DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE.

SEC. 151. DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE. (a) Annual Independent Audit of Private Deposit Insurer; Disclosure by Institutions Lacking Federal Deposit Insurance.— (1) In general.— The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), as amended by the preceding provisions of this Act, is further amended by adding at the end the following new section: “SEC. 40. DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE. “(a) Annual Independent Audit of Private Deposit Insurers.— “(1) Audit required.— Any private deposit insurer shall obtain an annual audit from an independent auditor using generally accepted auditing standards. The audit shall include a determination of whether the private deposit insurer follows generally accepted accounting principles and has set aside sufficient reserves for losses. “(2) Providing copies of audit report.— 105 STAT. 2283 “(A) Private deposit insurer.— The private deposit insurer shall provide a copy of the audit report— “(i) to each depository institution the deposits of which are insured by the private deposit insurer, not later than 14 days after the audit is completed; and “(ii) to the appropriate supervisory agency of each State in which such an institution receives deposits, not later than 7 days after the audit is completed. “(B) Depository institution.— Any depository institution the deposits of which are insured by the private deposit insurer shall provide a copy of the audit report, upon request, to any current or prospective customer of the institution. “(b) Disclosure Required.— Any depository institution lacking Federal deposit insurance shall, within the United States, do the following: “(1) Periodic statements; account records.— Include conspicuously in all periodic statements of account, on each signature card, and on each passbook, certificate of deposit, or similar instrument evidencing a deposit a notice that the institution is not federally insured, and that if the institution fails, the Federal Government does not guarantee that depositors will get back their money. “(2) Advertising; premises.— Include conspicuously in all advertising and at each place where deposits are normally received a notice that the institution is not federally insured. “(3) Acknowledgment of risk.— Receive deposits only for the account of persons who have signed a written acknowledgment that the institution is not federally insured, and that if the institution fails, the Federal Government does not guarantee that they will get back their money. “(c) Manner and Content of Disclosure.— To ensure that current and prospective customers understand the risks involved in foregoing Federal deposit insurance, the Federal Trade Commission, by regulation or order, shall prescribe the manner and content of disclosure required under this section. “(d) Exceptions for Institutions Not Receiving Retail Deposits.— The Federal Trade Commission may, by regulation or order, make exceptions to subsection (b) for any depository institution that, within the United States, does not receive initial deposits of less than $100,000 from individuals who are citizens or residents of the United States, other than money received in connection with any draft or similar instrument issued to transmit money. “(e) Eligibility for Federal Deposit Insurance.— “(1) In general.— Except as permitted by the Federal Trade Commission, in consultation with the Federal Deposit Insurance Corporation, no depository institution (other than a bank, including an unincorporated bank) lacking Federal deposit insurance may use the mails or any instrumentality of interstate commerce to receive or facilitate receiving deposits, unless the appropriate supervisor of the State in which the institution is chartered has determined that the institution meets all eligibility requirements for Federal deposit insurance, including— “(A) in the case of an institution described in section 19(b)(1)(A)(iv) of the Federal Reserve Act, all eligibility requirements set forth in the Federal Credit Union Act and 105 STAT. 2284regulations of the National Credit Union Administration; and “(B) in the case of any other institution, all eligibility requirements set forth in this Act and regulations of the Corporation. “(2) Authority of fdic and ncua not affected.— No determination under paragraph (1) shall bind, or otherwise affect the authority of, the National Credit Union Administration or the Corporation. “(f) Definitions.— For purposes of this section: “(1) Appropriate supervisor.— The ‘appropriate supervisor’ of a depository institution means the agency primarily responsible for supervising the institution. “(2) Depository institution.— The term ‘depository institution’ includes— “(A) any entity described in section 19(b)(1)(A)(iv) of the Federal Reserve Act; and “(B) any entity that, as determined by the Federal Trade Commission— “(i) is engaged in the business of receiving deposits; and “(ii) could reasonably be mistaken for a depository institution by the entity’s current or prospective customers. “(3) Lacking federal deposit insurance.— A depository institution lacks Federal deposit insurance if the institution is not either— “(A) an insured depository institution; or “(B) an insured credit union, as defined in section 101 of the Federal Credit Union Act. “(4) Private deposit insurer.— The term ‘private deposit insurer’ means any entity insuring the deposits of any depository institution lacking Federal deposit insurance. “(g) Enforcement.— Compliance with the requirements of this section, and any regulation prescribed or order issued under this section, shall be enforced under the Federal Trade Commission Act by the Federal Trade Commission.”. (2) Effective dates.— Section 40 of the Federal Deposit Insurance Act (as added by paragraph (1)) shall become effective on the date of enactment of this Act, except that— (A) paragraphs (1) and (2) of subsection (b) shall become effective 1 year after the date of enactment of this Act; (B) during the period beginning 1 year after that date of enactment of this Act and ending 30 months after that date of enactment, subsection (b)(1) shall apply with “, and that if the institution fails, the Federal Government does not guarantee that depositors will get back their money” omitted; (C) subsection (e) shall become effective 2 years after that date of enactment; and (D) subsection (b)(3) shall become effective 30 months after that date of enactment. (3) Conforming amendment to federal deposit insurance act.— Effective 1 year after the date of enactment of this Act, section 28 of the Federal Deposit Insurance Act (12 U.S.C. 1831e) is amended— (A) by striking subsection (h); and 105 STAT. 2285 (B) by redesignating subsection (i) as subsection (h). (b) Viability of Private Deposit Insurers.— (1) Deadline for initial independent audit.— The initial annual audit under section 40(a)(1) of the Federal Deposit Insurance Act (as added by subsection (a)) shall be completed not later than 120 days after the date of enactment of this Act. (2) Business plan required.— Not later than 240 days after the date of enactment of this Act, any private deposit insurer shall provide a business plan to each appropriate supervisor of each State in which deposits are received by any depository institution lacking Federal deposit insurance the deposits of which are insured by a private deposit insurer. The business plan shall explain in detail why the private deposit insurer is viable, and shall, at a minimum— (A) describe the insurer’s— (i) underwriting standards; (ii) resources, including trends in and forecasts of assets, income, and expenses; (iii) risk-management program, including examination and supervision, problem case resolution, and remedies; and (B) include, for the preceding 5 years, copies of annual audits, annual reports, and annual meeting agendas and minutes. (3) Definitions.— For purposes of this subsection, the terms “appropriate supervisor”, “deposit”, “depository institution”, and “lacking Federal deposit insurance” have the same meaning as in section 40(f) of the Federal Deposit Insurance Act (as added by subsection (a)).