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4000 - Advisory Opinions
Whether a Credit Union Advertisement for Excess Deposit Insurance
is a Claim That Credit Unions are Safer Than Banks
November 2, 2000
FDIC--00--9
Marc J. Goldstrom, Counsel
Re: Credit Union Advertisement of Excess Deposit Insurance
Thank you for your recent letter to Chairman Tanoue concerning the
above-referenced matter. The letter has been forwarded to me for review
and response.
As you indicate, the advertisement provided with your letter claims
that Credit Union is "Arkansas' safest financial cooperative."
We share your concern about advertisements that state that one type of
insured institution or federally insured deposit fund is stronger or
safer than another. Advertisements that cast any of the funds or
insured institutions in an unfavorable light can have the unfortunate
effect of undermining public confidence in all insured institutions or
federal deposit insurance.
In the past the FDIC has objected to advertisements claiming that
the NCUSIF is stronger or safer than the FDIC. Similarly, we have
objected to advertisements that directly claim that credit unions are
safer or stronger than banks. By contrast, the advertisement at issue
does not make any direct comparisons. Taken out of context, the
advertisement arguably implies that this particular credit union is
safer than banks and thrifts (as well as other credit unions). However,
taken in context the statement appears to be mere puffery for the
excess deposit insurance being offered by the credit union.
From time to time the FDIC has been asked to comment upon excess
deposit insurance programs. Assuming that an excess deposit insurance
plan does not involve potential risk or liability to insured
institutions, and assuming no laws are violated, the FDIC generally
does not object to private excess deposit insurance arrangements.
However, this should not be construed as an endorsement of excess
deposit insurance or any particular excess deposit insurance program.
The foregoing notwithstanding, the FDIC does have concerns with
respect to private excess deposit insurance arrangements. Inasmuch as
the subject plan involves excess deposit insurance offered by a credit
union rather than a bank, many of these concerns are not at issue.
However, we are still concerned with the manner in which the excess
deposit insurance program is advertised.
The manner in which a credit union, bank, or thrift advertises its
deposits is subject to the provisions of the Truth in Savings
regulations, 12 C.F.R. Parts
230 and 707, and section 709 of the United States criminal
code, 18 U.S.C. § 709. More
specifically, section 707.8(a) of the NCUA
regulations 1
provides that "[a]n advertisement shall not be misleading or
inaccurate and shall not misrepresent a credit union's account
contract." 12 C.F.R. § 707.8(a). Section 709 of Title 18, a
criminal statute, provides that it shall be unlawful for anyone to
"falsely advertise or otherwise [represent] by any device
whatsoever that his or her deposit liabilities, obligations,
certificates, shares or accounts are insured under the Federal Credit
Union Act or by the United States or any instrumentality
thereof. . . ." 2
Accordingly, in the case of credit unions, advertisements making any
reference to private insurance should clearly and conspicuously
differentiate the NCUSIF insurance from the private insurance. We
believe the advertisement at issue makes clear that the NCUSIF insures
deposits up to $100,000 and that the private insurer provides up to
$250,000 additional deposit insurance protection.
I hope this has been responsive to your inquiry. If you have further
questions please contact me at (202) 898--8807 or
mgoldstromfdic.gov.
{{4-30-01 p.4984.54}}
1The provision applicable to banks and thrifts is
section 230.8(a) of Regulation DD. Go Back to Text
218 U.S.C. § 709 contains a similar provision with respect to
deposits insured by the FDIC. Go Back to Text
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