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§ 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)).''



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