2025 Risk Series: Deposit Insurance & Consumer Protection Risks
The Regulatory Risks
Under a new administration, the regulatory landscape for deposit insurance and consumer protection is unclear. The CFPB has been effectively sidelined, with supervisory and rule-making activities paused, creating uncertainty around future enforcement. Discussions about consolidating banking regulators, including the FDIC and OCC, further complicate the outlook for compliance priorities.
Despite this uncertainty, the FDIC, OCC, and FRB have continued to issue enforcement actions in these areas. Recent actions highlight that while broad regulatory changes could be forthcoming, banks must remain diligent in their compliance efforts until the administration's priorities become clear.
Example Enforcement Actions
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Atmos Financial (2024): Cited by FDIC for falsely advertising FDIC insurance for accounts that were not eligible, leading to consumer confusion.
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Axiom Bank (2024): OCC enforcement action for deficiencies in prepaid card and merchant processing risk management, highlighting concerns about consumer protection and transparency in deposit-related services.
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BybitcoinEx, Inc. (2024): FDIC enforcement action for misleading statements regarding the FDIC insurance status of cryptocurrency-related deposits.
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Unbanked, Inc. (2023): Issued FDIC demand letter for misrepresenting deposit insurance coverage in marketing materials and misleading consumers about relationships with insured banks.
Key Risks to Address Now
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Misrepresentation of FDIC Deposit Insurance Coverage: Banks must ensure that their own marketing materials and communications including those reagrding their third-party partnerships do not mislead consumers regarding insured products.
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Consumer Protection Compliance: False or misleading communications and practices can result in significant enforcement actions.
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Third-Party Risks & Fintech Partnerships: Banks working with fintech partners must monitor all deposit-related claims and disclosures to ensure regulatory compliance.
Strategies to Strengthen Compliance & Mitigate Risk
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Ensure Clear & Accurate Deposit Insurance Disclosures
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Review marketing materials and disclosures to confirm compliance with FDIC rules.
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Train employees on properly communicating deposit insurance coverage.
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Enhance Consumer Protection Programs
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Conduct regular compliance reviews to identify and mitigate risks.
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Strengthen internal monitoring to prevent deceptive or unfair banking practices.
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Monitor Fintech & Third-Party Partnerships
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Establish robust due diligence and oversight procedures.
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Ensure all deposit-related products offered through partners comply with consumer protection regulations.
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Take Action Now
Although regulatory priorities may shift under the new administration, recent enforcement actions indicate that deposit insurance and consumer protection remain key focus areas. Banks should not assume that enforcement in these areas will disappear.
Instead, they should continue strengthening risk management frameworks, enhancing transparency, and ensuring proper oversight of third-party relationships until changes in regulatory direction become clearer. Strengthening risk management frameworks, enhancing transparency, and ensuring proper oversight of third-party relationships will help banks navigate the evolving regulatory landscape.
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