Home > Consumer Protection > Consumer News & Information > FDIC
Consumer News - Summer 2000
FDIC Consumer News - Summer 2000
|Answers to Our Quiz|
1. D and E. FDIC insurance only applies to funds that are placed on deposit at FDIC-insured institutions. These deposits include checking accounts, savings accounts, money market deposit accounts (a transaction account limited to six transfers per month) and certificates of deposit (CDs). Under the FDIC's deposit insurance rules, it's also permissible for brokerage firms to place funds for customers in insured accounts at banking institutions, even though the brokerage firm itself is not a member of the FDIC. There are special rules governing so-called "brokered deposits," so for more information, consult the FDIC's resources listed below.|
Why aren't mutual funds, annuities or the contents of safe deposit boxes protected by FDIC deposit insurance? Mutual funds and annuities are types of investments...not deposits...and therefore they are not guaranteed against loss by the FDIC, even if they are sold to you in the lobby of an FDIC-insured institution. As for safe deposit boxes, think of them strictly as storage space. Even if you stored cash or checks in a safe deposit box at an insured institution, they still wouldn't qualify as deposits under the insurance laws. Among the reasons: Deposits are intended for the bank to use to make loans to other customers.
2. B. Under FDIC rules, there is $100,000 of deposit insurance for each category of a customer's deposit accounts (including principal and accrued interest) at an institution. The most common categories are individual accounts, joint accounts, testamentary accounts (often called "payable-on-death" accounts), and retirement accounts (including Individual Retirement Accounts, Keoghs, and pension or profit-sharing plans). So, you can have more than $100,000 of coverage in the same institution, depending on the account types and how they're owned. Remember, too, that the funds you hold in separately chartered institutions are always separately insured from each other.
3. C. Just because you're pre-approved for a credit card doesn't mean you're guaranteed a card or the rates and terms touted in the promotion. Being pre-approved means that a "pre-screening" by the card company indicates you may meet the criteria it wants in a customer. But, as explained in the promotion, you still must apply for the card and await the results of a credit check before finding out what you're truly approved for, if anything. Many consumers don't see or hear the words in the sales pitch explaining that a pre-approved offer is a conditional offer only. What if, after applying, the card company offers you a less-attractive card instead? "You can always call or write the company about the terms they offered you," says Janet Kincaid, a credit card specialist with the FDIC in Kansas City. "Try to renegotiate or ask what criteria you did not meet in order to receive the original offer." If you're still not happy with the outcome, she adds, "You always have the right to refuse the new terms."
4. False. The federal Truth in Lending Act requires credit card issuers to disclose their interest rates, fees and other account terms, and to give card holders advance notice, typically at least 15 days, before changing the card's features. (In the case of a variable-rate card, no advance notice is required to change the rate.) But, when it comes to how much the card issuer can charge, that's only subject to your card agreement (a contract that you sign) and any restrictions on rates and fees under state law where the card issuer is chartered. That's why we advise consumers to read the documents sent by the card company and to try to understand as much as possible about the card's main features.
"Many consumers who contact the FDIC admit they didn't read the card agreement, or they complain that an employee told them one thing when the paperwork said something else," says Cora Lee Page, an FDIC consumer affairs specialist in San Francisco. "Consumers need to know that if they sign a form without reading it they are hurting themselves if a dispute later arises."
5. B. Most experts say you should get a copy of your credit report about once a year. Why? A regular review of your credit report helps reveal if a thief has been using your name for fraudulent purposes. (See our cover story about identity theft for more details.) Your credit report also is a reflection of your financial responsibility, so you want it to be complete and accurate. And, because you never know when you'll be in a rush to get your next credit card or loan, you can head off potential problems and delays by periodically looking at your report to supply missing details or fix inaccurate information.
There are three major credit bureaus that financial institutions rely on for credit reports. Call any of them toll-free for a copy of your credit report: Equifax at (800) 685-1111, Experian at (888) 397-3742, or Trans Union at (800) 888-4213. The most you can be charged for a credit report under current law is $8.50. Credit report content may vary significantly among the credit bureaus, so you may want to request copies from all three.
6. B. "Many people incorrectly believe that a financial institution just keeps accounts open forever and the money is sitting in the bank's vault waiting for them to come and get it," says Kathleen Halpin, an FDIC insurance claims agent based in Dallas. In reality, state laws require banks to transfer inactive accounts to the state government where the depositor was last known to live. While state laws vary, this transfer would occur if there were no transactions or communications from the account owner for about five years, and the bank was unsuccessful trying to reach the owner.
How do people "lose" bank accounts in the first place? Perhaps they moved and changed names without informing the financial institution, or they were unaware the account had been set up for them as a child. But, just because you find evidence of an old account, that doesn't mean the bank or the state would have the money. Among the reasons, according to Kathleen Nagle, a consumer affairs official with the FDIC in Washington: Banks do not require depositors to turn in an original passbook or certificate to close an account. "Our experience shows that it's likely that the account was closed years ago," she says, and the depositor failed to update the records at home, leaving a lot of people wondering what happened.
When in doubt about an old account, check with the bank or the state where any unclaimed property would have been sent. If you have problems locating a particular bank, contact the FDIC's
States do attempt to reunite property owners with their assets, but even if a state eventually sells an asset (such as jewelry in a safe deposit box), the original owner or any heirs generally still have the right to claim its value from the state. There is, though, an important deadline facing people who left deposits behind in an insured bank or savings institution that failed. Under federal laws, consumers who forget about insured deposits in a failed institution and can't be located by the FDIC or the state run the risk of forfeiting the money.
How long a depositor (or an heir) has to claim the funds depends on when the institution failed. In years past, a depositor had as little as 18 months to act after an institution closed. Under new rules effective since mid-1993, however, people now have an additional 10 years...11 1/2 years in total... to claim insured funds. Forfeited money is put back into the FDIC's deposit insurance funds to pay insured depositors in future bank failures.
7. B. Some companies on the Web pretend to be banks seeking deposits but really are not legitimate institutions. Furthermore, some thieves are using the Internet to obtain valuable personal information, such as credit card or Social Security numbers. So, before you send money or information to a bank Web site, first contact the FDIC or any federal or state banking regulator (see For More Information) to confirm that the bank named on the Web site is legitimate. One resource is our database of FDIC-insured financial institutions at www2.fdic.gov/structur/search. Also remember that there may be institutions on the Web that are not supervised by U.S. banking regulators and are not insured by the FDIC, but they still may be legitimate, such as some foreign banks.
"But, even if you confirm that a particular bank is legitimate, that doesn't necessarily mean the Web site you have visited belongs to that bank," warns Cynthia Bonnette, a bank technology specialist with the FDIC in Washington. That's because con artists may try to confuse consumers by using company names or Web addresses that sound like familiar, legitimate organizations. So, to be sure a Web site belongs to a real bank, consider calling that bank using the number provided by a banking regulator, the phone book, directory assistance or some other trusted source. Do not use the phone number or e-mail address shown on the Web site, Bonnette says, "because that won't be helpful if you're simply put in touch with individuals who created a fraudulent site."
If you want more information about topics addressed here or other issues affecting bank customers, the FDIC can help. Contact the FDIC's Division of Compliance and Consumer Affairs toll-free at 800-934-3342, or by mail at 550 17th Street, NW, Washington, DC 20429. You can also get answers to questions by visiting the FDIC's Web site. Start at the home page at www.fdic.gov or go straight to our Customer Assistance page at www.fdic.gov/quicklinks/consumers.html, where you'll find connections to resource materials and a form you can use to send questions electronically to the FDIC. We hope you enjoyed our quiz. We also hope you passed with flying colors and perhaps learned something that can help you achieve your financial goals.
|Previous Story||Table of Contents||Next Story|
|Last Updated firstname.lastname@example.org|