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FTC releases final rule on insurance disclosures
WASHINGTON (5/27/10)—Credit unions and other financial institutions that are backed by private insurance will now be required to more fully disclose that fact after the Federal Trade Commission (FTC) on Wednesday released its final rule on depository institution disclosures. The new rule will require non-federally insured financial institutions to disclose their insurance status and state clearly that they are not federally insured and that share or deposit accounts they hold are not backed by federal government guarantee. The required disclosures must be made on account statements, in advertising and inside branches at the deposit window. While the new rule will require non-federally-insured financial institutions to disclose their insurance status, that disclosure is not required to appear “in a sign, document, or other item that has the institution’s name but no information about the institution’s products or services or information otherwise promoting the institution.” However, the institution must “conspicuously disclose” that it is not federally insured wherever deposits are received as well as on its web site. National Credit Union Administration (NCUA) Chairman Debbie Matz applauded the FTC decision, saying in a Wednesday release that “effective consumer protection starts with relevant, practical information, and the FTC has taken an important step to equip members of non-federally insured institutions with essential details about their accounts.” “In these uncertain and difficult economic times, consumers should know more about how their money is insured, and should know that the federal deposit insurance provided by the National Credit Union Share Insurance Fund is the best option for credit union members," she added. The FTC release noted that commenters were most concerned by disclosure requirements for institutions participating in shared branching networks and service centers and “the timing of signed acknowledgment requirements.” Commenters were also reportedly concerned that the new rules would require federally insured institutions in shared branching networks to post Federal Deposit Insurance Corporation Improvement Act (FDICIA) disclosures on behalf of each of the non-federally ensured entities in those networks. “Both federally and non-federally insured institutions argued that such a requirement would be unreasonable” and, potentially, confusing for customers, the release added. Many also suggested that the FTC could “rely on recent disclosure requirements issued by the NCUA for such networks in lieu of imposing a separate disclosure requirement.” Commenters argued that the NCUA disclosure provides a clear explanation to consumers and that any FTC disclosure could cause confusion. The final rule will become effective 30 days after it is published in the Federal Register.

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