------------------------

Issue and Comments: In response to the supplemental notice, many
commenters raised concerns about whether the disclosure requirements
apply to shared branching networks. Shared branching allows
participating institutions to accept deposits and provide additional
services for members of other institutions in the network. Shared
branching arrangements typically involve hundreds of

[[Page 31684]]

institutions, both federally and non-federally insured.\15\ Three such
networks exist nationwide involving approximately 3,700 locations.\16\
The vast majority of institutions in these networks have federal
deposit insurance.\17\
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\15\ For a general discussion of shared branching networks, see
comments from American Share Insurance ( 540033-00003).
\16\ Id.
\17\ Id.
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Many commenters raised concern that the FTC will require federally
insured institutions in shared branching networks to post FDICIA
disclosures on behalf of each of the non-federally ensured entities in
those networks. Both federally and non-federally insured institutions
argued that such a requirement would be unreasonable. Federally insured
institutions warned that disclosures at their facilities would confuse
consumers and may even lead some to believe their institutions lack
federal insurance.\18\ Non-federally insured institutions argued that
such a requirement may limit or prevent their participation in these
networks because federally insured institutions may refuse to post such
disclosures.\19\
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\18\ See, e.g., Honda Federal Credit Union ( 540033-
00004); International Harvester Employee Credit Union (
540033-00028).
\19\ See, e.g., AurGroup Financial Credit Union (
540033-00011), Christian Community Credit Union ( 540033-
00015); Cincinnati Central Credit Union ( 540033-00025);
Firefighters Community Credit Union ( 540033-00009).
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American Share Insurance (ASI), a private insurer for depository
institutions, agreed that such disclosures would confuse consumers and
also argued that Congress did not intend to require disclosures at such
locations.\20\ ASI argued that deposit locations at institutions in a
shared branching network are analogous to deposits at ATM's (which, in
some cases, do allow deposits from other institutions). It then
reasoned that, because Congress exempted ATM's from FDICIA's disclosure
requirements, participants in shared branching networks should receive
similar treatment.\21\ ASI also stated that Congress intended FDICIA's
requirements to match National Credit Union Administration (NCUA)
regulations which require disclosures only at facilities owned or
controlled by the regulated institution.\22\
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\20\ ASI ( 540033-00003).
\21\ See 12 U.S.C. 1831t(b)(2)(A).
\22\ Id. The NCUA regulations for federally insured institutions
require posting ``at each station or window where insured account
funds or deposits are normally received in its principal place of
business and in all its branches . . . .'' See 12 C.F.R. 740.4(c)
(emphasis added). In comparison, FDICIA states that the disclosure
should appear ``at each station or window where deposits are
normally received, its principal place of business and all its
branches where it accepts deposits or opens accounts (excluding
automated teller machines or point of sale terminals), and on its
main Internet page.'' See 12 U.S.C. 1831t(b)(2)(a).
---------------------------------------------------------------------------

Several other commenters also suggested that the Commission rely on
recent disclosure requirements issued by the NCUA for such networks in
lieu of imposing a separate disclosure requirement.\23\ Recently, NCUA
addressed the signage requirements for institutions participating in
shared branching networks (74 FR 9347 (March 4, 2009)). For federally
insured institutions and facilities operated by a non-credit union
entity, the new rules require a general disclosure that not all
institutions in the network are federally insured.\24\ Commenters
argued that the NCUA disclosure provides a clear explanation to
consumers and that any FTC disclosure could cause confusion.
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\23\ 74 FR 9347 (March 4, 2009) (NCUA regulations). See, e.g.,
Atlantic Regional Federal Credit Union ( 540033-00030);
Coast Hills Federal Credit Union ( 540033-00013); Mazuma
Credit Union ( 540033-00027); and ASI ( 540033-
00003).
\24\ NCUA's disclosure reads: ``This credit union participates
in a shared branch network with other credit unions and accepts
share deposits for members of those other credit unions. While this
credit union is federally insured, not all of these other credit
unions are federally insured. If you need information on the
insurance status of your credit union, please contact your credit
union directly.'' 12 C.F.R. 740.4(c)(1).
---------------------------------------------------------------------------

Discussion: Under the statute, disclosures must appear at ``each
station or window where deposits are normally received'' (emphasis
added).\25\ By its plain language, the law does not limit such
locations to those owned or controlled by the institution. At the same
time, the law does not require disclosures at every station or window
that could conceivably receive a deposit. Instead, the law covers
locations that ``normally'' receive deposits, which the Commission
interprets to include locations that operate as the functional
equivalent of stations or windows at the institution's own facilities.
Whether a location ``normally'' receives deposits for a non-federally
insured institution likely depends on factors such as the volume of
deposits, the frequency of deposits, the signage at the receiving
institution, and whether the receiving institution is in the same city
as the non-federally insured institution.\26\
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\25\ 12 U.S.C. 1831t(b)(2)(a).
\26\ The record does not identify, nor is the Commission aware
of, any federally insured institutions in a shared branching network
that constitute locations where the deposits of non-federally
insured institutions are ``normally'' received.
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Service centers present a different issue than shared networks.
Specifically, these entities are independent facilities operated on
behalf of specific institutions that share costs and ownership.\27\
Therefore, it seems likely that these facilities ``normally'' receive
deposits for participating non-federally insured institutions.
Accordingly, absent circumstances demonstrating that a particular
shared center does not ``normally'' receive deposits (as discussed
above) for a non-federally insured institution, the required
disclosures should appear at the service center to ensure the
institution complies with FDICIA.
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\27\ See ASI ( 540033-00003).
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B. Timing for Signed Acknowledgments

Issue: FDICIA requires institutions without federal deposit
insurance to obtain signed statements from their depositors
acknowledging that the institution does not have federal deposit
insurance. The law, however, allows institutions under certain
circumstances to provide notices to depositors in lieu of obtaining
signed acknowledgments.\28\ Specifically, for depositors who joined the
institution before October 13, 2006 (i.e., ``current'' depositors), an
institution either must obtain a signed acknowledgement, or make two
attempts to obtain such a signed acknowledgement through notices to
depositors. Under the statute, institutions must transmit the first of
these notices to current depositors not later than three months after
October 13, 2006, and the second not less than thirty days, but not
more than three months, after the first.
---------------------------------------------------------------------------

\28\ The acknowledgments and notices must indicate that the
institution is not federally insured and that the federal government
does not guarantee that depositors will recover their money if the
institution fails. See 12 U.S.C. 1831t(b)(2).
---------------------------------------------------------------------------

Comment: The Credit Union National Association (CUNA) \29\ urged
the FTC to change the threshold date from October 13, 2006 to the date
the Commission's rule becomes effective. It reasoned that the 2006 date
is now impossible to meet.
---------------------------------------------------------------------------

\29\ CUNA ( 540033-00022).
---------------------------------------------------------------------------

Discussion: Congress set the October 13, 2006 date and the
Commission has no discretion to change it. Importantly, the FSRRA
amendments were immediately enforceable upon enactment. Therefore, the
date was binding on covered institutions at that time. Complaints about
retroactive application of the law, therefore, are misplaced. If an
institution has not already sent notices to persons who were depositors
as of October 13, 2006 pursuant to the statute, the law requires it to
obtain a signed acknowledgment from that depositor before accepting a

[[Page 31685]]

deposit. The Commission cannot alter this mandate.
Finally, in issuing the FSRRA amendments, the Commission notes that
Congress used the term ``current depositor'' to cover depositors
obtained on or before October 13, 2006. As that date becomes more
remote, the term ``current depositor'' may cause confusion because some
may incorrectly assume the term applies to depositors obtained more
recently than 2006. To address this concern, the Commission has changed
the title of Section 320.5(c) to ``Depositors Obtained On Or Before
October 13, 2006'' instead of ``Current Depositors.''

IV. Summary of Final Rule

Generally, the final rule incorporates the language of the statute,
in many cases repeating the law's language verbatim. Like the statute,
the final rule addresses disclosure requirements for periodic
statements and account records, advertising, and locations that receive
deposits; signed acknowledgment requirements; and an exception to these
requirements for certain depository institutions. The final rule is
identical in substance to that published in the supplemental
notice.\30\ The following summarizes the final rule's basic provisions.
---------------------------------------------------------------------------

\30\ The final rule contains non-substantive editorial changes
in Sections 320.2, 320.3, 320.4(a) & (b), and 320.5(a), (b), & (c).
---------------------------------------------------------------------------

A. Scope of the Final Rule

Section 320.1 of the rule indicates that the FTC's new requirements
apply to depository institutions (e.g., banks, savings association, and
credit unions) that do not have federal deposit insurance. Consistent
with Section 43(f)(3)(B) of the FDIA, a depository institution lacks
federal deposit insurance if it is neither an insured depository
institution as defined in the FDIA (12 U.S.C. 1813(c)(2)), nor an
insured credit union as defined in Section 101 of the FCUA, 12 U.S.C.
1752. Most banks and savings associations must have federal deposit
insurance under state or federal law.\31\ Accordingly, the rule applies
apply to only a small number of state-chartered banks and savings
associations.\32\
---------------------------------------------------------------------------

\31\ See, e.g., 12 U.S.C. 222 (national banks); Cal. Fin. Code
5606(a) (California savings associations); and 12 U.S.C. 3104(c)(1)
(state and federal branches of foreign banks receiving deposits of
less than $100,000).
\32\ Consistent with the statute, the rule applies to non-
federally insured credit unions in any State, the District of
Columbia, the several territories and possessions of the United
States, the Panama Canal Zone, and the Commonwealth of Puerto Rico
(see 12 U.S.C. 1781). The Commission understands that many credit
unions in Puerto Rico do not have federal deposit insurance but,
instead, operate under a Puerto Rican government-backed deposit
insurance system. Section 43 imposes disclosure requirements
specifically on institutions that do not have federal deposit
insurance and does not exempt institutions operating under non-
federal insurance systems. Accordingly, Puerto Rico credit unions
are subject to the rule's requirements.
---------------------------------------------------------------------------

B. Disclosures in Periodic Statements

Consistent with the statute (12 U.S.C. Sec. 1831t(b)(1)), Section
320.3 requires covered depository institutions to conspicuously
disclose in all periodic statements and account records that the
institution is not federally insured, and that, if the institution
fails, the federal government does not guarantee that depositors will
recoup their money. Section 320.3 offers model language that depository
institutions may use to satisfy this requirement. The Commission will
evaluate whether disclosures are conspicuous according to well-
established FTC law.\33\
---------------------------------------------------------------------------

\33\ See, e.g., Thompson Medical Co., 104 F.T.C. 648, 797-98
(1984); The Kroger Co., 98 F.T.C. 639, 760 (1981).
---------------------------------------------------------------------------

C. Disclosures in Advertising

Under Section 320.4, covered depository institutions must disclose
in advertising consistent with 12 U.S.C. Sec. 1831t(b)(2) that the
institution is not federally insured.\34\ As dictated by the statute
(12 U.S.C. Sec. 1831t(b)(2)(B)), the rule also contains specific
exemptions to this advertising disclosure requirement. In particular,
the required short disclosure (that the institution is not federally
insured) need not appear in a sign, document, or other item that has
the institution's name but no information about the institution's
products or services or information otherwise promoting the
institution. Consistent with the law, the rule also exempts from the
disclosure requirement, ``[s]mall utilitarian items [e.g., common pens
and key chains] that do not mention deposit products or insurance if
inclusion of the notice would be impractical.''
---------------------------------------------------------------------------

\34\ For the purposes of the rule, advertising includes, but is
not limited to, advertising in print, electronic, Internet, or
broadcast media.
---------------------------------------------------------------------------

D. Disclosures at Deposit Locations

Section 320.4 requires covered institutions to clearly and
conspicuously disclose that the institution is not federally insured
``at each station or window place where deposits are normally received,
its principal place of business and all branches where it accepts
deposits or opens accounts (excluding automated teller machines or
point of sale terminals), and on its main Internet page . . . .'' This
section tracks the language in 12 U.S.C. 1831t(b)(2)(A).

E. Disclosure Acknowledgment

Sections 320.5 and 320.6 require covered institutions to obtain
signed acknowledgments of the fact that the institution is not
federally insured from new depositors. The rule language tracks the 12
U.S.C. 1831t(b)(3) requirements. For certain customers (e.g., those
obtained through a merger), the rule, consistent with the statute,
provides an alternative notice requirement which allows institutions to
send notifications attempting to obtain signed acknowledgments no later
than 45 days after the merger or conversion to customers in lieu of
obtaining signatures.

F. Exception for Certain Depository Institutions

Section 43(d) of the FDIA (``Exceptions for institutions not
receiving retail deposits'') provides the Commission with discretion to
except certain institutions from the disclosure requirements.
Specifically, the FDIA allows the Commission to exempt depository
institutions that do not receive initial deposits of less than ``an
amount equal to the standard maximum insurance amount'' from
individuals who are citizens or residents of the United States.\35\
That amount is currently $250,000. The Commission's 2005 proposed rule
and the 2009 supplemental notice contained such an exception.\36\ The
Commission reasoned that customers of institutions that handle only
large initial deposits are sufficiently sophisticated that they do not
need disclosures. Some commenters supported the proposed exemption
while others raised concerns.\37\ For example, the Office of the
Comptroller of the Currency (OCC) urged the Commission to expand the
proposed exception to include uninsured national trust banks and
federal and state branches of foreign banks altogether because these
institutions do not accept retail deposits.\38\ NAFCU, on the other

[[Page 31686]]

hand, opposed the provision arguing that some customers with initial
deposits over the standard maximum insurance amount at federal credit
unions do not understand how their funds are insured.\39\ In its
supplemental notice, the Commission continued to propose the exception
and sought further comment on the issue. The Commission received none.
---------------------------------------------------------------------------

\35\ 12 U.S.C. 1821(a)(1).
\36\ See 70 FR 12823, 12825 (Mar. 16, 2005) and 74 FR 10843,
10846 (Mar. 13, 2009). The statute indicates that the FTC should not
consider ``money received in connection with any draft or similar
instrument issued to transmit money'' to be a deposit for the
purposes of this exemption. In 2006, Congress amended the exception
language by changing the threshold from ``$100,000'' to ``an amount
equal to the standard maximum deposit insurance amount.'' Public Law
109-173 (Feb. 26, 2006).
\37\ The National Association of Federal Credit Unions (NAFCU)
( 515567-00121) and the Greater Cincinnati Credit Union
( 515567-00081) opposed the proposed exception. The Navy
Federal Credit Union ( 515567-00083) supported the proposed
exception.
\38\ OCC (515567-00201).
\39\ NAFCU ( 515567-00121).
---------------------------------------------------------------------------

The final rule contains the exception. The Commission continues to
believe that customers who make large deposits ($250,000 or more) at
institutions that refuse initial deposits under $250,000 do not need
the FDICIA disclosures because they are sufficiently sophisticated and
likely understand the institution's deposit insurance status. The rule
also defines ``standard maximum insurance amount'' to mean the maximum
amount of deposit insurance as determined under Section 11(a)(1) of the
FDIA (12 U.S.C. 1821(a)(1)).
This exception addresses one of the two issues raised by the OCC.
Specifically, the OCC expressed concern about the application of FDICIA
disclosure requirements to uninsured national trust banks even though
they do not accept deposits. Because these institutions accept no
deposits, they by definition do not accept initial deposits of under
$250,000, and are therefore, exempt from the rule's requirements. The
OCC also expressed concern that the rule would cover federal and state
branches of foreign banks. While Congress has already granted these
institutions an exemption from federal deposit insurance requirements
(12 U.S.C. 3104(c)), FDICIA contains no such exception from its
disclosure requirements. Therefore, if such institutions accept initial
deposits of less than $250,000, they have to comply with the rule's
disclosure requirements.
Finally, the Commission notes that NAFCU raised concerns about
persons making large initial deposits at credit unions and not
receiving the disclosures. The record did not identify any credit
unions serving individuals (i.e., natural persons) that only receive
initial deposits of more than $250,000.\40\ Any credit unions receiving
initial deposits under $250,000 must make the disclosures even if some
depositors happen to open accounts with $250,000 or more. Accordingly,
the Commission does not expect that the exception will apply to any
credit unions.
---------------------------------------------------------------------------

\40\ In addition, the record did not identify any credit unions
that only receive initial deposits of more than $100,000. Although
there are approximately two dozen ``corporate'' credit unions which
serve only other credit unions and may have such initial deposit
policies, these institutions already have federal deposit insurance
and thus would not fall under the FDICIA disclosure requirements.
See, e.g., (https://www.ncua.gov/DataServices/FindCU.aspx) (National
Credit Union Administration database).
---------------------------------------------------------------------------

V. Paperwork Reduction Act

The disclosures and written acknowledgment statements do not
constitute a ``collection of information'' under the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501-3520) because they are a ``public
disclosure of information originally supplied by the government to the
recipient for the purpose of disclosure to the public'' as indicated in
Office of Management and Budget regulations.\41\
---------------------------------------------------------------------------

\41\ 5 CFR 1320.3(c)(2).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601-612, requires
that the Commission provide an Initial Regulatory Flexibility Analysis
(IRFA) with a proposed rule and a Final Regulatory Flexibility Analysis
(FRFA), if any, with the final rule, unless the Commission certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. See 5 U.S.C. 603-605. The
Commission published an IRFA pursuant to the RFA in its March 16, 2005
proposed rule notice (70 FR 12823).
The Commission does not anticipate that the final rule will have a
significant economic impact on a substantial number of small entities.
The Commission recognizes that many of the affected depository
institutions may qualify as small businesses under the relevant
threshold ( i.e., assets that do not exceed $150 million) and that the
economic impact of the rule on a particular small entity could be
significant. Overall, however, the rule likely will not have a
significant economic impact on a substantial number of small entities.
The Commission staff estimates that these requirements apply to fewer
than 400 credit unions, banks, and savings associations. These
depository institutions have been required to make the applicable
disclosures for more than ten years under Section 43 of the FDIA. In
addition, the Commission expects that most covered entities make
disclosures about their deposit insurance as a matter of course. The
Commission does not expect that the disclosures specified in the rule
will have a significant impact on these entities. Accordingly, this
document serves as notice to the Small Business Administration of the
agency's certification of no effect. Although the Commission certifies
under the RFA that the rule in this notice will not have a significant
impact on a substantial number of small entities, the Commission has
determined, nonetheless, to publish a FRFA to explain the impact of the
rule on small entities as follows:

A. Statement of the need for, and objectives of, the amendments

The Federal Trade Commission is charged with enforcing the
requirements of 12 U.S.C. 1831t(b) and prescribing the manner and
content of disclosures required by the law.

B. Issues raised by comments in response to the Initial Regulatory
Flexibility Analysis

Public comments raised various issues about the impacts of the
initial proposed rule. However, as detailed in the supplemental notice,
the FSRRA amendments addressed these concerns. Section III of this
notice discusses in detail the issues raised in response to the
supplemental notice.

C. Estimate of the number of small entities to which the amendments
will apply

As described above, the rule applies to depository institutions
lacking federal deposit insurance, including state-chartered credit
unions, banks, and savings associations, many of which may be small
entities. According to the GAO, in 2003 there were 212 credit unions in
the 50 states that chose to use private deposit insurance instead of
federal insurance. The Commission estimates that this number is smaller
now. The Commission estimates that, in addition to this number, there
are approximately 150 credit unions in Puerto Rico that do not have
federal deposit insurance. In addition, the Commission estimates that
there are fewer than 20 banks and savings associations that would be
covered by the rule. The Commission assumes that few of these
depository institutions have assets exceeding $150 million.

D. Projected reporting, recordkeeping, and other compliance
requirements

The law requires affected institutions to comply regardless of the
existence of an FTC rule. Nevertheless, the Commission recognizes that
the law, and thus the FTC rule, involves some costs for affected
depository institutions. Most of these costs are in the form of
printing costs for account statements, signature cards, and other
printed material requiring the disclosures. It is unlikely that

[[Page 31687]]

compliance involves any significant costs associated with legal, other
professional, or training costs to determine the nature of the
disclosure because the rule provides the information required to be
disclosed to the public. The Commission does not expect that the
disclosure requirements impose significant incremental costs for
websites or other advertising. Adding the required disclosure to
various materials imposes on the depository institutions some printing
costs and perhaps minimal initial design or layout costs. A precise
estimate of such costs is difficult to determine without data regarding
the required volume of such materials.

E. Alternatives

The amendments closely track the prescriptive requirements of the
statute, and thus leave little room for significant alternatives to
decrease the burden on regulated entities. In addition, the statutory
requirements reflected in this final rule already apply to the affected
entities. Accordingly, alternatives such as extending the effective
date of the rule would have no effect on burden.

List of Subjects in 16 CFR Part 320

Credit unions, Depository institutions, Federal Deposit Insurance
Act, Federal Trade Commission Act, and Federal deposit insurance.

0
For the reasons stated in the preamble, the Federal Trade Commission
adds Part 320 to 16 CFR chapter I, subchapter C as set forth below:

PART 320--DISCLOSURE REQUIREMENTS FOR DEPOSITORY INSTITUTIONS
LACKING FEDERAL DEPOSIT INSURANCE

320.1 Scope.
320.2 Definitions.
320.3 Disclosures in periodic statements and account records.
320.4 Disclosures in advertising and on the premises.
320.5 Disclosure acknowledgment.
320.6 Exception for certain depository institutions.
320.7 Enforcement.

Authority: 12 U.S.C. 1831t; 15 U.S.C. 41 et seq

Sec. 320.1 Scope.

This part applies to all depository institutions lacking federal
deposit insurance. It requires the disclosure of certain insurance-
related information in periodic statements, account records, locations
where deposits are normally received, and advertising. This part also
requires such depository institutions to obtain a written
acknowledgment from depositors regarding the institution's lack of
federal deposit insurance.

Sec. 320.2 Definitions.

(a) Depository institution means any bank or savings association as
defined under 12 U.S.C. 1813, or any credit union organized and
operated according to the laws of any State, the District of Columbia,
the several territories and possessions of the United States, the
Panama Canal Zone, or the Commonwealth of Puerto Rico, which laws
provide for the organization of credit unions similar in principle and
objectives to federal credit unions.
(b) Lacking federal deposit insurance means the depository
institution is neither an insured depository institution as defined in
12 U.S.C. 1813(c)(2), nor an insured credit union as defined in Section
101 of the Federal Credit Union Act, 12 U.S.C. 1752.
(c) Standard maximum deposit insurance amount means the maximum
amount of deposit insurance as determined under Section 11(a)(1) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)).

Sec. 320.3 Disclosures in periodic statements and account records.

Depository institutions lacking federal deposit insurance must
include a notice disclosing clearly and conspicuously 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, in all periodic statements of account, on each
signature card, and on each passbook, certificate of deposit, or share
certificate. For example, a notice would comply with the requirement if
it conspicuously stated: ``[Institution's name] is not federally
insured. If it fails, the Federal Government does not guarantee that
you will get your money back.'' The disclosures required by this
section must be clear and conspicuous and presented in a simple and
easy to understand format, type size, and manner.

Sec. 320.4 Disclosures in advertising and on the premises.

(a) Required disclosures. Each depository institution lacking
federal deposit insurance must include a clear and conspicuous notice
disclosing that the institution is not federally insured:
(1) At each station or window where deposits are normally received,
its principal place of business and all its branches where it accepts
deposits or opens accounts (excluding automated teller machines or
point of sale terminals), and on its main Internet page; and
(2) In all advertisements except as provided in paragraph (c) of
this section.
(b) Format and type size. The disclosures required by this section
must be clear and conspicuous and presented in a simple and easy to
understand format, type size, and manner.
(c) Exceptions. The following need not include a notice that the
institution is not federally insured:
(1) Any sign, document, or other item that contains the name of the
depository institution, its logo, or its contact information, but only
if the sign, document, or item does not include any information about
the institution's products or services or information otherwise
promoting the institution; and
(2) Small utilitarian items that do not mention deposit products or
insurance, if inclusion of the notice would be impractical.

Sec. 320.5 Disclosure acknowledgment.

(a) New depositors obtained other than through a conversion or
merger. With respect to any depositor who was not a depositor at the
depository institution on or before October 13, 2006, and who is not a
depositor as described in paragraph (b) of this section, a depository
institution lacking federal deposit insurance may receive a deposit for
the account of such depositor only if the institution has obtained the
depositor's signed written acknowledgement that:
(1) The institution is not federally insured; and
(2) If the institution fails, the Federal Government does not
guarantee that the depositor will get back the depositor's money.
(b) New depositors obtained through a conversion or merger. With
respect to a depositor at a federally insured depository institution
that converts to, or merges into, a depository institution lacking
federal insurance after October 13, 2006, a depository institution
lacking federal deposit insurance may receive a deposit for the account
of such depositor only if:
(1) The institution has obtained the depositor's signed written
acknowledgement described in paragraph (a) of this section; or
(2) The institution makes an attempt, sent by mail no later than 45
days after the effective date of the conversion or merger, to obtain
the acknowledgment. In making such an attempt, the institution must
transmit to each depositor who has not signed and returned a written
acknowledgement described in paragraph (a) of this section:

[[Page 31688]]

(i) A conspicuous card containing the information described in
paragraphs (a)(1) and (a)(2) of this section, and a line for the
signature of the depositor; and
(ii) Accompanying materials requesting the depositor to sign the
card, and return the signed card to the institution.
(c) Depositors obtained on or before October 13, 2006. Any
depository institution lacking federal deposit insurance may receive
any deposit after October 13, 2006, for the account of a depositor who
was a depositor on or before that date only if:
(1) The depositor has signed a written acknowledgement described in
paragraph (a) of this section; or
(2) The institution has transmitted to the depositor:
(i) A conspicuous card containing the information described in
paragraphs (a)(1) and (a)(2) of this section, and a line for the
signature of the depositor; and
(ii) Accompanying materials requesting that the depositor sign the
card, and return the signed card to the institution.
Note to paragraph (c): The institution must have made the
transmission described in paragraph (c)(2) of this section via mail not
later than three months after October 13, 2006. The institution must
have made a second identical transmission via mail not less than 30
days, and not more than three months, after the first transmission to
the depositor in accordance with paragraph (c)(2) of this section, if
the institution has not, by the date of such mailing, received from the
depositor a card referred to in paragraph (c)(1) of this section which
has been signed by the depositor.
(d) Format and type size. The disclosures required by this section
must be clear and conspicuous and presented in a simple and easy to
understand format, type size, and manner.

Sec. 320.6 Exception for certain depository institutions.

The requirements of this part do not apply to any depository
institution lacking federal deposit insurance and located within the
United States that does not receive initial deposits of less than an
amount equal to the standard maximum deposit insurance amount from
individuals who are citizens or residents of the United States, other
than money received in connection with any draft or similar instrument
issued to transmit money.

Sec. 320.7 Enforcement.

Compliance with the requirements of this part shall be enforced
under the Federal Trade Commission Act, 15 U.S.C. 41 et seq.
By direction of the Commission.

Donald S. Clark
Secretary
[FR Doc. 2010-13085 Filed 6-3-10: 10:48 am]
[Billing Code: 6750-0-1-S]

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