One of the FDIC’s newly added FAQs about signage is causing confusion at my bank. At issue is FAQ #7 under Non-Deposit signs:
When disability insurance or credit insurance is added to a loan, such as a car loan, does the bank need to post the ‘not FDIC insured’ sign?
Answer: Generally, FDIC staff has viewed credit life insurance as well as disability insurance as part of the offering of credit. Under 12 CFR 328.1, the definition of “non-deposit product” does not include “credit products” which means the non-deposit sign is not required when an IDI offers credit products.
Q Does this mean that the “Not, Not, May” disclosures no longer apply to credit life, disability, or flood insurance, as they are now considered “credit related” and thus exempt from those disclosure rules?
A No. This FAQ is strictly addressing signage requirements, not the “Not, Not, May” disclosures required for non-deposit products under the Consumer Protections in Sales of Insurance regulation, which apply to these types of insurance. Credit life and disability insurance as well as flood insurance, are covered under Consumer Protections in Sales of Insurance, (different citations depending on the agency: Fed, OCC, FDIC.) Although these regulations do not define “insurance,” for over 20 years, credit life and disability insurance as well as flood insurance have been considered covered products subject to the “Not, Not May” disclosure requirements.
Although only the FDIC rule addresses signage, the Consumer Protections in Sales of Insurance law and the FDIC’s signage rules have similar provisions. For example, they have similar requirements related to segregation of space where insurance products are offered or sold, prohibition on selling such products at or near where deposits are accepted, and prohibitions against misrepresenting the insured nature of the product.
For more information, contact ABA’s Leslie Callaway.
Please note that this section is not a substitute for professional legal advice.
