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FDIC Consumer News - Summer 1999

Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

You've Got Questions? We've Got Answers

FDIC responses to some frequently asked questions from consumers

The FDIC learns a lot from the thousands of calls, letters and e-mails received each year from consumers, bankers, state and federal legislators, and others who contact us. We learn, for example, what people find particularly confusing or where consumers need the most help or guidance. And we figure that you, too, can learn from some of the more common questions received by the FDIC. That's because knowing the right answers some day might save you some time, hassles and even money.

As you might expect, the top issue that consumers contact the FDIC about is the insurance coverage of their deposit accounts. In fact, about three out of every four questions that come to the FDIC's Division of Compliance and Consumer Affairs (DCA) have to do with deposit insurance. "The number of phone calls on deposit insurance topics has been exceptionally high recently due to changes in the insurance rules that became effective April 1, 1999," says Kate Spears, a DCA Consumer Affairs Specialist in Washington. "But we also field a lot of questions and complaints on other topics, including credit cards and mortgages."

Based on the more than 5,000 letters (including e-mail messages) and 60,000 telephone calls received by DCA during the first half of 1999, we put together this list of frequently asked questions (and their answers) that we hope you'll find useful.

Deposit Insurance
I have two accounts at the bank under my Social Security number (SSN). I've been told that everything under the same SSN is covered up to the $100,000 FDIC insurance limit. Is this true?

No. Deposit insurance is not determined by Social Security numbers, but rather by who "owns" the money in the accounts and the types of accounts involved. For example, if you have $100,000 in an individual account and $100,000 in your share of a joint account at the same bank, you're covered to $200,000, not $100,000. It doesn't matter that your SSN is on both accounts.

I heard recently that the FDIC has changed the insurance rules for joint accounts. How are they insured now?

The old rules involved two different calculations that consumers found confusing and that often caused them to believe they had more insurance coverage in joint accounts than they did. But under the new, simpler rules that went into effect April 1, 1999, the FDIC just looks at your share in the joint accounts at an institution and insures you up to $100,000.

"It doesn't matter whether the funds are in one joint account or many joint accounts—your total share will be covered to $100,000," says Joe DiNuzzo, an FDIC attorney in Washington. So if you have only one joint account at a bank and it's owned by two people, that account is insured up to $200,000 ($100,00 for each owner). Likewise, if four people have one joint account at the bank, the account is insured up to $400,000. Also, remember that joint accounts are insured separately from your other types of accounts.

My banker says that if I open an account in trust for someone, it"s separately insured from what I already have at the bank. Is this true?

It depends on what you already have at the institution and who the beneficiary is. Your banker probably is referring to "testamentary" accounts (a type of payable-on-death account, also known as an "In Trust For" account). These are accounts where the depositor indicates in the bank's records that, upon his or her death, the funds will be payable to one or more named beneficiaries.

Testamentary accounts are insured up to $100,000 for each "qualifying" beneficiary (spouse, children, grandchildren, parents, siblings) separately from any funds the depositor holds in his or her name alone at the same institution. This means that a parent's testamentary account that lists three children as the beneficiaries would be insured up to $300,000 (assuming that the parent holds no other testamentary accounts for any of the same three children). If the testamentary account is owned by both parents for the three children, the account would be insured up to $600,000 (again, assuming that the parents hold no other testamentary accounts for any of those three children). This money also would be separately insured from the depositor's individual accounts at the bank.

What if you place money in trust for non-qualifying beneficiaries (such as friends, cousins or in-laws)? That money would be insured as part of your individually owned funds, up to a maximum of $100,000.


Insurance Brochure Revised

The FDIC has revised its "Your Insured Deposits" brochure to reflect April 1, 1999, amendments to the deposit insurance rules on joint accounts and "payable-on-death" (POD or trust) accounts. The free publication explains deposit insurance coverage in a question-and-answer format. The latest edition is marked "1999" on the last page. Previous editions do not reflect the recent rule changes and should be destroyed. The brochure is available from FDIC-insured banks and savings associations as well as from the FDIC's Public Information Center. You can also read the brochure at our www.fdic.gov Web site.

I see promotions for institutions in newspapers or on the Internet that say they're "FDIC-insured." Should I believe them? Where can I call or look to check?

The FDIC is your best source. The two fastest ways to verify that an institution is FDIC-insured are to check the FDIC's list of insured institutions posted on our Web site (www.fdic.gov) or call our Division of Compliance and Consumer Affairs toll-free at (800) 934-3342. To check on whether a credit union is insured by the National Credit Union Administration, call (703) 518-6330, search the NCUA's database of insured credit unions at www.ncua.gov/indexdata.html, or write to NCUA, 1775 Duke Street, Alexandria, VA 22314.

FDIC attorney Mark Mellon also notes that it's a federal crime to falsely represent that a depository institution is federally insured.

I read in the newspaper that a local broker was advertising FDIC-insured certificates of deposit (CDs). Are you insuring brokers now, too?

The FDIC does not insure individual brokers or brokerage firms. The investment the broker is offering to make for you, however, may be FDIC-insured if the funds are placed in a deposit account at an FDIC-insured institution (and certain deposit insurance requirements are met). Your first question to the broker should be: "What is the name of the institution?" You then can verify that the institution is FDIC-insured (see previous question).

You also should make sure you understand completely what kind of investment the broker is making on your behalf and ask about any potential risks. It also helps to check on whether complaints have been filed against that broker before you send money his or her way. Possible sources of information include the National Association of Securities Dealers at (800) 289-9999 (for "registered" broker/dealers) and the state government agency that regulates businesses in your state (if it requires brokers to register in order to do business in the state).

Cashing Checks
I just went to a bank to cash my paycheck, which is drawn on that bank. But because I didn
't have an account there, the bank wanted to charge me a service fee. Isn't a bank required to honor its checks?

Financial institutions are not prohibited by state or federal law from having different rules for non-customers. So, despite the fact that the check was drawn on that bank, it legally can impose a fee for cashing one of its checks for a non-customer. Had you instead deposited the check at your own bank, you would not have been charged a fee. Why? "Because financial institutions do not charge each other for checks presented through the normal clearing process," says FDIC Washington-based attorney Robert Patrick.

I deposited a check earlier this week, and have confirmed through the person who wrote it that it has cleared her bank. I went to my bank to take out the money, and the bank says that it will still be on hold for several days. Can the bank do this?

The Expedited Funds Availability Act sets limits on how long financial institutions can place holds on deposits. The time frames depend on many factors, including the type of deposit (check, wire transfer, cash), whether the check is drawn on a "local" or "non-local" institution, and the amount of the check. These deadlines represent the maximum time allowed for holds. That means there's nothing prohibiting an institution from releasing deposited funds sooner than the law requires, but it also means the institution isn't required to make the funds available before the end of the hold period. Discuss your concerns with a manager at your financial institution. Or, for more information about the rules governing the availability of funds, contact the Federal Reserve System.

A bank denied my loan application, and it mentioned that a "credit scoring" system was part of the evaluation process. What is that system all about?

Financial institutions frequently use credit scoring systems to help evaluate an applicant's ability to repay a loan. This type of system was adopted, among other reasons, to process loan applications quickly and help avoid credit discrimination. Under the Equal Credit Opportunity Act (ECOA), banks are permitted to use a credit scoring system that is statistically accurate and does not result in unfair treatment. For example, a person cannot lose points because of his or her racial background. But you can gain or lose points because of factors such as your income, employment history, past use of credit cards, and whether you rent or own your own home. (For more information about credit scoring)

I've got a problem with a fee my bank has charged me on my credit card. Is the bank allowed to charge whatever it wants?

The federal Truth in Lending Act requires that credit card issuers disclose their interest rates, fees and other account terms, so that consumers can shop around for the best deal. That law also requires card issuers to give card holders advance notice (typically at least 15 days) before making changes to your card features — such as increasing the interest rate, lowering the credit limit, or adding new fees and penalties. "But when it comes to how much your bank can charge on a credit card or when it can impose a fee," says Kathy Nagle of the FDIC Division of Compliance and Consumer Affairs, "that's up to the institution, subject to any restrictions in your credit card account agreement and state law." If you're not happy with your card's interest rate, fees, credit limit or other terms, or if you just don't like the way a problem is being resolved, try to work things out with the card company directly. If you're still having problems, you might want to contact your state's consumer protection office listed in your phone book or simply look for another credit card. Charles Small of the FDIC's Division of Compliance and Consumer Affairs regional office in New York City offers this final advice to credit card customers: "Read all the information from your card issuer, so you can understand the terms of your contract and maybe avoid problems and misconceptions in the first place."


Where to Turn for More Help and Information

The FDIC Division of Compliance and Compliance and Consumer Affairs helps educate consumers and bankers on topics such as deposit insurance, community reinvestment and fair lending. You can contact DCA toll-free at (800) 934-FDIC—that's (800) 934-3342. Recorded information is available 24 hours a day, seven days a week. Specialists are available Monday through Friday from 9:00 a.m. to 5:00 p.m., Eastern time. If you are hearing impaired, call (800) 925-4618. Consumers also may write to FDIC Consumer Affairs, 550 17th Street, NW, Washington, DC 20429. Or, e-mail your question to consumer@fdic.gov.

Final Thoughts
The laws and rules governing banking are often complex and confusing. You've seen that in the questions and answers you just read. Typically, the quickest way to answer a question or resolve a problem is by discussing the matter with a representative from your financial institution. But we also invite your calls, e-mails and letters. Your financial decisions are too important to be based on the wrong information.

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Last Updated 2/25/2004 communications@fdic.gov