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Tuesday, November 6, 2012

FDIC Encourages ‘Adequate Notice’ on TAG Expiration

The FDIC in a financial institution letter yesterday encouraged banks to give customers adequate advance notice that the Transaction Account Guarantee program’s temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts -- including Interest on Lawyer Trust Accounts, or IOLTAs -- is scheduled to expire on Dec. 31.

ABA bankers and staff members had encouraged the FDIC to provide timely and flexible guidance on the TAG’s possible expiration so that bankers can inform customers through routine communications. ABA, however, also continues to press strongly for a legislative extension of the program. The association will be looking for a bill to attach the extension to during the congressional lame-duck session that starts on Nov. 13.

The FDIC noted that the Dodd-Frank Act imposes no specific notice requirement for the coverage expiration. But the agency added that
we encourage [insured depository institutions], as a matter of prudent commercial practice, to remind their … depositors about the pending expiration and the impact that expiration will have on their deposit insurance coverage.

IDIs (insured depository institutions) may use any reasonable method of providing reminders to depositors, such as individual written notices to each [noninterest-bearing transaction account] depositor or notices on regular account statements. IDIs may use electronic mail for depositors who ordinarily receive account information in this manner.
The agency added that it will provide additional guidance if Congress modifies coverage for noninterest-bearing transaction accounts.

Read the FDIC letter.

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