Non-banks’ use of banking lingo, FDIC logo draw scrutiny. Amid bank failures, FDIC sees an increase in false promises of deposit insurance
Mercury, a financial technology company and major beneficiary of recent turmoil in the banking industry, is not a bank–but that key point hasn’t always been clear to consumers, according to California’s financial-services regulator.
“We believe in transparency and seek to be clear in our communications that banking services are provided by our regulated partner banks,” the Mercury spokesperson told MarketWatch. When the California regulator raised its concerns, the spokesperson said, “we acted quickly to settle the matter and update any marketing materials that were ambiguous or needed clarification.”
Amid the scrutiny, the FDIC is seeing an increase in misrepresentations about deposit insurance, the agency said in a February statement announcing that it had sent cease and desist letters to several companies making false and misleading statements about the insurance coverage. “These practices not only harm those who are targeted with the false promise of deposit insurance, but, if left unchecked, could also undermine confidence in the FDIC, FDIC-insured banks, and the U.S.
Many non-bank fintech companies clearly state that they’re not banks and not FDIC insured–but in some cases, there’s still room for confusion, consumer advocates say. The website of fintech company Tellus states in several places that it is not a bank and not FDIC-insured, but it compares the interest earned on a Tellus account with major banks such as Bank of America BAC and Wells Fargo WFC .
If the requirements are not met, only the account itself–and not each consumer–would be insured up to $250,000, the GAO report said. “If this is the case, consumers may not be aware that their deposits are not fully FDIC-insured,” the GAO said.
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