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Charge a FDIC fee? Don’t even think about it.

You’re charging customers a “FDIC Fee?”  Really?  Still?

In July 2012, the FDIC published FIL-33-2012. In that FIL, the FDIC made clear it was not going to be happy if it discovered an insured institution was attempting to pass along some or all of the institutions FDIC deposit insurance assessment costs. These fees were variously called an “FDIC Fee,” “FDIC Assessment,” “FDIC Insurance Premium,” “FDIC Insurance Charge,” or similarly described fee for deposit insurance.

Naturally, customers who encountered this were not happy and expressed their displeasure to the FDIC.

Of course, FDIC doesn’t prohibit institutions from passing the costs of deposit insurance on to customers.  However,  the FDIC discourages institutions from (a) specifically designating that a customer fee is for deposit insurance or (b) from stating or implying that the FDIC is charging such a fee.

The FDIC opposes characterizing fees in this manner because it may:

(1) reveal information that could be used to determine an institution’s confidential supervisory ratings,
(2) mislead customers into believing that the FDIC charges IDI customers and/or
(3) mislead customers into thinking the FDIC requires IDIs to charge customers for deposit insurance.

In the July 2012 FIL, the FDIC encouraged institutions to review their designation and identification of fees and ensure that those fees do not reveal confidential supervisory information or mislead customers — in other words, “Knock it off with the so-called FDIC fees!”

Honestly, what were these institutions thinking?

Did any one of them call their regulator and run this idea by them? Did these banks think customers would stand still for this? Really?  Did management run over compliance people with this idea?  Somebody really should have explained to the king he had no clothes.

Of course, a bank has to make a profit.

Of course, passing along costs if a great way to make some money, or recapture costs.  But, charging for FDIC insurance, even if the Agency was OK with it, is a very bad idea. It reinforces customer perceptions of banks (and bankers) as  greedy opportunists. How in the world do we separate our community banks from the conscience-free money-center banks when we’re guilty of this kind of shenanigans?

If a bank really must raise fees to cover the FDIC assessment costs, then know there are better ways to charge a fee and properly disclose it.  (A key point here is to be up front about the fee and not lay it on the FDIC.)

If you’d like to brainstorm how to make this fee real, send me an email with “NO FDIC FEE” in the subject line. It never costs anything to kick around ideas with us.

You can learn more about us at www.bankexam.com.  We’re here to be part of your compliance (and fee generation) solution.