[Federal Register: March 16, 2005 (Volume 70, Number 50)]
[Proposed Rules]
[Page 12823-12828]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr05-20]
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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: Notice of proposed rulemaking; request for public comment.
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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 disclosures that must be used by depository
institutions that do not have federal deposit insurance. The Commission
seeks comment on these proposed disclosure rules for non-federally
insured depository institutions.
DATES: Written comments must be received on or before June 15, 2005.
ADDRESSES: Interested parties are invited to submit written comments.
Comments should refer to ``Proposed Rule for FDICIA Disclosures, Matter
No. R411014'' to facilitate the organization of comments. A comment
filed in paper form should include this reference both in the text and
on the envelope, and should be mailed or delivered to the following
address: Federal Trade Commission/Office of the Secretary, Room H-159
(Annex A), 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments
containing confidential material must be filed in paper form and the
first page of the document must be clearly labeled ``Confidential.''
The FTC is requesting that any comment filed in paper form be sent by
courier or overnight service, if possible, because postal mail in the
Washington area and at the Commission is subject to delay due to
heightened security precautions. Comments filed in electronic form
should be submitted by clicking on the following: https://secure.commentworks.com/ftc-fdicia
and following the instructions on
the web-based form.
To ensure that the Commission considers an electronic comment, you
must file it on the web-based form at https://secure.commentworks.com/ftc-fdicia.
You also may visit http://www.regulations.gov to read this
proposed Rule, and may file an electronic comment through that website.
The Commission will consider all comments that regulations.gov forwards
to it.
The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. The Commission will consider all timely and responsive
public comments that it receives, whether filed in paper or electronic
form. Comments received will be available to the public on the FTC
website, to the extent practicable, at http://www.ftc.gov. As a matter
of discretion, the FTC makes every effort to remove home contact
information for individuals from the public comments it receives before
placing those comments on the FTC website. More information, including
routine uses permitted by the Privacy Act, may be found in the FTC's
privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
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. Background
In 1991, Congress enacted the FDICIA which, among other things,
added a new section 43 (12 U.S.C. 1831t) to the Federal Deposit
Insurance Act (FDIA). This section, passed in response to incidents
affecting the safety of deposits in certain financial institutions,
imposes several requirements on non-federally insured institutions and
private deposit insurers.\1\ Among other things, section 43(b) mandates
that depository institutions lacking federal deposit insurance provide
certain disclosures to consumers, in periodic statements and
advertising, that the institution does not have federal deposit
insurance and that, if the institution fails, the federal government
does not guarantee that depositors will get their money back.
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\1\ See Pub. L. 102-242, 105 Stat. 2236. 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.
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Under existing law, all federally chartered and most state
chartered depository institutions have federal deposit insurance.
Federal deposit insurance funds provide a government guarantee of up to
$100,000 per depositor in most cases. Pursuant to Federal Deposit
Insurance Corporation (FDIC) and National Credit Union Administration
(NCUA) requirements, federally insured banks and credit unions must
display signs that depositors are federally ``insured to $100,000.''
\2\
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\2\ See 12 CFR part 328 and 12 CFR part 740.
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Although most depository institutions have federal deposit
insurance, there are some exceptions. For instance, several hundred
state-chartered credit unions in eight States and Puerto Rico do not
have federal deposit insurance.\3\ These credit unions generally use a
private deposit insurer to protect members' accounts in lieu of federal
insurance. The Puerto Rican government provides deposit insurance for
credit unions located there. In addition, 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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\3\ According to the U.S. Government Accountability Office
(GAO)(formerly, and then, the General Accounting Office), eight
States have credit unions that purchase private deposit insurance in
lieu of federal insurance. Other States either require federal
insurance or allow private insurance but do not have any privately
insured credit unions. ``Federal Deposit Insurance Act: FTC Best
Among Candidates to Enforce Consumer Protection Provisions,'' GAO-
03-971 (Aug. 2003), p. 7.
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A. Requirements of FDIA Section 43
Section 43 requires that depository institutions lacking federal
deposit insurance affirmatively disclose that fact to their depositors
or members. 12 U.S.C. 1831t(b). Specifically, section 43(b) of the FDIA
requires non-federally insured depository institutions to: (1) Include
conspicuously in all periodic statements of account, on each signature
card, and on each passbook, certificate of deposit, or similar
instrument evidencing a deposit a notice that the institution is not
federally insured, and that if the institution fails, the federal
government does not guarantee that depositors will get their money back
(section 43(b)(1)), and (2) include conspicuously in all advertising
and at each place where deposits are normally received a notice that
the institution is not federally insured (section 43(b)(2)).
Section 43(b) further provides that non-federally insured
institutions may receive deposits only from persons who have signed
acknowledgments that the institution is not federally insured and that
if the institution fails, the federal government does not guarantee
that they will get their money back (see section 43(b)(3)). Section 43
specifically directs the FTC to prescribe ``the manner and content'' of
the required disclosures by
[[Page 12824]]
regulation or order. It also gives the Commission discretion to exempt
from the disclosure requirements depository institutions within the
U.S. that do not receive initial deposits of less than $100,000 from
individuals who are U.S. citizens or residents.
Section 43 applies to ``depository institutions'' lacking federal
insurance. Based on definitions incorporated into section 43, this
includes credit unions, banks, and savings associations. Specifically,
section 43(f)(2) incorporates the FDIA definition of ``depository
institution'' in 12 U.S.C. 1813(c), which includes ``banks'' and
``savings associations.'' Section 43(f)(2) also expands the FDIA
definition of ``depository institution'' to include any entity
described in 12 U.S.C. 461(b)(1)(A)(iv). This includes any ``insured
credit union'' as defined in the Federal Credit Union Act (FCUA) (12
U.S.C. 1752) or ``any credit union which is eligible to make
application to become an insured credit union'' under 12 U.S.C.
1781.\4\ The definition of ``depository institution'' in section
43(f)(2) also includes any entity that, as determined by the FTC, is
engaged 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). Finally,
section 43(f)(3) indicates that the term ``lacking federal deposit
insurance'' means an institution is not either: (1) an insured
depository institution \5\; or (2) an insured credit union, as defined
in section 101 of the FCUA (12 U.S.C. 1752).
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\4\ 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). Entities
that are eligible to make an application to become an ``insured
credit union'' consist of: (1) Credit unions organized and operated
according to the laws of any state, the District of Columbia, the
several territories, including the trust territories, and
possessions of the United States, the Panama Canal Zone, or the
Commonwealth of Puerto Rico and (2) credit unions organized and
operating under the jurisdiction of the Department of Defense if
such credit unions are operating in compliance with the requirements
of the FCUA (12 U.S.C. 1781).
\5\ The FDIA defines ``insured depository institution'' as any
bank or savings association the deposits of which are insured by the
Corporation pursuant to this chapter (12 U.S.C. 1813(c)).
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In addition to the disclosure requirements, section 43 prohibits
depository institutions lacking federal deposit insurance from using
the mails or other instrumentalities of interstate commerce to
facilitate depository activities unless the appropriate state
supervisor has determined that the institution meets eligibility
requirements for such insurance (12 U.S.C. 1831t(e)(1) (commonly
referred to as the ``shut-down'' provision)). Section 43 also requires
private insurers of depository institutions lacking federal insurance
to obtain annual independent audits, which the depository institution
must make available to its depositors upon request and file with
appropriate state agencies (12 U.S.C. 1831t(a) and
1831t(a)(2)(A)(ii)).\6\ Section 43(g) directs the FTC to enforce the
requirements of section 43, including the shut-down and audit
provisions.
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\6\ The law also contains a provision requiring private insurers
to file business plans with appropriate state agencies (section
151(b)(2) of the FDICIA).
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B. FTC Authority
Until recently, the Commission's appropriations authority
prohibited the use of FTC resources to enforce section 43. In
connection with that prohibition, the Commission in 1992 notified every
then-existing known credit union subject to the statute that, despite
the enforcement ban, the requirements of the statute remained in
effect.
In 2003, Congress lifted the longstanding FTC appropriations ban
for certain provisions of the FDICIA, including the disclosure
provisions of section 43.\7\ This action occurred shortly after the GAO
had released a study (GAO-03-971) that discussed, among other things,
the potential impact on consumers from non-enforcement of section 43 as
to credit unions. The GAO had concluded that credit union compliance
``varied considerably'' and that the ``most apparent impact on
consumers, from the lack of enforcement of these provisions, may result
from credit unions not providing adequate disclosures that they are not
federally insured.'' (GAO-03-971, p. 3.) The conference committee
report accompanying the 2003 legislation noted the GAO report
conclusions about the effect of non-enforcement of section 43. The
committee report also directed the FTC to consult with the FDIC and the
NCUA when determining the manner and content of disclosure
requirements, and to coordinate with state supervisors of non-federally
insured depository institutions to assist the FTC in enforcing these
requirements.\8\
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\7\ 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).
\8\ Id. at 637-38. In preparing this notice, Commission staff
has consulted with the FDIC, the NCUA, the National Association of
State Credit Union Supervisors (NASCUS), and the Puerto Rican
Corporacion de Seguro de Acciones y Depositos de Cooperativas de
Ahorro y Credito (PROSAD).
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Although Congress also lifted the funding prohibition for
enforcement of the audit provision of the FDICIA (section 43(a)), the
statute does not direct the Commission to issue rules related to that
provision. Accordingly, the Commission does not plan to address the
audit provision in this proceeding.\9\
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\9\ In addition, the Commission is not addressing the issue of
``look-alike'' institutions in this rulemaking proceeding. As the
GAO report states, the GAO examined credit unions ``as agreed with
[Congressional] committee staff.'' The GAO report did not examine
look-alike institutions. The Commission has not identified any
``look-alike'' institutions at this time. If it does identify
``look-alike'' institutions, it may conduct a rulemaking proceeding
concerning look-alike institutions at a future time.
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II. Proposed Disclosure Requirements and Request for Comment
A. Scope of the Proposed Rule
The proposed rule would 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 not an
insured depository institution as defined in the FDIA (12 U.S.C.
1813(c)(2)), or is not an insured credit union, as defined in section
101 of the FCUA, 12 U.S.C. 1752. Most banks and savings associations
are required to have federal deposit insurance under state or federal
laws.\10\ Accordingly, we expect that the proposed rule would apply to
only a small number of state-chartered banks and savings associations.
The Commission seeks comment on the number of banks and savings
associations that lack federal deposit insurance and thus would be
covered by the proposed rule's requirements.
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\10\ 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).
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Consistent with the statute, the proposed rule would apply 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, or 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 its disclosure requirements specifically on institutions that
do not have federal insurance and does not exempt institutions
operating under
[[Page 12825]]
state-run insurance systems. Accordingly, Puerto Rico credit unions
would be subject to the rule's requirements.
B. Disclosures in Periodic Statements
Consistent with section 43(b)(1) of the statute, section 320.3 of
the proposed rule would require covered institutions to include
conspicuously in all periodic statements and account records an
indication that the institution is not federally insured, and that, if
the institution fails, the federal government does not guarantee that
depositors will get their money back. Section 320.3 offers model
language that depository institutions may use to satisfy the
requirement. The Rule also specifies that disclosures must be
conspicuous. The Commission will evaluate whether disclosures are
conspicuous according to well-established FTC law.\11\
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\11\ See, e.g., Thompson Medical Co., 104 F.T.C. 648, 797-98
(1984); The Kroger Co., 98 F.T.C. 639, 760 (1981).
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C. Disclosures in Advertising
Under proposed rule section 320.4, covered depository institutions
must place a notice that the institution is not federally insured at
each location where the depository institution's account funds or
deposits are normally received and in all advertising. For the purposes
of the proposed rule, advertising includes, but is not limited to,
advertising in print, electronic, webpage, or broadcast media. This
requirement implements section 43(b)(2) of the statute, which states
that any covered institution shall ``include conspicuously in all
advertising and at each place where deposits are normally received a
notice that the institution is not federally insured.''
The proposed rule language does not enumerate any exceptions to
section 43's broad mandate. Although NCUA and FDIC rules exempt many
types of advertising from the mandatory deposit insurance disclosures
(see 12 CFR Part 740 and 12 CFR Part 328), those rules and exemptions
are based on other statutory authority. In addition, those rules apply
to federally-insured institutions and are intended to inform depositors
that a limited amount of insurance exists for their deposits. Here, by
contrast, the proposed rule's purpose is to alert depositors that their
deposits are not federally insured and will not be guaranteed by the
federal government should the institution fail. The Commission seeks
comment on the proposed advertising disclosure requirements.
D. Disclosures at Deposit Locations
In implementing section 43(b)(2) of the statute, section 320.4 of
the proposed rule requires disclosures at each location ``where the
depository institution's account funds or deposits are normally
received including, but not limited to, its principal place of
business, its branches, its automated teller machines, and credit union
centers, service centers, or branches servicing more than one credit
union or institution.'' The Commission seeks comment on whether this
list accurately describes the types of locations where deposits are
normally received. For instance, commenters should consider whether
automatic teller machines are locations where deposits are ``normally
received.''
E. Disclosure Acknowledgment
Sections 320.5 and 320.6 of the proposed rule indicate that non-
federally insured depository institutions must obtain from new and
existing depositors signed acknowledgments of the fact that the
institution is not federally insured. The proposed rule language tracks
the requirements set forth in section 43(b)(3) of the FDIA. For certain
customers (those holding accounts before 1994), depository institutions
may have already discharged their acknowledgment obligations by means
of a series of notifications as specified in section 43(b)(3)(C).\12\
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\12\ Section 43(b)(3)(C) allowed affected institutions to
transmit to each depositor who was a depositor before June 19, 1994
and had not signed a written acknowledgment, a signature card
containing the necessary acknowledgment information and accompanying
materials requesting the depositor to sign and return the card. By
mailing such card three times, the institution discharged its duty
under the statute even if the depositor did not return a signed
card. If the institution followed such procedures, the statute does
not require the institution to provide another separate written
acknowledgment to the depositor.
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F. Exception for Certain Depository Institutions
Section 43(d) of the FDIA (``Exceptions for institutions not
receiving retail deposits'') provides the Commission with the
discretion to exempt certain institutions from the disclosure
requirements. Consistent with that provision, section 320.6 of the
proposed rule exempts from the disclosure requirements depository
institutions that do not receive initial deposits of less than $100,000
from individuals who are citizens or residents of the U.S., other than
money received in connection with any draft or similar instrument
issued to transmit money. Because it appears unlikely that such
institutions are engaged in the business of retail deposits, insurance
disclosures do not appear to be necessary for their customers. The
Commission expects that customers of such institutions (i.e., those
dealing with initial deposits of $100,000 or more) are sufficiently
knowledgeable about these institutions and do not need the same
disclosures required for other customers. Such an exception would be
similar to exemptions from deposit insurance requirements for non-
retail deposits accepted by federal and state branches of foreign banks
(12 U.S.C. 3104(c)). Without the FTC exemption, such institutions would
have to follow FTC disclosure requirements even though the FDIC
specifically exempts them from the federal deposit insurance
requirements designed to protect retail customers. The Commission seeks
comment on whether such an exemption is appropriate.
G. Proposed Rule's Impact on State Requirements
The Commission understands that some states have their own
disclosure requirements for depository institutions and that new
federal disclosures may affect those rules. The proposed disclosure
requirements provide covered entities with the information that must be
disclosed to the public, and offer model language that depository
institutions may use to satisfy the requirement. The proposed rule,
however, does not mandate precise wording for the disclosures. In the
Commission's view, a state's required disclosure language would not
have to be identical to that suggested by the FTC if state disclosures
are consistent with the purpose and requirements of section 43 (that
is, to alert depositors and potential depositors to the absence of
federal deposit insurance and to the fact that the federal government
does not guarantee they will get their money back should the
institution fail).\13\ Accordingly, in some cases, depository
institutions may be able to comply with the FTC rule and a state
disclosure requirement simultaneously. On the other hand, if it is
impossible for a depository institution to comply with applicable state
and FTC requirements simultaneously, or if a required state disclosure
would frustrate the purpose of the federal requirement by contradicting
the meaning or undermining the effectiveness of the
[[Page 12826]]
FDICIA mandated disclosure, it is likely the State requirement would be
preempted by the FTC's rule.\14\ The Commission seeks comment on the
impact of the proposed rule on depository institutions' compliance with
state disclosure requirements, including information about existing
state disclosure requirements and how they relate to the FTC's proposed
rule.
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\13\ Federal law will preempt state law if it frustrates the
purpose of the federal statutory scheme or if compliance with both
the State and federal laws is physically impossible. See Crosby v.
National Foreign Trade Council, 530 U.S. 363, 372-73 (2000).
\14\ It is also possible that a state's required language would
not be sufficient to effectuate section 43's purpose but would not
present a conflict with the FTC's required disclosure. In such a
case, the depository institution would have to make both
disclosures.
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H. Enforcement
Section 43(g) authorizes the Commission to enforce compliance with
the rule in accordance with the Federal Trade Commission Act.\15\
Section 320.7 tracks this statutory directive.
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\15\ See 12 U.S.C. 1831t(g) (``Compliance with the requirements
of this section, and any regulation prescribed or order issued under
this section, shall be enforced under the Federal Trade Commission
Act [15 U.S.C. 41 et seq.] by the Federal Trade Commission.'')
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III. Communications by Outside Parties to Commissioners or Their
Advisors
Written communications and summaries or transcripts of oral
communications respecting the merits of this proceeding from any
outside party to any Commissioner or Commissioner's advisor will be
placed on the public record. See 16 CFR 1.26(b)(4).
IV. Paperwork Reduction Act
The proposed disclosure 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
OMB regulations.\16\
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\16\ 5 CFR 1320.3(c)(2).
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V. 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 does not anticipate that the proposed 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 thresholds (i.e., assets that do not exceed $150 million) and
that the economic impact of the proposed rule on a particular small
entity could be significant. Overall, however, the proposed rule likely
will not have a significant economic impact on a substantial number of
small entities. The Commission staff estimates that these requirements
will 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 proposed 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. To ensure
the accuracy of this certification, however, the Commission requests
comment on whether the proposed rule will have a significant impact on
a substantial number of small entities, including specific information
on the number of entities that would be covered by the proposed rule,
the number of these companies that are ``small entities,'' and the
average annual burden for each entity. Although the Commission
certifies under the RFA that the rule proposed in this notice would
not, if promulgated, have a significant impact on a substantial number
of small entities, the Commission has determined, nonetheless, that it
is appropriate to publish an IRFA in order to inquire into the impact
of the proposed rule on small entities. Therefore, the Commission has
prepared the following analysis:
A. Description of the Reasons That Action by the Agency Is Being Taken
The Federal Trade Commission is charged with enforcing the
requirements of 12 U.S.C. 1831t(b).
B. Statement of the Objectives of, and Legal Basis for, the Proposed
Rule
The objective of the proposed rule is to require depository
institutions lacking federal deposit insurance to: (1) Include
conspicuously in all periodic statements and account records a
statement that the institution is not federally insured, and that if
the institution fails, the government does not guarantee that
depositors will get back their money; (2) include in all advertising
and at each location where the depository institution's account funds
or deposits are normally received a statement that the institution is
not federally insured; and (3) obtain from their new and existing
depositors signed acknowledgments of the fact that the institution is
not federally insured. The proposed rule is authorized by and based
upon section 151 of FDICIA, Public Law 102-242, 105 Stat. 2236.
C. Small Entities to Which the Proposed Rule Will Apply
As described above, the proposed rule applies to depository
institutions lacking federal deposit insurance, including State-
chartered credit unions, banks, and savings associations that are small
entities. According to the GAO, in 2003 there were 212 credit unions in
the 50 states that choose to use private deposit insurance instead of
federal insurance. 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 proposed rule. The Commission assumes that
few of these depository institutions have assets exceeding $150
million. The Commission, therefore, invites comment and information on
this issue.
D. Projected Reporting, Recordkeeping and Other Compliance Requirements
The Commission recognizes that the proposed disclosure rule will
involve some increased costs for affected depository institutions. Most
of these costs will be in the form of printing costs for account
statements, signature cards, and other printed material requiring the
disclosures. The Commission does not expect that there will be any
significant costs associated with legal, other professional, or
training costs to determine the nature of the disclosure because the
Commission is providing in the proposed rule the information required
to be disclosed to the public. The Commission does not expect that the
disclosure requirements will impose significant incremental costs for
websites or other advertising. Adding the required disclosure to
account statements, signature cards, passbooks, signed acknowledgment
cards, and certificates of deposit imposes on the depository
institutions some printing costs and perhaps minimal initial design or
layout costs. A precise estimate of such costs is difficult
[[Page 12827]]
to determine without data regarding the required volume of such
materials. The Commission invites comment and information on this
issue.
E. Duplicative, Overlapping, or Conflicting Federal Rules
The Commission has not identified any other federal statutes,
rules, or policies that would duplicate, overlap, or conflict with the
proposed rule. The Commission invites comment and information on this
issue.
F. Significant Alternatives to the Proposed Rule
The provisions of the rule directly reflect the requirements of the
statute, and thus leave little room for significant alternatives to
decrease burden. One possible measure to decrease the rule's burden
would be to set an effective date for the rule's requirements beyond
the typical 30 days to allow entities additional time to come into
compliance. Because the requirements of section 43 have been in effect
for more than ten years, however, the Commission does not expect that a
different effective date would have a significant effect on the rule's
impact on small entities. Nevertheless, the Commission seeks comment
and information with regard to: (1) The existence of small business
entities for which the proposed rule would have a significant economic
impact; and (2) suggested alternative methods of compliance that,
consistent with the statutory requirements, would reduce the economic
impact of the rule on such small entities. If the comments filed in
response to this notice identify small entities that are affected by
the rule, as well as alternative methods of compliance that would
reduce the economic impact of the rule on such entities, the Commission
will consider the feasibility of such alternatives and determine
whether they should be incorporated into the final rule.
VI. Invitation to Comment and Questions for Comment
All persons are hereby given notice of the opportunity to submit
written data, views, facts, and arguments addressing the issues raised
by this Notice. Written comments must be received on or before June 15,
2005. Comments should refer to: ``Proposed Rule for FDICIA Disclosures,
Matter No. R411014'' to facilitate the organization of comments. A
comment filed in paper form should include this reference both in the
text and on the envelope, and should be mailed or delivered to the
following address: Federal Trade Commission/Office of the Secretary,
Room H-159 (Annex A), 600 Pennsylvania Avenue, NW., Washington, DC
20580. If the comment contains any material for which confidential
treatment is requested, it must be filed in paper (rather than
electronic) form, and the first page of the document must be clearly
labeled ``Confidential.''\17\ The FTC is requesting that any comment
filed in paper form be sent by courier or overnight service, if
possible, because U.S. postal mail in the Washington area and at the
Commission is subject to delay due to heightened security precautions.
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\17\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be
accompanied by an explicit request for confidential treatment,
including the factual and legal basis for the request, and must
identify the specific portions of the comment to be withheld from
the public record.
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To ensure that the Commission considers an electronic comment, you
must file it on the web-based form at https://secure.commentworks.com/ftc-fdicia.
You may also visit http://www.regulations.gov to read this
proposed Rule, and may file an electronic comment through that Web
site. The Commission will consider all comments that regulations.gov
forwards to it.
The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. The Commission will consider all timely and responsive
public comments that it receives, whether filed in paper or electronic
form. Comments received will be available to the public on the FTC Web
site, to the extent practicable, at http://www.ftc.gov. As a matter of
discretion, the FTC makes every effort to remove home contact
information for individuals from the public comments it receives before
placing those comments on the FTC Web site. More information, including
routine uses permitted by the Privacy Act, may be found in the FTC's
privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
The questions below are designed to assist the public and should
not be construed as a limitation on the issues on which public comment
may be submitted.
A. What types of banks and savings associations do not have federal
deposit insurance? How many of these institutions exist?
B. What costs or burdens would the proposed requirements impose,
and on whom?
C. What regulatory alternatives to the proposed requirements are
available that would reduce the burdens of the proposed requirements,
while providing the same benefits?
D. Are the proposed advertising disclosure requirements appropriate
and consistent with the purposes of section 43?
E. What impact would the proposed rule have on existing state
requirements?
F. What effect would the proposed rule have on credit unions
insured by the Commonwealth of Puerto Rico?
G. Is it appropriate for the Commission to exempt institutions that
do not receive initial deposits of less than $100,000, as proposed in
section 320.6? Why or why not?
H. Does the list of locations in section 320.4(a) accurately
describe the types of locations where deposits are normally received?
I. What should be the effective date period for the final
requirements (i.e., the number of days between publication and the
effective date of the rule)?
VII. Proposed Rule Language
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 proposes to add Part 320 to 16 CFR chapter I, subchapter C
as set forth below:
PART 320--DISCLOSURE REQUIREMENTS FOR DEPOSITORY INSTITUTIONS
LACKING FEDERAL DEPOSIT INSURANCE
Sec.
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(b); 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.
[[Page 12828]]
Sec. 320.2 Definitions.
(a) Lacking federal deposit insurance means the depository
institution is not an insured depository institution as defined in 12
U.S.C. 1813(c)(2), or is not an insured credit union, as defined in
section 101 of the Federal Credit Union Act, 12 U.S.C. 1752.
(b) 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.
Sec. 320.3 Disclosures in periodic statements and account records.
Depository institutions lacking federal deposit insurance must
include in all periodic statements of account, on each signature card,
and on each passbook, certificate of deposit, or similar instrument
evidencing a deposit a notice disclosing 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. For example, a notice would comply with the
requirement if it conspicuously stated the following: ``[Institution's
name] is not federally insured. If it fails, the federal government
does not guarantee that you will get your money back.''
Sec. 320.4 Disclosures in advertising and on the premises.
Depository institutions lacking federal deposit insurance must
include conspicuously a notice disclosing that the institution is not
federally insured:
(a) At each location where the depository institution's account
funds or deposits are normally received, including, but not limited to,
its principal place of business, its branches, its automated teller
machines, and credit union centers, service centers, or branches
servicing more than one credit union or institution; and
(b) In all advertisements, including, but not limited to,
advertising in print, electronic, webpage, or broadcast media.
Sec. 320.5 Disclosure acknowledgment.
Except as provided in Sec. 320.6, depository institutions lacking
federal deposit insurance are prohibited from receiving any deposit for
the account of a new or existing depositor unless the depositor has
signed a written acknowledgment indicating that the institution is not
federally insured and, if the institution fails, the federal government
does not guarantee that the depositor will get back the depositor's
money.\1\
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\1\ Depository institutions lacking federal deposit insurance
may receive deposits from members who were depositors before June
19, 1994 without obtaining a signed written acknowledgment, if the
depository institution followed the procedures set forth in 12
U.S.C. 1831t(b)(3)(C). If the institution followed such procedures,
the statute does not require the institution to provide another
separate written acknowledgment to the depositor.
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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
$100,000 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. 05-5218 Filed 3-15-05; 8:45 am]
BILLING CODE 6750-01-P