WASHINGTON — Bankers are divided over a Federal Deposit Insurance Corp. plan to train bank employees on insurance limits and require tellers to question depositors about their accounts.
On one side, several large and small banks say the changes are burdensome and will conflict with their own training programs. They also contend that insurance education should best come from the insurer — namely, the FDIC, not the banks.
"It is respectfully suggested that this proposal is a tactical, cost-shifting device to divert the customer service burden from the FDIC" to banks, wrote Agnes Bundy Scanlan the chief compliance officer for the TD Bank NA unit of Toronto-Dominion Bank, in an April 12 letter.
The questioning of customers and the required training will "generate unnecessary costs and anxiety and … waste millions of hours of time," Virginia O'Neill, a senior counsel for the American Bankers Association, wrote in an April 12 letter.
But in the 34 comment letters to the agency, other institutions argued it made sense to have an agency-sanctioned training course for the confusing world of deposit insurance coverage.
Zions Bancorp. of Salt Lake City "sees the benefit of providing computer-based training to our employees to ensure our institution is providing accurate, up-to-date FDIC insurance information to our consumers allowing them to make well-informed decisions about their insurance options," Norman Merritt, an executive vice president for the $50 billion-asset Zions, wrote in a March 8 letter.
Deposit insurance coverage has been a moving target in recent years. The standard limit had long held steady at $100,000 per depositor. But a reform law in 2006 raised the limit for retirement accounts to $250,000. The crisis brought temporary increases to $250,000 for all, and that became the permanent ceiling for standard accounts under the Dodd-Frank Act. Temporary blanket coverage for transaction checking deposits, implemented during the liquidity scare of 2008, is still in place.
But even more complex are the various rules for different account categories. A married person, for example, can have double the standard amount in a joint account, plus $250,000 each in two separate accounts set up by each spouse at the same bank. Trust and retirement accounts carry other differences.
The FDIC proposal cited "tens of thousands" of phone calls and other correspondence the agency receives from depositors ignorant about the rules, as well as concerns about bank employees communicating faulty information.
"Beginning in 2008, we saw a spike in deposit inquiries from bank customers and bank employees," Kathy Nagle, associate director in the FDIC's division of depositor and consumer protection, said in an interview.
In the failure of IndyMac Bank in Southern California — the most famous example of a recent failure involving uninsured deposits — customers alleged they were misinformed about whether certain deposits were covered.
"The FDIC regularly receives complaints from … customers, asserting that their banks were unable to answer their deposit insurance questions or, in some cases, may have provided inaccurate deposit insurance guidance," the proposal said. "The FDIC is concerned that these situations could cause financial harm to depositors and have the potential to undermine customer confidence in [banks] and the federal deposit insurance system."
Under the proposal, the FDIC would provide annual computer-based training to banks for employees. New employees would undergo the training within a month of a taking the job. In most cases the program would take "less than two hours" in each sitting, the agency said.
Whenever a customer opens an account, an employee would have to inquire about other accounts at the bank and whether the customer exceeds the FDIC limit. If so, the employee would provide FDIC literature about insurance.
Banks called both requirements onerous.
The Consumer Bankers Association "urges the FDIC to not move forward and finalize the provisions that would require bank employees to complete the additional computer-based training and, for the reasons indicated, we do not believe it is necessary for bank employees to inquire as to whether the combined account balances exceed the $250,000 insurance limit," Jeffrey Bloch, senior regulatory counsel for the CBA, wrote in an April 12 letter.
He added that the affected customer base is too small for the scope of the rulemaking. "Depositors who have accounts exceeding the $250,000 limit comprise a very small percentage of the total number of accounts and to require a large group of bank employees to complete a two-hour training program each year on an issue that affects only a fraction of customers would be excessive," he wrote.
Meanwhile, commenters said the required questions for account holders would also raise problems, including that such conversations could potentially enter a sensitive area where employees would feel compelled to advise depositors about their accounts structure.
JPMorgan Chase & Co. "respectfully opposes any requirement that a [bank] employee ask a customer at account opening about the customer's aggregate balances regardless of the trigger amount," Ryan McInerney, Chase's chief executive for consumer banking, wrote in an April 12 letter. "Trying to make distinctions among customers opening accounts and consistently asking questions like this would present numerous training and operational challenges, and could cause an unsatisfactory customer experience."
Raymond Lynch, senior company counsel for Wells Fargo Bank NA, said that although the FDIC's aim to improve customer information is well intentioned, "the proposal will not achieve its stated goals."
"The proposal will create unnecessary burdens on" institutions, "benefit few depositors and result in negative customer experiences," Lynch wrote April 12. "Wells Fargo believes it would be better if the FDIC withdrew the proposal and worked with the banking industry to adopt less burdensome and more effective methods to improve and expand access to accurate information about deposit insurance for depositors."
To be sure, several bankers were more complimentary, and some observers suggested the industry may be overreacting about the burden. "Two hours out of the roughly 2,000 hours a year that a bank employee might put in just doesn't seem like a lot," Lawrence White, a professor at New York University, said in an interview.
Some bankers clearly agreed.
Michele Spear, chief compliance officer of Flagstar Bank in Troy, Mich., said "improved access to accurate information about FDIC insurance coverage will promote public confidence in federal deposit insurance."
"We currently require our 'front line' employees to receive training, regarding FDIC insurance, but believe that standard training provided by the FDIC would be beneficial," she wrote in an April 6 letter.
Other banks, while seeing the benefit of required training, simply requested flexibility in being able to use their existing training programs.
Most insured depository institutions "currently provide computer-based education to their employees. These computer based education systems have integrated learning management that allow IDIs to assign training courses and efficiently track employees' progression," Dean Miller, a senior vice president at the $24 billion-asset BOK Financial Corp., wrote in an April 5 letter.
"We believe any courses provided by the FDIC should be flexible enough to allow IDIs to incorporate those into their existing learning management systems."
Large institutions were not the only ones to criticize the proposal.
The required training "would impose a disproportionately high and significant burden on community banks without commensurate benefit to consumers," wrote Lilly Thomas, regulatory counsel for the Independent Community Bankers of America, in an April 12 letter.
Gary Propheter, chief operations officer at the $251 million-asset Bank of Eastern Oregon in Heppner, said, "Adding a new rule governing the training of front-line staff on FDIC insurance, making banks maintain yet another set of formal training records, all for something we already do as a matter of course is a total waste of time and money, yours and ours."