Requirements of Section 43 of the FDIA

Section 43 of the Federal Deposit Insurance Act, as amended by the Federal Deposit Insurance Corporation Improvement Act of 1991, requires depository institutions without federal deposit insurance to: * Include conspicuously on all periodic account statements, signature cards, passbooks, certificates of deposits, or similar instruments 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 back their money; * Include conspicuously in all advertising and where deposits are normally received a notice that the institution is not federally insured; and * Obtain a written acknowledgement from depositors that the institution is not federally insured and that if the institution fails, the federal government does not guarantee that the depositor will get back their money. The provisions also prohibit institutions lacking federal deposit insurance from engaging in interstate commerce unless their state regulator determines that the institution is eligible for federal deposit insurance. This prohibition is referred to as the “shut-down” provision. Private deposit insurers are required to: * Obtain an annual audit from an independent auditor using generally accepted auditing standards that includes a determination of whether the private deposit insurer follows generally accepted accounting principles and has set aside sufficient reserves for losses; and * Distribute copies of the audit report to each depository institution it insures and to the appropriate supervisory agency of each state in which such an institution receives deposits, within specified time frames. Under section 43 the Federal Trade Commission is empowered to: * Prescribe “the manner and content of disclosure required under the section” in order to “ensure that current and prospective customers understand the risks involved in forgoing federal deposit insurance;” * Enforce compliance with the section under the FTC Act; * Determine that an institution not chartered as a depository institution nonetheless is subject to the section, referred to as the look-alike provision; and * Exempt an institution, in consultation with FDIC, from the shut-down provision. Source: GAO study, FEDERAL DEPOSIT INSURANCE ACT: FTC Best Among Candidates to Enforce Consumer Protection Provisions