Maryland Legal Alert for Financial Services
FDIC Extends Comment Period for Fintech Partnership Record-Keeping Rules
As we reported in our October 2024 Maryland Legal Alert, the Federal Deposit Insurance Corporation (FDIC) proposed a new rule aimed at addressing risks associated with fintech partnerships. The proposed rule imposes stricter record-keeping requirements by mandating that federally insured depository institutions (IDIs) either maintain a ledger of beneficial owners of accounts accessed by third-party fintech providers or have unrestricted access to a ledger maintained by a third-party fintech provider to reconcile accounts each day and track end-user funds on a real-time basis. This rule would only apply to for-benefit-of (FBO) accounts with a “transactional feature” (i.e., accounts in which customers can make purchases or transfer funds). The FDIC exempted certain third-party FBO accounts, such as custodial trust accounts and accounts set up by broker-dealers.
The proposed rule seeks to address the delays that often occur when attempting to pass through deposit insurance to customers of third-party fintech providers in the event of an IDI failure (because the FDIC relies on the records of IDIs when making determinations regarding insurance coverage). Initially, comments on the proposed rule were to be received for 60 days following its notice in the Federal Register. However, on November 18, 2024, the FDIC announced a 45-day extension, extending the comment period through January 16, 2025.
For more information, contact Christopher R. Rahl or Tamia J. Morris.