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FDIC's Fall 2009 Consumer News - FDIC Coverage, Safe Deposit Box, Debit Card Protections


The FDIC just released its Fall 2009 Consumer News. Some excerpts that I thought would be useful to highlight include:

Safety of FDIC Insured Deposits:
If a bank fails, the FDIC has always paid every penny of insured deposits, up to the insurance limit, including principal and any accrued interest through the date of the closing.

I've noted this because I've seen so many commenters who think that the FDIC doesn't cover accrued interest. Make sure to bookmark this so you can help me educate future commenters.

All Deposits Insured?:
Events such as the death of an owner or a beneficiary on a deposit account can result in changes in the calculation of coverage, including possibly reducing the amount of insurance coverage

This is a concern if you go above the basic FDIC limit (currently $250K). There's a 6-month grace period for the death of a joint owner. There's no grace period for the death of a beneficiary.

Safe Deposit Box When a Bank Fails:
In general, the full contents of your box should be available the first business day after the bank closes.

However, there's no FDIC insurance for the contents:
Remember that, by law, FDIC insurance covers only deposit accounts. Also, don't expect the bank to reimburse you for theft of or damage to the contents of your safe deposit box.

They have the good suggestion of using zip-lock bags to protect against water damage.

Debit vs. Credit Cards in Terms of Consumer Protection:
[Debit cards] are considered less beneficial than credit cards for major purchases or buying items online because of the more limited protections in cases of unauthorized transactions or disputes.

Article has more details about the protections. I know many readers have avoided reward checking accounts due to fewer protections provided to debit cards. I discussed this issue at length in this debit card issues post.

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Anonymous   |     |   Comment #1
FDIC coverage is over rated. It is true, should the bank FAIL, you are covered . . . beyond doubt provided your accounts are fully insured within FDIC limits.


I recall reading within the last year about an instance, I think it was a western bank (not CA, though) where depositors really took a beating. The bank did not fail. But there was a dishonest employee who stole depositors' money. The FDIC did nothing . . whatsoever. They took a "not our problem" attitude toward the entire matter. Their position was that the depositors needed to sue the bank to recover their deposits. Of course the interest losses were gargantuan. And I never learned if the money was recovered. If it was, don't thank the FDIC. What a bunch of slugs!!

At the present time I have a huge deposit at one bank. It is fully FDIC insured, beyond doubt. But I still worry about the attention such a large deposit garners amongst bank insiders and employees. A dishonest one could really hurt me, and the FDIC would not care. Of course if the bank itself discovered the fraud I might be fine. But you can't rely on that every time. Banks are very hesitant to restore stolen funds to depositors' accounts. And when the problem is theft and not bank failure, the FDIC doesn't give a ****.
Anonymous   |     |   Comment #2
If it was the work of someone stealing money from within the bank, then there should be some kind of safeguard in place. I believe that brokerage accounts are protected in the case of inner criminal activities of the workers there. If the fraud was not instigated by the customer, then that seem a bit odd that the customer would need to absorb the loss.
Anonymous   |     |   Comment #3
If those reward checking account rates drop more, then a debit card becomes less attractive to use.

Regarding safe deposit boxes. What if a thief broke into that vault and stole all of the diamonds and gold that you kept inside your box? I believe the bank has no liability if that happened.
Anonymous   |     |   Comment #4
If someone breaks into your safe deposit box, you can open up a "rewards" checking account @ 0.88% APY and just earn it all back in that.

Why do you need FDIC insurance when interest rates are so high? I mean, it just doesn't get any better than a 0.88% APY interest rate.

Oh and if you're worried about your belongings in a safe deposit box, just store all of your valuables in zip lock bags and bury them in your yard. Do what the squirrels do.
Anonymous   |     |   Comment #5
Your homeowner's insurance might (repeat: might) cover losses in a safe deposit box. However, the same limitations would apply as to articles in your home. Most policies provide limited coverage for jewelry, furs, cash, and certain other valuables. Water loss is not covered unless you have flood insurance. You can also buy private insurance to cover the contents of your box. Check your policy and talk to your agent to see whether you might be covered.

But there are also some things insurance can't replace. In the case of important documents or records, keep copies somewhere else, perhaps a far distance away in case your entire town is hit by a hurricane, quake, volcano, or other disaster.
Anonymous   |     |   Comment #6
Certainly nobody wants to loose money and precious possessions through theft or natural disasters, but you also can be so paranoid about loosing your material possessions and not really enjoy life to it's fullest.
Anonymous   |     |   Comment #7
Regarding a thief breaking into a safe deposit box...

A bank-robber is not an authorized agent of the bank he is robbing. As the thefts occurred by a duly authorized agent of the bank the bank is clearly liable in this case. Or at least SHOULD be clearly liable... Legally, it's a no-brainer, but morally, for those trying to sleaze their way out of their legal responsibilities, it's pathetic.
S   |     |   Comment #8
When it comes to theft, I agree that some sort of safeguard should be set in place. Who's to say that John Smith working as a teller at my bank isn't going to pocket my $$... if that happens so much for FDIC insurance!

Here's another instance of bank employee fraud, I don't think the bank has taken any responsibility for the dishonest employee.



Anonymous   |     |   Comment #9
I wrote the first comment, above. The instance to which I made reference was COMPLETELY unrelated to safe deposit boxes. The theft was from multiple CD ACCOUNTS.

I'm working from memory here and might be in error. So please cut me some slack:

I think the employee stole the money at the front end of the deposit process. It was a woman. She never actually opened various CDs, pocketing large sums of money, instead. She sent the "depositors" paperwork indicating their CD accounts had been opened. There is much more, and other detail, I just don't recall.

Main point for me was that the FDIC didn't do SQUAT. They took a totally hands off - "not our problem" - approach, refusing to become involved despite staggering losses for depositors. That was my indelible take home, my stark memory, from what I read.

And again, finally, we are talking CD accounts here, NOT safety deposit box theft.
Anonymous   |     |   Comment #10
First Commenter - you are thinking of the MetaBank case which is referenced in a URL in the post just about your second comment.
Anonymous   |     |   Comment #11
Yes, thanks very much. It was MetaBank. I could not remember the name.

I just checked for any news on this. There is none, which leads me to think the litigation is ongoing. We are coming up on two years, plus the years prior when the CDs supposedly were active. This is an outrage for those depositors involved, at least IMHO. And they remain uncompensated.

Since the FDIC is maintaining strictly a "hands off" posture, only way for us to guard against this is to deal with multiple, different employees at any institution where we have money on deposit. Also, obviously, to check statements carefully. Though I suspect statements also could be manipulated by an employee bent on big theft.

Meanwhile, MetaBank just keeps on keepin' on . . like nothing was wrong. They have not stepped up. They have not taken responsibility for the actions of their employee.

Those CD funds were wired to an FDIC-insured bank. FDIC claims not a penny of depositors' money ever has been lost. Horsefeathers!!

What a giant cartload of sh*t this is!!!!!!!!