Section 343 of the Dodd-Frank Act

1/6/2011

By Fran Sponsler, CRCM, CCBCO

On November 10, 2010, the FDIC Board of Directors issued a final rule to implement Section 343 of the Dodd-Frank Wall Street Reform and Consume Protection Act (DFA). Section 343 provides temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts at all FDIC-insured depository institutions. The DFA Provision is effective from December 31, 2010, through December 31, 2012.

Although the DFA Provision is similar to the Transaction Account Guarantee Program (TAGP), there are three important differences, as noted below:

1. The DFA Provision applies to all FDIC-insured institutions (IDIs). There is no opt out of the new provision, and there is no additional action required to obtain the coverage provided under the provision.
2. The DFA Provision covers only traditional, noninterest-bearing transaction accounts. Unlike the TAGP, the DFA Provison does not include either low-interest NOW accounts or IOLTAs (Interest on Lawyers Trust Accounts) within the definition of noninterest-bearing transaction accounts.
3. The FDIC will not charge a separate assessment (or premium) for the insurance of noninterest-bearing transaction accounts under the DFA Provision.

Disclosure Requirements

Effective December 31, 2010, the final rules require each IDI that offers noninterest-bearing transaction accounts to post, prominently a copy of the following notice in the lobby of the IDI’s main office, in each domestic branch, and if applicable, on its website:

NOTICE OF CHANGES IN TEMPORARY FDIC INSURANCE
COVERAGE FOR TRANSACTION ACCOUNTS

All funds in a “noninterest-bearing transaction account” are insured in full by the Federal Deposit Insurance Corporation from December 31, 2010, through December 31, 2012. This temporary unlimited coverage is in addition to, and separate from the coverage of at least $250,000 available to depositors under the FDIC’s general deposit insurance rules.

The term “noninterest-bearing transaction account” includes a traditional checking account or demand deposit account on which the insured depository institution pays no interest. It does not include other accounts, such as, traditional checking or demand deposit accounts that my earn interest, NOW accounts, money-market deposit accounts and IOLTAs.

For more information about temporary FDIC insurance coverage of transaction accounts visit www.fdic.gov.