Consumer groups are complaining that deposit insurance is confusing, and they want the government to intervene.
Banks in three states have done poorly on deposit insurance quizzes administered by the groups, which say that neither financial institutions nor regulators are doing enough to protect customers.
In California, site of the most recent test, the California Public Interest Research Group questioned customer service representatives at 35 banks. Correct answers required knowledge of rules pertaining to joint, in- trust-for, and business accounts.
Thirty of the 35 bank employees who were phoned got at least one question wrong. Nearly one-third flubbed all three questions. In identical exams, selected banks in Massachusetts and Florida also tested poorly.
Jon Golinger, Calpirg's consumer program director, suggested several fixes. Most sweeping: a call for legislation requiring banks to identify uninsured deposits on every bank statement.
Mr. Golinger also proposed that the Federal Deposit Insurance Corp. test banks on their knowledge of insurance coverage. The FDIC could fine banks that failed, or even deny them insurance, he said.
"In most professions, there is some standard to insure that the professionals know what they're talking about," Mr. Golinger said.
The American Bankers Association took issue with Calpirg's recommendations.
James D. McLaughlin, the ABA's director of regulatory and trust affairs, said overly complex deposit insurance law is the cause of errors and that simplification is the solution.
He called Calpirg's bank statement disclosure proposal "extremely expensive" but declined to put a price tag on it. "The record-keeping here just boggles the mind."
As for the idea of testing banks and denying deposit insurance to poor performers, Mr. McLaughlin said, "you can just quote me with a laugh."
Carmen Sullivan, the FDIC's compliance and consumer affairs director, also dismissed Calpirg's punitive approach. She said, "I don't know under what authority" the FDIC wouldfine a bank.
Besides, by yearend, the FDIC expects to install an interactive deposit- insurance calculator on its Web site, according to Ms. Sullivan. With it, a bank customer or employee will be able to find out which accounts carry how much insurance.
Ms. Sullivan also recommended that Calpirg establish a "working partnership" with managers of the poorly performing banks and put FDIC's deposit insurance educators in touch with them.
The FDIC and the banking industry "have worked together to increase the amount of education to bank employees" through training, distribution of pamphlets, and FDIC's "800" number, she said.
Calpirg's Mr. Golinger responded that confusion over deposit insurance law is "not likely to go away by sending out a few more brochures."
As for the Web site innovation, he said that while it is "useful to give consumers more tools ... there's no substitute for making sure that bank professionals do their job right."
Calpirg and the ABA did agree on one thing: Bank customers should call the FDIC for accurate information about deposit insurance rules. "That's always good advice," said the ABA's McLaughlin. "I'd venture to say that most banking attorneys would get some of the questions wrong."