§ 1831t. — Depository institutions lacking Federal deposit insurance.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 12USC1831t]
TITLE 12--BANKS AND BANKING
CHAPTER 16--FEDERAL DEPOSIT INSURANCE CORPORATION
Sec. 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, Sec. 2[43], formerly Sec. 2[40], as added Pub.
L. 102-242, title I, Sec. 151(a)(1), Dec. 19, 1991, 105 Stat. 2282;
renumbered Sec. 2[43], Pub. L. 102-550, title XVI Sec. 1602(b), Oct. 28,
1992, 106 Stat. 4078; amended Pub. L. 103-325, title III, Sec. 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 (Sec. 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 (Sec. 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.
Amendments
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.''
Effective Date of 1994 Amendment
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].''
Effective Date
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.''
Viability of Private Deposit Insurers
Section 151(b) of Pub. L. 102-242, as amended by Pub. L. 102-550,
title XVI, Sec. 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)).''