4000 - Advisory Opinions
Whether a Credit Union Advertisement for Excess Deposit Insurance is a Claim That Credit Unions are Safer Than Banks
November 2, 2000
Marc J. Goldstrom, Counsel
Re: Credit Union Advertisement of Excess Deposit Insurance
Thank you for your recent letter to Chairman Tanoue concerning the above-referenced matter. The letter has been forwarded to me for review and response.
As you indicate, the advertisement provided with your letter claims that Credit Union is "Arkansas' safest financial cooperative." We share your concern about advertisements that state that one type of insured institution or federally insured deposit fund is stronger or safer than another. Advertisements that cast any of the funds or insured institutions in an unfavorable light can have the unfortunate effect of undermining public confidence in all insured institutions or federal deposit insurance.
In the past the FDIC has objected to advertisements claiming that the NCUSIF is stronger or safer than the FDIC. Similarly, we have objected to advertisements that directly claim that credit unions are safer or stronger than banks. By contrast, the advertisement at issue does not make any direct comparisons. Taken out of context, the advertisement arguably implies that this particular credit union is safer than banks and thrifts (as well as other credit unions). However, taken in context the statement appears to be mere puffery for the excess deposit insurance being offered by the credit union.
From time to time the FDIC has been asked to comment upon excess deposit insurance programs. Assuming that an excess deposit insurance plan does not involve potential risk or liability to insured institutions, and assuming no laws are violated, the FDIC generally does not object to private excess deposit insurance arrangements. However, this should not be construed as an endorsement of excess deposit insurance or any particular excess deposit insurance program.
The foregoing notwithstanding, the FDIC does have concerns with respect to private excess deposit insurance arrangements. Inasmuch as the subject plan involves excess deposit insurance offered by a credit union rather than a bank, many of these concerns are not at issue. However, we are still concerned with the manner in which the excess deposit insurance program is advertised.
The manner in which a credit union, bank, or thrift advertises its deposits is subject to the provisions of the Truth in Savings regulations, 12 C.F.R. Parts 230 and 707, and section 709 of the United States criminal code, 18 U.S.C. § 709. More specifically, section 707.8(a) of the NCUA regulations1 provides that "[a]n advertisement shall not be misleading or inaccurate and shall not misrepresent a credit union's account contract." 12 C.F.R. § 707.8(a). Section 709 of Title 18, a criminal statute, provides that it shall be unlawful for anyone to "falsely advertise or otherwise [represent] by any device whatsoever that his or her deposit liabilities, obligations, certificates, shares or accounts are insured under the Federal Credit Union Act or by the United States or any instrumentality thereof. . . ."2 Accordingly, in the case of credit unions, advertisements making any reference to private insurance should clearly and conspicuously differentiate the NCUSIF insurance from the private insurance. We believe the advertisement at issue makes clear that the NCUSIF insures deposits up to $100,000 and that the private insurer provides up to $250,000 additional deposit insurance protection.
1The provision applicable to banks and thrifts is section 230.8(a) of Regulation DD. Go back to Text
218 U.S.C. § 709 contains a similar provision with respect to deposits insured by the FDIC. Go back to Text