§ 1831t. Depository Institutions Lacking Federal Deposit Insurance

(a) Annual independent audit of private deposit insurers

(1) Audit required

     Any private deposit insurer shall obtain an annual audit from an independent auditor using generally accepted auditing standards. The audit shall include a determination of whether the private deposit insurer follows generally accepted accounting principles and has set aside sufficient reserves for losses.

(2) Providing copies of audit report

(A) Private deposit insurer

     The private deposit insurer shall provide a copy of the audit report—

     (i) to each depository institution the deposits of which are insured by the private deposit insurer, not later than 14 days after the audit is completed; and

     (ii) to the appropriate supervisory agency of each State in which such an institution receives deposits, not later than 7 days after the audit is completed.

(B) Depository institution

     Any depository institution the deposits of which are insured by the private deposit insurer shall provide a copy of the audit report, upon request, to any current or prospective customer of the institution.

(b) Disclosure required

     Any depository institution lacking Federal deposit insurance shall, within the United States, do the following:

(1) Periodic statements; account records

     Include conspicuously in all periodic statements of account, on each signature card, and on each passbook, certificate of deposit, or similar instrument evidencing a deposit a notice that the institution is not federally insured, and that if the institution fails, the Federal Government does not guarantee that depositors will get back their money.

(2) Advertising; premises

     Include conspicuously in all advertising and at each place where deposits are normally received a notice that the institution is not federally insured.

(3) Acknowledgement of disclosure

(A) New depositors

     With respect to any depositor who was not a depositor at the depository institution before June 19, 1994, receive any deposit for the account of such depositor only if the depositor has signed a written acknowledgement that—

     (i) the institution is not federally insured; and

     (ii) if the institution fails, the Federal Government does not guarantee that the depositor will get back the depositor’s money.

(B) Current depositors

     Receive any deposit after the effective date of this paragraph for the account of any depositor who was a depositor before June 19, 1994, only if—

     (i) the depositor has signed a written acknowledgement described in subparagraph (A); or

     (ii) the institution has complied with the provisions of subparagraph (C) which are applicable as of the date of the deposit.

(C) Alternative provision of notice to current depositors

(i) In general

     Transmit to each depositor who was a depositor before June 19, 1994, and has not signed a written acknowledgement described in subparagraph (A)—

(I) a card containing the information described in clauses (i) and (ii) of subparagraph (A), and a line for the signature of the depositor; and

(II) accompanying materials requesting the depositor to sign the card, and return the signed card to the institution.

(ii) Manner and timing of notice

(I) First notice

Make the transmission described in clause (i) via first class mail not later than September 12, 1994.

(II) Second notice

Make a second transmission described in clause (i) via first class mail not less than 30 days and not more than 45 days after a transmission to the depositor in accordance with subclause (I), if the institution has not, by the date of such mailing, received from the depositor a card referred to in clause (i) which has been signed by the depositor.

(III) Third notice

Make a third transmission described in clause (i) via first class mail not less than 30 days and not more than 45 days after a transmission to the depositor in accordance with subclause (II), if the institution has not, by the date of such mailing, received from the depositor a card referred to in clause (i) which has been signed by the depositor.

(c) Manner and content of disclosure

     To ensure that current and prospective customers understand the risks involved in foregoing Federal deposit insurance, the Federal Trade Commission, by regulation or order, shall prescribe the manner and content of disclosure required under this section.

(d) Exceptions for institutions not receiving retail deposits

     The Federal Trade Commission may, by regulation or order, make exceptions to subsection (b) of this section for any depository institution that, within the United States, does not receive initial deposits of less than $100,000 from individuals who are citizens or residents of the United States, other than money received in connection with any draft or similar instrument issued to transmit money.

(e) Eligibility for Federal deposit insurance

(1) In general

     Except as permitted by the Federal Trade Commission, in consultation with the Federal Deposit Insurance Corporation, no depository institution (other than a bank, including an unincorporated bank) lacking Federal deposit insurance may use the mails or any instrumentality of interstate commerce to receive or facilitate receiving deposits, unless the appropriate supervisor of the State in which the institution is chartered has determined that the institution meets all eligibility requirements for Federal deposit insurance, including—

     (A) in the case of an institution described in section 461(b)(1)(A)(iv) of this title, all eligibility requirements set forth in the Federal Credit Union Act [12 U.S.C. 1751 et seq.] and regulations of the National Credit Union Administration; and

     (B) in the case of any other institution, all eligibility requirements set forth in this chapter and regulations of the Corporation.

(2) Authority of FDIC and NCUA not affected

     No determination under paragraph (1) shall bind, or otherwise affect the authority of, the National Credit Union Administration or the Corporation.

(f) Definitions

     For purposes of this section:

(1) Appropriate supervisor

     The "appropriate supervisor" of a depository institution means the agency primarily responsible for supervising the institution.

(2) Depository institution

     The term "depository institution" includes—

     (A) any entity described in section 461(b)(1)(A)(iv) of this title; and

     (B) any entity that, as determined by the Federal Trade Commission—

     (i) is engaged in the business of receiving deposits; and

     (ii) could reasonably be mistaken for a depository institution by the entity’s current or prospective customers.

(3) Lacking Federal deposit insurance

     A depository institution lacks Federal deposit insurance if the institution is not either—

     (A) an insured depository institution; or

     (B) an insured credit union, as defined in section 101 of the Federal Credit Union Act [12 U.S.C. 1752].

(4) Private deposit insurer

     The term "private deposit insurer" means any entity insuring the deposits of any depository institution lacking Federal deposit insurance.

(g) Enforcement

     Compliance with the requirements of this section, and any regulation prescribed or order issued under this section, shall be enforced under the Federal Trade Commission Act [15 U.S.C. 41 et seq.] by the Federal Trade Commission.

(Sept. 21, 1950, ch. 967, § 2[43], formerly § 2[40], as added Pub. L. 102–242, title I, § 151(a)(1), Dec. 19, 1991, 105 Stat. 2282; renumbered § 2[43], Pub. L. 102–550, title XVI § 1602(b), Oct. 28, 1992, 106 Stat. 4078; amended Pub. L. 103–325, title III, § 340(a), Sept. 23, 1994, 108 Stat. 2237.)

References in Text

     For the effective date of this paragraph, referred to in subsec. (b)(3)(B), see Effective Date of 1994 Amendment note below.

     The Federal Credit Union Act, referred to in subsec. (e)(1)(A), is act June 26, 1934, ch. 750, 48 Stat. 1216, as amended, which is classified generally to chapter 14 (§ 1751 et seq.) of this title. For complete classification of this Act to the Code, see section 1751 of this title and Tables.

     The Federal Trade Commission Act, referred to in subsec. (g), is act Sept. 26, 1914, ch. 311, 38 Stat. 717, as amended, which is classified generally to subchapter I (§ 41 et seq.) of chapter 2 of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see section 58 of Title 15 and Tables.

     1994—Subsec. (b)(3). Pub. L. 103–325 amended heading and text of subsec. (b)(3) generally. Prior to amendment, text read as follows: "Receive deposits only for the account of persons who have signed a written acknowledgment that the institution is not federally insured, and that if the institution fails, the Federal Government does not guarantee that they will get back their money."

     Section 340(b) of Pub. L. 103–325 provided that: "Section 43(b)(3) of the Federal Deposit Insurance Act [12 U.S.C. 1831t(b)(3)], as amended by subsection (a), shall take effect in accordance with section 151(a)(2)(D) of the Federal Deposit Insurance Corporation Improvement Act of 1991 [see Effective Date note below]."

     Section 151(a)(2) of Pub. L. 102–242 provided that: "Section 40 of the Federal Deposit Insurance Act [12 U.S.C. 1831t] (as added by paragraph (1)) shall become effective on the date of enactment of this Act [Dec. 19, 1991], except that—

"(A) paragraphs (1) and (2) of subsection (b) shall become effective 1 year after the date of enactment of this Act;

"(B) during the period beginning 1 year after that date of enactment of this Act and ending 30 months after that date of enactment, subsection (b)(1) shall apply with `, and that if the institution fails, the Federal Government does not guarantee that depositors will get back their money’ omitted;

"(C) subsection (e) shall become effective 2 years after that date of enactment; and

"(D) subsection (b)(3) shall become effective 30 months after that date of enactment."

     Section 151(b) of Pub. L. 102–242, as amended by Pub. L. 102–550, title XVI, § 1603(f)(1), Oct. 28, 1992, 106 Stat. 4081, provided that:

     "(1) Deadline for initial independent audit.—The initial annual audit under section 43(a)(1) of the Federal Deposit Insurance Act [12 U.S.C. 1831t(a)(1)] (as added by subsection (a)) shall be completed not later than 120 days after the date of enactment of this Act [Dec. 19, 1991].

     "(2) Business plan required.—Not later than 240 days after the date of enactment of this Act [Dec. 19, 1991], any private deposit insurer shall provide a business plan to each appropriate supervisor of each State in which deposits are received by any depository institution lacking Federal deposit insurance the deposits of which are insured by a private deposit insurer. The business plan shall explain in detail why the private deposit insurer is viable, and shall, at a minimum—

"(A) describe the insurer’s—

     "(i) underwriting standards;

     "(ii) resources, including trends in and forecasts of assets, income, and expenses;

     "(iii) risk-management program, including examination and supervision, problem case resolution, and remedies; and

"(B) include, for the preceding 5 years, copies of annual audits, annual reports, and annual meeting agendas and minutes.

     "(3) Definitions.—For purposes of this subsection, the terms `appropriate supervisor’, `depository institution’, `lacking Federal deposit insurance’, and `private deposit insurer’ have the same meaning as in section 43(f) of the Federal Deposit Insurance Act [12 U.S.C. 1831t(f)] (as added by subsection (a))."