CFPB clarifies deceptive and misleading use of FDIC logo, protection
The Consumer Financial Protection Bureau (CFPB) this week took action to clarify regulations around the use (and misuse) of the logo and auspices of the Federal Deposit Insurance Corporation (FDIC). The FDIC is the federal agency that ensures bank deposits up to $250,000.
In a statement, CFPB Director Rohit Chopra noted that consumers have a positive association with the FDIC and that misuse of the FDIC logo or representation that financial products are protected by FDIC carries significant weight. As such, misrepresentations around FDIC protection can carry heavy consequences for consumers.
“People know and trust the FDIC name and logo, and firms must not prey on that trust by making deceptive representations about deposit insurance,” said CFPB Director Rohit Chopra. “Companies undermine competition, erode confidence in the deposit insurance system, and threaten our hard-earned savings when they engage in false marketing or advertising.”
The CFPB outlined specific ways the new regulation will protect consumers in reference to particular harms resulting from misrepresentation of FDIC protections.
- Misrepresenting the FDIC logo or name will typically be a material misrepresentation. Material misrepresentations are deceptive practices in violation of the Consumer Financial Protection Act. Representations made by covered firms to consumers about FDIC insurance will typically be material. The misuse of the name or logo of the FDIC or engagement in false advertising or making misrepresentations to consumers about deposit insurance, regardless of whether such conduct is engaged in knowingly, is likely deceptive.
- Misrepresentation or misuse of the FDIC name or logo harms customers and puts them at significant risk of unexpected losses. Customers can be at risk of loss if they discover their assets are not insured during a time of financial distress. Because of their relatively recent entrance into the consumer marketplace, emerging financial products and services--such as digital assets, including crypto-assets--may present particularly acute risks to consumers. Claims that financial products or services are “regulated” by the FDIC or “insured” or “eligible for” FDIC insurance are likely deceptive if those claims expressly or implicitly indicate that the product or service is FDIC-insured when that is not in fact the case.
- Misuse of the FDIC name or logo harms honest companies. A covered firm deceptively advertising that its products or services are FDIC-insured may convince individuals to purchase that firm’s products or services when the individuals may have otherwise selected similar products or services from one of the firm’s competitors engaged in honest advertising and marketing.