Q: What type of action by an IDI would trigger the notification requirement under 12
C.F.R. § 330.16(c)(3)?
A: Section §330.16(c)(3) provides that if an IDI “uses sweep arrangements, modifies the terms
of an account, or takes other actions that result in funds no longer being eligible for full
coverage” under the Dodd-Frank Deposit Insurance Provision, the IDI “must notify the
affected customer and clearly advise them, in writing, that such actions will affect their
deposit insurance coverage.”
This notice requirement is intended primarily to apply to IDIs that, on or after July 21, 2011,
begin paying interest on DDAs, as is permitted under Section 627 of the DFA. If an IDI
modifies the terms of its DDA agreement so that the account may pay interest, the IDI must
notify affected customers and clearly advise them in writing that the account no longer will
be eligible for full deposit insurance coverage as a noninterest-bearing transaction account.
This provision also applies to “sweep accounts” where funds are swept from a noninterestbearing
transaction account to an interest-bearing deposit account.
This can be found in - FAQ#31 of FDIC’s FAQs. FDIC’s FAQs can be found at: http://www.fdic.gov/deposit/deposits/unlimited/faq.pdf