In response to an increasing number of instances where companies have misused the Federal Deposit Insurance Corporation's branding, the FDIC issued a new rule that prohibits misrepresentations about FDIC deposit insurance and that also prohibits the misuse of the FDIC's name and logo.  

FDIC Acting Chairman Martin J. Gruenberg said, "These practices not only harm those who are targeted with the false promise of deposit insurance, but, if left unchecked, could also undermine confidence in the FDIC, FDIC-insured banks, and the U.S. banking system." 

The Federal Deposit Insurance Act prohibits anyone from misrepresenting that any deposit liability, obligation, certificate, or share is insured by the FDIC.  Since the law was adopted, the FDIC has only issued one formal enforcement order against a non-bank entity for misuse of the FDIC's name or logo.  During 2019 and 2020, however, the FDIC reached informal resolutions regarding the misuse of its name or logo in at least 165 different instances.  

The FDIC said that it has recently "observed an increasing number of instances where financial services providers or other entities or individuals have misused the FDIC's name or logo or have made false or misleading representations about deposit insurance."  The FDIC pointed to both "scammers" who made false claims as well as non-banks who made unsubstantiated claims.  

The FDIC new rule -- which is primarily targeted at non-bank entities -- is intended to address these practices. Some of the key provisions of the new rule include:  

  • No person may misrepresent that a product is insured or guaranteed by the FDIC by using "FDIC" or related terminology as part of a business name; 
  • No person may misrepresent that a product is insured by the FDIC by using "FDI" or related terminology in any advertising; and 
  • No person may knowingly make false or misleading representations about deposit insurance. 

With the increasing use of new types of financial products, it's important for businesses to ensure that they're only promoting products as being insured by the FDIC if they are, in fact, insured.  This new rule from the FDIC is a sure sign that the agency will be on the lookout for businesses that mislead consumers about what coverage is being provided.