CFPB handles false insurance coverage claims
Consumer Financial Protection Bureau intends to strengthen enforcement and monitoring of FDIC insurance claims
Digital assets and stablecoins have been identified in reference to misuse of the FDIC logo and name and false insurance claims
Claims by fintech offerers that products are “regulated” by the FDIC or “eligible for FDIC insurance” may violate consumer financial protection law if the products are not actually insured
In collaboration with a new final rulethe Consumer Financial Protection Bureau (CFPB) has issued a execution note provide guidance on deceptive acts or practices related to the use of the Federal Deposit Insurance Corporation (FDIC) name or logo. The guidelines also explain how misrepresentations regarding deposit insurance, even those who are not “in the know”, can violate the Consumer Financial Protection Act (the Act).
Under applicable rules, financial institutions may not misuse the FDIC name or logo or make misleading statements regarding deposit insurance, FDIC insurance eligibility, or insurance coverage. FDIC intermediary.
The CFPB highlighted that issues relating to FDIC insurance coverage claims have taken on renewed importance with the emergence of technologies and financial products, particularly cryptocurrencies and stablecoins. The CFPB has also identified the risks posed to consumers if they are enticed to purchase and use certain products, services or financial assets through misrepresentations or false advertisements relating to insurance coverage.
The law prohibits deceptive acts and practices, including misleading representations involving the FDIC name or logo or relating to deposit and account insurance coverage. When fintech companies, stablecoin offerors, financial product offerors, and depository providers make statements about the FDIC, FDIC membership, and direct or indirect insurance coverage applicable to the products or accounts, such statements are subject to review by the CFPB and must be designed to comply with the provisions and prohibitions of the Act.
In particular, the CFPB guidelines emphasize two main concerns:
Misstatements harm customers and pose a significant risk of unexpected losses. The CFPB noted that emerging financial products and services, including digital assets and stablecoins, likely pose risks to consumers, especially in times of financial hardship, as they are likely to rely on misleading advertisements. indicating that such uninsured products or services are, in fact, FDIC-insured.
The guidelines emphasize that prohibited claims that financial products or services are “regulated” by the FDIC, “insured,” or “eligible for” FDIC insurance are misleading if those claims indicate to consumers that the product or service is insured. by the FDIC when this is not the case. . For example, the applicable rules require that certain non-bank entities that place a customer’s deposits with an insured deposit-taking institution must identify the insured institution in which the funds may be placed so that consumers can verify the status of the institution and its FDIC insurance coverage.
Identify emerging fintech and digital assets in the Notice Materials, the CFPB, as part of its April Non-Bank Notice, advises stablecoin and virtual currency businesses that the CFPB Regime may apply to their products and activities in the to the extent that they make representations regarding the applicability or eligibility of their products and accounts for FDIC coverage. Offerors of digital assets, digital dollars, and stablecoins making claims regarding linked or underlying insured accounts linked to or supporting digital asset offerings comply with updated CFPB and FDIC rules.
The new rules provide procedures for identifying and investigating behavior related to the use of the FDIC name and logo and statements relating to covered products and accounts, as well as standards for assessing potential violations. Providers of digital assets, fintech, and financial services should consider performing an in-depth analysis of statements indicating FDIC coverage for products, accounts, and services.