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What's in a Name?
The FDIC, joined by the other bank regulatory agencies, has just issued guidance on the use of trade names. In FIL-46-98 the agency raises concerns about the use of several trade names by one bank. This may occur because the bank opens branches under a different name (for example, to serve different markets) or may conduct Internet banking using a variation on its name.
The regulatory concern is that customers may believe they are dealing with two different institutions and may therefore expect twice as much deposit insurance as is actually available.
While institutions may have good reason for using different names, the use of the names should be reviewed and controlled to prevent any customer confusion.
The agencies are requesting banks to take four steps to minimize customer confusion. First, banks should clearly disclose in all advertising and public materials that the facility with a different name is actually a part of the bank.
Second, all legal documents, such as signature cards, notes, and statements, should use the bank's legal name as it appears on its charter.
Third, train staff throughout the depository institution on the correct use of names, and the relationship of the institutions. In addition, staff that opens accounts should be trained to ask customers whether they already have accounts at the same institution using a different institutional name. And staff should be trained to explain deposit coverage to customers.
Finally, banks should have customers sign an acknowledgment that they understand that the offices operating under different names are actually part of the same institution and that accounts made in offices of each name are not separately insured.
These steps are particularly important when institutions merge. During the period that the merger is being implemented but the institutions continue to use the previous names, the opportunities for customer confusion are high.
Notice the similarity of approach to the non-deposit investment product guidelines? Disclose, explain, and make sure the customer understands.
Copyright © 1998 Compliance Action. Originally appeared in Compliance Action, Vol. 3, No. 8, 6/98
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