FDIC Issues Guidelines to Impede Unfair Practices by State-Chartered Banks

The FDIC has issued a report to help clarify and carry out the prohibitions against unfair or deceptive trade practices found in section 5 of the Federal Trade Commission Act. This act was established to prevent all businesses engaged in commerce, including state-chartered banks, from engaging in business practices that may be harmful or deceitful to consumers.

The FDIC has issued a report that clarifies the meaning of unfair or deceptive practices for banks falling under its jurisdiction. The FDIC defines an unfair practice as a practice that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition.” Deceitful practices are those that influence a consumer to make a decision through a representation, omission, or practice that is deceptive in nature. These deceitful practices must make a consumer make a reasonable decision about a product or service that he may not have made if not for the omission of important information or a false representation of the product or service.

The purpose of these guidelines is to enable banks to provide services to consumers in a manner that is fair, allows informed customer choice, and is consistent with section 5 of the Federal Trade Commission Act.

Links:

• http://www.fdic.gov/news/news/financial/2004/fil2604a.html
• http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040311/default.htm
• http://www.ftc.gov/ogc/brfovrvw.htm

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