Joint Ownership Deposit Accounts

AGENCY:

Federal Deposit Insurance Corporation.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Federal Deposit Insurance Corporation (FDIC) is seeking comment on a proposed rule that would amend the regulation governing one of the requirements for an account to be separately insured as a joint account. Specifically, the proposed rule would provide an alternative method to satisfy the “signature card” requirement. Under the proposal, the “signature card” requirement could be satisfied by information contained in the deposit account records of the insured depository institution establishing co-ownership of the deposit account, such as evidence that the institution has issued a mechanism for accessing the account to each co-owner or evidence of usage of the deposit account by each co-owner.

DATES:

Comments will be accepted until May 6, 2019.

ADDRESSES:

You may submit comments on the notice of proposed rulemaking using any of the following methods:

• Agency Website: https://www.fdic.gov/regulations/laws/federal. Follow the instructions for submitting comments on the agency website.
• Email: comments@fdic.gov. Include RIN 3064-AF04 on the subject line of the message.
• Mail: Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. Include RIN 3064-AF04 on the subject line of the letter.
• Hand Delivery/Courier: Comments may be hand delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7 a.m. and 5 p.m. Include RIN 3064-AF04 on the subject line of the letter.
• Public Inspection: All comments received, including any personal information provided, will be posted generally without change to https://www.fdic.gov/regulations/laws/federal.

FOR FURTHER INFORMATION CONTACT:

James Watts, Counsel, Legal Division, (202) 898-6678, jwatts@fdic.gov; Teresa Franks, Associate Director, Division of Resolutions and Receiverships, (571) 858-8226, tfranks@fdic.gov; Martin Becker, Chief, Deposit Insurance, Division of Depositor and Consumer Protection, (202) 898-7207, mbecker@fdic.gov.

SUPPLEMENTARY INFORMATION:

Policy Objectives

The FDIC is proposing to amend its regulation governing the requirements for a deposit account to be insured as a joint account, 12 CFR 330.9, and specifically, the requirement that each co-owner of a joint account has personally signed a deposit account signature card. The FDIC periodically receives inquiries regarding this requirement. Those inquiries have increased following the issuance of a rule (Recordkeeping Rule) that requires certain large insured depository institutions (covered institutions) to configure their information technology systems to be capable of calculating insurance coverage for deposit accounts in the event of the institution's failure. The Recordkeeping Rule has introduced an element of pre-judgment involving identification of account categories and satisfaction of recordkeeping requirements for the institutions subject to that Rule. In particular, for purposes of that Rule, covered institutions are required to review their records and update missing and erroneous deposit account information (Legacy Data Cleanup). As part of the Legacy Data Cleanup, covered institutions must obtain signature cards for owners of accounts with multiple co-owners that are missing one or more required signature cards (affected joint accounts). Staff at the FDIC has engaged in discussions with these covered institutions as part of the implementation process, and these discussions have brought to light certain issues concerning the application of the signature card requirement, leading the FDIC to reconsider the methods by which joint ownership may be established for purposes of deposit insurance.

The proposed rule is intended to reduce the regulatory burden associated with obtaining deposit account signature cards for all insured depository institutions (IDIs). For covered institutions (i.e., IDIs subject to the Recordkeeping Rule) discussed above, the proposed rule also would reduce the burden of obtaining signature cards for owners of affected joint accounts. The proposed rule is intended to facilitate the prompt payment of deposit insurance in the event of an IDI's failure by providing alternative methods that the FDIC could use to determine the owners of joint accounts, consistent with its statutory authority. These changes would promote confidence in FDIC-insured deposits. Finally, the proposal embodies a forward-looking approach that would permit the use of new and innovative technologies and processes to meet the FDIC's policy objectives.

Background: Current Regulatory Approach

The FDIC is authorized to prescribe rules and regulations as it may deem necessary to carry out the provisions of the Federal Deposit Insurance Act (FDI Act). Under the FDI Act, the FDIC is responsible for paying deposit insurance in the event of an IDI's failure up to the standard maximum deposit insurance amount, which is currently set at $250,000. The statute provides that deposits maintained by each depositor in the same capacity and the same right at the same IDI generally must be aggregated and insured up to the standard maximum deposit insurance amount. Because the statute does not define “capacity” or “right,” the FDIC has implemented these terms by issuing regulations recognizing particular categories of accounts, such as single ownership accounts and joint ownership accounts. If a deposit meets the requirements for a particular category, the deposit is insured up to the $250,000 limit separately from deposits held by the depositor in a different category at the same IDI. For example, deposits in the single ownership category will be separately insured from deposits in the joint ownership category held by the same depositor at the same IDI.

Section 330.9 of the FDIC's regulations governs insurance coverage for joint ownership accounts. Joint ownership accounts include deposit accounts held pursuant to various forms of co-ownership under state law. For example, joint tenants could each hold an equal, undivided interest in a deposit account. Section 330.9 provides that only “qualifying joint accounts” (whether owned as joint tenants with the right of survivorship, as tenants in common, or as tenants by the entirety) are insured separately from individually-owned deposit accounts maintained by the co-owners. “Qualifying joint accounts” generally must satisfy three requirements: (1) All co-owners of the funds in the account are “natural persons,” as defined in section 330.1(l) of the regulations; (2) each co-owner has personally signed a deposit account signature card; and (3) each co-owner possesses withdrawal rights on the same basis. If a joint deposit account is not a qualifying joint account, each co-owner's actual ownership interest in the account is aggregated with other single ownership accounts of such individual or other accounts of such entity. This may result in some uninsured deposits if a depositor's single ownership accounts at the same IDI, including deposits in any non-qualifying joint accounts, exceed $250,000.

The requirement that each co-owner of a joint account has personally signed a deposit account signature card (signature card requirement) in order for the account to be insured as a joint account has been included in the regulation governing insurance coverage since 1967. This requirement was intended to address practices such as the addition of nominal co-owners to an account solely to increase deposit insurance coverage. The FDIC has periodically considered whether the signature card requirement should be eliminated, but retained the requirement, concluding that signature cards are reliable indicators of deposit ownership. The FDIC continues to view the signature card requirement as important to ensuring consistency with the FDI Act, which expressly limits the amount of deposit insurance coverage available to each depositor at a particular IDI based on the right and capacity in which funds are held.

Neither the FDI Act nor the FDIC's regulations define the term “signature card.” FDIC staff has taken the position that section 330.9 does not require any particular format for a deposit account signature card. Therefore, staff has previously concluded that IDIs may satisfy the requirement through various forms of documentation used in their account opening processes. For example, staff has concluded that a deposit account agreement signed by each of an account's co-owners would satisfy the signature card requirement. Published guidance also states that electronic signatures satisfy the requirement.

Description of the Proposed Rule

The FDIC is proposing to amend section 330.9 to provide an alternative method to satisfy the signature card requirement. The proposed rule would allow the signature card requirement to be satisfied by information contained in the deposit account records of the IDI establishing co-ownership of the deposit account, such as evidence that the institution has issued a mechanism for accessing the account to each co-owner or evidence of usage of the deposit account by each co-owner. For example, under this proposal, the requirement could be satisfied by evidence that an IDI has issued a debit card to each co-owner of the account or evidence that each co-owner of the account has transacted using the deposit account. These examples, however, are not intended to define the only forms of evidence of co-ownership that could satisfy the signature card requirement.

The proposed rule only would affect a requirement in the FDIC's regulations that must be satisfied for a deposit account to be separately insured as a joint account; it would not affect any other legal requirements applicable to IDIs. IDIs may, for legal or other reasons, find it appropriate or necessary to continue collecting customers' signatures.

The proposed rule also would not affect the general provisions contained in the FDIC's deposit insurance regulations regarding recognition of deposit ownership. These general rules concerning recognition of deposit ownership would continue to apply to all deposit accounts, including joint accounts.

The proposed rule would not introduce new requirements with respect to the requirements for an account to be insured as a joint account, and would not reduce or affect insurance coverage for any account for which the existing joint account requirements are satisfied. The proposed rule simply would provide an alternative method to satisfy the existing signature card requirement. If each co-owner of a joint account signs, or has previously signed, a deposit account signature card in accordance with the existing requirement, the alternative method provided by the proposed rule would be unnecessary. Assuming that the remaining joint account requirements are satisfied—that is, all co-owners of the account are natural persons and possess equal withdrawal rights—the account would be insured as a joint account.

The FDIC is also proposing a conforming amendment to section 330.9 consistent with the Electronic Signatures in Global and National Commerce Act (E-Sign Act). Specifically, the FDIC proposes to amend the regulation to state expressly that the signature card requirement may be satisfied electronically. The current requirement that each depositor has personally signed a deposit account signature card would be amended to require that each depositor has personally signed, which may include signing electronically, a deposit account signature card. This amendment would clarify for IDIs and depositors the manner in which the signature card requirement may be satisfied, and is consistent with published guidance and staff interpretations of section 330.9. It would not substantively alter the regulatory requirements for joint accounts.

Expected Effects

The proposed rule would apply to all IDIs and is expected to broaden the types of documentation that would be acceptable to satisfy the signature card requirement at the time of an IDI's failure. In this way, for all IDIs, the proposed rule is intended to reduce the regulatory burden associated with obtaining deposit account signature cards. It would not impose any new recordkeeping requirements for joint accounts.

The proposed rule would, however, have a more immediate regulatory burden relief impact on the covered institutions subject to the Recordkeeping Rule. For purposes of that Rule, as discussed above, covered institutions are currently engaged in Legacy Data Cleanup. As part of the Legacy Data Cleanup, covered institutions must obtain signature cards for owners of affected joint accounts. By providing an alternative method to satisfy the signature card requirement that relies on other information in the institution's deposit account records, the proposed rule should reduce the Legacy Data Cleanup burden associated with obtaining missing signature cards for covered institutions subject to the Recordkeeping Rule.

To estimate the burden reduction of the proposed rule relating to Legacy Data Cleanup, the FDIC estimates: (1) The cost of obtaining signature cards for an affected joint account; and (2) the total number of affected joint accounts held at covered institutions subject to the Recordkeeping Rule. The product of these two figures is the estimated cost burden of collecting missing signatures. The proposed rule would reduce that burden by allowing covered institutions subject to the Recordkeeping Rule to satisfy the signature card requirement using other information in their deposit account records establishing co-ownership of the deposit account.

The FDIC's estimate of the cost of obtaining missing signature cards for an affected joint account is based on cost estimates used in connection with the Recordkeeping Rule. Legacy Data Cleanup costs for the Recordkeeping Rule were estimated at $226 million to address approximately 21 million deposit accounts held in covered institutions. This represents an average of approximately $11 per account. Although accounts may require Legacy Data Cleanup for a variety of reasons, the Recordkeeping Rule estimates that “more than 90 percent of the legacy data cleanup costs are associated with manually collecting account information from customers and entering it into the covered institution's systems.” The process of obtaining a missing signature fits this description, and the FDIC believes that $11 per account is a reasonable estimate of the average cost of obtaining signatures for an affected joint account.

The cost estimates used in the Recordkeeping Rule are based on data from the institutions covered by the Recordkeeping Rule at the time that Rule was issued. As of December 31, 2018, 36 covered institutions subject to the Recordkeeping Rule held approximately 418 million deposit accounts. Assuming that 25 percent of those accounts are joint, and assuming that 5 percent of joint accounts are missing at least one required signature, there are a total of approximately 5.2 (= 418 * 25% * 5%) million affected joint accounts. At an estimated cost of $11 per affected joint account, the FDIC estimates a total cost burden of $57 million for covered institutions subject to the Recordkeeping Rule to update deposit account records related to affected joint accounts. The proposed rule would reduce this burden, resulting in an estimated cost savings for these institutions of $57 million.

IDIs that are not subject to the Recordkeeping Rule are not required to perform Legacy Data Cleanup, but some may, nonetheless, choose to do so to provide added certainty regarding deposit insurance coverage to their depositors. As of December 31, 2018, there were approximately 162 million deposit accounts held at 5,379 IDIs not covered by the Recordkeeping Rule. Given the same assumptions outlined in the previous paragraph, the FDIC estimates there are a total of 2.0 (= 162 * 25% * 5%) million affected joint accounts held at these IDIs. The proposed rule would alleviate some of the burden of addressing these affected joint accounts, resulting in estimated cost savings of up to $22 ($11 * 2.0) million.

The total estimated burden reduction for the industry associated with updating deposit account records for joint accounts is estimated to be between $57 and $79 million, depending on the number of IDIs not subject to the Recordkeeping Rule that choose to update their deposit account records. In addition, the proposed rule could alleviate some of the burden of obtaining signature cards for new joint accounts at all IDIs. The FDIC expects this benefit to be de minimis because electronic signatures may be used to satisfy the signature card requirement pursuant to the E-Sign Act.

The rule also provides non-quantifiable benefits to owners of joint accounts. By providing alternative methods that the FDIC could use to determine the owners of joint accounts, the proposed rule would further support a prompt deposit insurance determination in the event of an IDI's failure, alleviating delays in the recognition of account ownership and uncertainty regarding the extent of deposit insurance coverage. These benefits would promote depositor confidence in the nation's banking system and particularly in FDIC-insured deposits.

The FDIC is also proposing a conforming amendment to section 330.9 consistent with the E-Sign Act. This conforming amendment is not expected to result in any discernable economic effect, as current FDIC practice already permits IDIs to use electronic signatures. The effects of the conforming amendment would be limited to eliminating uncertainty regarding the regulation.

The FDIC invites comments on all aspects of the information provided in this section.

Alternatives Considered

The FDIC has considered alternatives to the proposed rule that could achieve its policy objectives. A few of these alternatives are described below.

Alternative 1: Status Quo. The FDIC considered maintaining the current requirements for accounts to be insured as joint accounts. To address burden issues raised by covered institutions currently conducting Legacy Data Cleanup pursuant to the Recordkeeping Rule, the FDIC notes that such institutions may request relief pursuant to that Rule for existing accounts for which the owners seek deposit insurance coverage as a joint account. However, as discussed above, the proposed rule would reduce the burden associated with Legacy Data Cleanup, so the potential cost savings to covered institutions subject to the Recordkeeping Rule would result in a greater benefit. The proposed rule also may result in cost savings for IDIs that are not subject to the Recordkeeping Rule, but nonetheless choose to perform Legacy Data Cleanup.

As a subset of Alternative 1, the FDIC considered whether covered institutions could simply focus on or prioritize accounts with balances of more than $250,000 for purposes of their Legacy Data Cleanup. This approach may address regulatory burden to some degree, but could also be interpreted as introducing a distinction between large IDIs and small IDIs with respect to deposit insurance coverage. Due to this concern, the expected benefits of this alternative are smaller than those of the proposed rule.

Alternative 2: Amend Certification Requirement for Institutions Subject to Part 370. As discussed above, the covered institutions subject to the Recordkeeping Rule are required to collect missing signatures for joint accounts. The FDIC considered amending the Recordkeeping Rule's certification requirements to allow covered institutions to certify their compliance based on substantial or good faith compliance with the deposit insurance rules with respect to their joint deposit accounts. This would allow institutions subject to the Recordkeeping Rule to certify compliance with that Rule while continuing to address data cleanup for affected deposit accounts. Because institutions would still incur costs associated with obtaining missing signatures, however, the expected benefits of this alternative are smaller than the expected benefits of the proposed rule.

Alternative 3: Eliminate Signature Card Requirement for Qualifying Joint Accounts. The FDIC considered amending section 330.9 to eliminate the signature card requirement for joint accounts. As discussed above, however, the FDIC continues to view the signature card requirement as important to ensuring consistency with the FDI Act, particularly, the requirement to insure depositors based on the right and capacity in which funds are held. The signature card requirement is intended to address practices such as the addition of nominal co-owners to a deposit account without their knowledge solely for the purpose of increasing deposit insurance coverage. The proposed rule is intended to retain consistency with the FDI Act while providing a method of satisfying the signature card requirement that reduces regulatory burden. Given the benefits of keeping the signature card requirement, the expected benefits of this alternative are smaller than those of the proposed rule.

Alternative 4: Leverage Bank Secrecy Act/Anti-Money Laundering Processes. The FDIC considered amending section 330.9 to allow IDIs to satisfy the signature card requirement based on existing Bank Secrecy Act/Anti-Money Laundering (BSA/AML) processes. This could reduce regulatory burden by leveraging existing compliance processes. However, while BSA/AML processes serve a valuable purpose in identifying the individuals opening accounts, these processes do not address the purpose of the signature card requirement, which is to indicate actual ownership of the funds in the deposit account. This approach would intertwine deposit insurance coverage with a compliance regime that serves a different purpose. Moreover, exceptions to BSA/AML requirements may apply to many of the older deposit accounts for which signature cards are less likely to be available. Thus, it is unclear that compliance with BSA/AML requirements would provide additional assurance that a deposit account's titled co-owners actually own the funds in the account. In addition, this approach could allow weaknesses in BSA/AML compliance to affect deposit insurance coverage for the IDI's customers. Due to the concerns discussed above, the expected benefits of this alternative are smaller than those of the proposed rule.

Request for Comment

The FDIC is requesting comment on all aspects of the proposed rule, including the alternatives presented. Comment is specifically invited with respect to the following questions:

• Can IDIs, including IDIs that rely on deposit account systems designed or maintained by third-party vendors, obtain information on account usage or access by the co-owners of an account?
• Would the proposed rule sufficiently address satisfaction of the signature card requirement through electronic methods, given the variety of account opening procedures used by IDIs? If not, what clarifications or changes are necessary?
• Is any data available concerning the cost or effort that might be required for IDIs to obtain deposit account signature cards for co-owners where a signature card is currently not available in the deposit account records of the IDI?
• How should the FDIC approach ensuring that a depositor does not use another person's personally identifiable information to establish a deposit account without the other person's knowledge simply to increase deposit insurance coverage?
• Are there any additional factors that the FDIC should consider in determining whether the alternatives to the proposed rule described above would better satisfy the agency's policy objectives of reducing regulatory burden and promoting the prompt payment of deposit insurance consistent with the FDI Act in the event of an IDI's failure?
• Are there other alternatives that the FDIC should consider that would better satisfy those objectives?
• Does the proposed rule minimize the potential for depositor confusion over the requirements for joint accounts?

Regulatory Analysis

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency, in connection with a proposed rule, to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of a proposed rule on small entities. However, an initial regulatory flexibility analysis is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. The Small Business Administration (SBA) has defined “small entities” to include banking organizations with total assets of less than or equal to $550 million. For the reasons described below, the FDIC certifies pursuant to section 605(b) of the RFA that the proposed rule will not have a significant economic impact on a substantial number of small entities.

As of September 30, 2018, the FDIC insured 5,486 institutions, of which 4,047 are considered small entities for the purposes of RFA. These small IDIs hold approximately 31 million deposit accounts, with an average of 7,700 deposit accounts and a maximum of approximately 143,000 deposit accounts held at a single small IDI.

The proposed rule would amend section 330.9 to provide an alternative method to satisfy the signature card requirement for joint accounts based on information contained in the deposit account records of the insured depository institution establishing co-ownership of the deposit account. As discussed in Expected Effects section, because no small IDIs are covered by the Recordkeeping Rule, a small IDI would only experience burden relief from the proposed rule if it first chose to update its account records. In this case, the proposed rule is estimated to reduce burden in the amount of $11 per affected joint account. This potential burden reduction is conditional on the IDI's choice to update its records.

Following the burden reduction estimation outlined in the Expected Effects section, the FDIC estimates the burden reduction for each of the 4,047 small IDIs covered by this proposed rule by multiplying the number of deposit accounts held at each small IDI by 25 percent to estimate the number of joint accounts, then by 5 percent to estimate the number of affected joint accounts, and finally by $11 to estimate the cost of addressing those affected joint accounts. The potential burden reduction for each institution ranges from less than a dollar to approximately twenty thousand dollars, with an average of approximately one thousand dollars per small IDI. Expressed as a proportion of assets, the potential burden reduction ranges from less than a millionth of one percent to less than two hundredths of one percent of total assets.

The proposed rule would apply to all IDIs, affecting a substantial number of small entities. However, the economic impact on each small entity is insignificant, with no entity affected by more than two hundredths of one percent of total assets held. Accordingly, the FDIC certifies that the proposal will not have a significant economic impact on a substantial number of small entities.

The FDIC invites comments on all aspects of the supporting information provided in this section, and in particular, whether the proposed rule would have any significant effects on small entities that the FDIC has not identified.

Riegle Community Development and Regulatory Improvement Act

Section 302 of the Riegle Community Development and Regulatory Improvement Act (RCDRIA) requires that the Federal banking agencies, including the FDIC, in determining the effective date and administrative compliance requirements of new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. Subject to certain exceptions, new regulations and amendments to regulations prescribed by a Federal banking agency which impose additional reporting, disclosures, or other new requirements on insured depository institutions shall take effect on the first day of a calendar quarter which begins on or after the date on which the regulations are published in final form.

The proposed rule would not impose additional reporting or disclosure requirements on insured depository institutions, including small depository institutions, or on the customers of depository institutions. It would provide an alternative method to satisfy the existing signature card requirement for joint deposit accounts based on information contained in the deposit account records of the insured depository institution. Accordingly, section 302 of RCDRIA does not apply. Nevertheless, the requirements of RCDRIA will be considered as part of the overall rulemaking process, and the FDIC invites comments that will further inform its consideration of RCDRIA.

Paperwork Reduction Act

In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501-3521, the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The proposed rule would not require any information collections for purposes of the PRA, and therefore, no submission to OMB is required.

The Treasury and General Government Appropriations Act, 1999—Assessment of Federal Regulations and Policies on Families

The FDIC has determined that the proposed rule will not affect family well-being within the meaning of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112 Stat. 2681).

Plain Language

Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies to use plain language in all proposed and final rulemakings published in the Federal Register after January 1, 2000. The FDIC invites your comments on how to make this proposal easier to understand. For example:

• Has the FDIC organized the material to suit your needs? If not, how could the material be better organized?
• Are the requirements in the proposed regulation clearly stated? If not, how could the regulation be stated more clearly?
• Does the proposed regulation contain language or jargon that is unclear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand?

List of Subjects in 12 CFR Part 330

• Bank deposit insurance
• Reporting and recordkeeping requirements
• Savings associations

Authority and Issuance

For the reasons stated in the preamble, the Federal Deposit Insurance Corporation proposes to amend 12 CFR part 330 as follows:

PART 330—DEPOSIT INSURANCE COVERAGE

1. The authority citation for Part 330 continues to read as follows:

Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q), 1819(a)(Tenth), 1820(f), 1820(g), 1821(a), 1821(d), 1822(c).

2. Revise § 330.9(c) to read as follows: