As we mentioned in our previous blog, the Transaction Account Guarantee Program’s (TAGP) unlimited coverage of low-interest NOW accounts and all IOLTAs is ending December 31, 2010. Thus, banks are required to notify existing customers who will be losing this unlimited coverage. The new rules do not provide a model notice for this purpose, but do allow the required lobby notice to be provided to these customers. For banks that are looking to provide a modified, shorter version in a statement message, we’ve developed the following wording:
Unlimited deposit insurance protection of low-interest NOW accounts [and all IOLTAs] will end on December 31, 2010. These accounts will be insured under the general deposit insurance rules of at least $250,000. All funds in ‘‘noninterest-bearing transaction accounts” are insured in full by the FDIC through December 31, 2012.
Below is the model notice (required to be posted in the bank/branch lobbies and website, if internet deposit services are offered). However, we recommend modifying it to also state: These other accounts will be insured under the general deposit insurance rules of at least $250,000.
NOTICE OF CHANGES IN TEMPORARY FDIC INSURANCE COVERAGE FOR TRANSACTION ACCOUNTS
All funds in a ‘‘noninterest-bearing transaction account” are insured in full by the Federal Deposit Insurance Corporation from December 31, 2010, through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from, the coverage of at least $250,000 available to depositors under the FDIC’s general deposit insurance rules.
The term ‘‘noninterest-bearing transaction account” includes a traditional checking account or demand deposit account on which the insured depository institution pays no interest. It does not include other accounts, such as traditional checking or demand deposit accounts that may earn interest, NOW accounts, money-market deposit accounts, and Interest on Lawyers Trust Accounts (‘‘IOLTAs”). [These other accounts will be insured under the general deposit insurance rules of at least $250,000.]
For more information about temporary FDIC insurance coverage of transaction accounts, visit www.fdic.gov.
Please keep in mind that these modifications (both to the customer notice and lobby notice) were not specified in the final rule. Thus, you might want to consider running this verbiage past legal counsel and/or your examiners to ensure compliance with the requirements.