Thursday, December 12, 2024

August 2024 OBA Legal Briefs

In this issue:

  • 2024 Oklahoma Legislation – Part I
  • A potpourri of deceased customer Q&As
  • Still more on the FDIC’s revisions to part 328

2024 Oklahoma Legislation – Part I

By Pauli D. Loeffler

Uniform Special Deposits Act – Tit. 6 O.S. § 910 et seq.

This is an entirely new Act that has only been adopted in the states of Oklahoma,
Colorado, and Washington and has been introduced in three other states: West
Virginia, Rhode Island, and Delaware.

There is no requirement that a bank offer accounts subject to the Special Deposit Act.

First, in order to be a “special deposit,” the deposit must be designated as “special” in
an account agreement. Second, the account must be for the benefit of at least two
beneficiaries. One or more of the beneficiaries may be the depositor. It must be
denominated in money defined as a medium of exchange authorized by a domestic or
foreign government for a permissible purpose, meaning a governmental, regulatory,
commercial, charitable, or testamentary objective. Finally, the account must be subject
to a contingency specified in the account agreement that is not certain to occur but if it
does, it creates the bank’s obligation to pay a beneficiary.

Quite frankly, the bank already has certain deposit accounts which are essentially
“special deposits.” For instance, funeral homes and cemeteries which sell plots and pre-
need funeral policies under Title 36 O.S. Sec. 7103 and Sec. 7126 the of the Oklahoma
Statutes would meet the definition of a special deposit. Another example are CDs
required by the Oklahoma Corporation Commission as bond for plugging wells. A third
example is under the Residential Landlord Tenant Act requiring the establishment of an
escrow account for security deposits of the tenant. These and similar relationships such
as those mentioned above will continue as they are.

The Act clarifies what a “special deposit” is. A special deposit must be (i) designated as
“special deposit” in an account agreement governing the deposit at a bank, (ii) for the
benefit of at least two beneficiaries (one or more of which may be a depositor), (iii)
denominated in money, (iv) for a permissible purpose identified in the account
agreement, and (v) subject to a contingency specified in the account agreement that is
not certain to occur, but if it does occur, creates the bank’s obligation to pay a
beneficiary. The examples I mentioned above meet all the criteria EXCEPT for being
designated a “special deposit” in the account agreement.

Inasmuch as only three states have adopted this Uniform Act, whether your current
deposit software provider will produce a specific form or add a check box to the existing
forms to designate the account as subject to the Special Deposit Act is a question I cannot answer. If a customer provides his own “Special Account” agreement, you need to discuss this with bank counsel.

I will add that the Uniform Laws Committee that promulgated the Uniform Special
Deposit Account Act has produced a one hour video I viewed and that you may access
via this link.

Title 19 O.S. § 298 – Change in margin size for recording with County Clerk

The margins for deeds, mortgages, releases, etc., presented to the county clerk for
recording on and after November 1, 2024, are changing. The top margin is increasing
from at least one inch to at least two inches, and all other margins are increasing from
at least one-half (1/2) inch to one inch. I would note that by increasing the size of the
margins, the number of pages being recorded may also increase. Banks will need to
keep the change in mind when providing cost disclosures for consumer loans.

B.

The top margin of all documents shall be at least two (2) inches and all other
margins shall be at least one (1) inch.

C. Despite any provision in this section to the contrary, the county clerk shall accept for
filing any document that fails to meet the requirements of subsection B of this section if:

1. The document is an original or a certified copy of an original;
2. The document is legible without the aid of magnification or other enhancement
of the text;
3. The document is xerographically reproducible by the copying equipment in use
by the county clerk;
4. The document meets all other statutory requirements for recordation; and
5. The person offering the instrument for recording pays the additional fee
provided in Section 32 of Title 28 of the Oklahoma Statutes for nonconforming
documents.

If the bank does not comply with the new margin requirements, there will be an
additional fee under § 32 of Title 28:

13. For recording the first page of deeds, mortgages, and any other instruments
which are nonconforming pursuant to subsection C of Section 298 of Title 19 of
the Oklahoma Statutes – $25.00
14. For recording each additional page of an instrument which is nonconforming
pursuant to subsection C of Section 298 of Title 19 of the Oklahoma Statutes –
$10.00

A potpourri of deceased customer Q&As

By Pauli D. Loeffler

The OBA Legal and Compliance Team receives a lot of questions regarding deceased
customers. Here are just a few of the many we received in the last month.

Finding the POD

Q. We have a checking account that has a POD beneficiary named and the customer
has passed away. However, it is an older account and all we have is a name with no
other identifying information for the beneficiary, not even a phone number. To
complicate matters further, the beneficiary is not one of the customer’s children. One of
the customer’s sons has been named special administrator of the estate. However,
since the account had a POD named it doesn’t become part of the estate. Can we tell
the son that the account has a POD beneficiary, and he is not it? Is there anything he
can do or provide to us that would require us to share who the POD beneficiary is?

A. The son appointed as Special Administrator of the estate stands in the shoes of the
deceased customer and can have any and all information regarding the account
including the signature card naming the POD. Perhaps the son may be able to provide
information regarding the POD. You will have to advise him that the funds are not part
of the estate, and if the bank cannot locate the POD, the funds will be escheated as
unclaimed property for the POD to claim.

Minors as PODs

Q. The owner passed away in March of 2021 leaving two CDs. One of the CDs has his
granddaughter, age 17, listed as his beneficiary, and the other has his grandson, age
14, listed. We have made numerous attempts to have the father of the grandchildren,
who was also a representative for the estate, come and close the accounts for the
benefit of his children. He will not come. We can only speculate on the reasons why.
The money is now due to be sent as unclaimed property to the state. We really do not
want to do that to these kids. Can we make checks payable directly to children and
bypass the father? Do we have other options? I do have a way to contact the
granddaughter directly. She was informed that she has funds here.

A. First, we are talking about CDs that I presume automatically renew. These have a
much longer period before reporting and remitting to the Oklahoma Treasurer as
unclaimed property:

Tit. 60 O.S. Sec. 652

D. Automatically renewable time deposits shall be subject to this section, except that
automatically renewable time deposits shall be presumed abandoned fifteen (15) years
following the expiration of the initial time period of the time deposit unless, during that
period the owner has:

1. Increased or decreased the amount of the deposit;

2. Communicated in writing with the banking or financial organization concerning
the property;

3. Otherwise indicated an interest in the property as evidenced by a
memorandum or other record on file prepared by an employee of the banking or
financial organization; or

4. Had another relationship with the banking or financial organization concerning
which the owner has:

a. communicated in writing with the banking or financial organization, or
b. otherwise indicated an interest as evidenced by a memorandum or
other record on file prepared by an employee of the banking or financial
organization and if the banking or financial organization communicates in
writing with the owner with regard to the property that would otherwise be
presumed abandoned under this section at the address to which
communications regarding the other relationship are regularly sent.

Upon presumed abandonment of the automatically renewable time
deposit, the holder shall report the presumed abandonment to the State
Treasurer and may, at the holders option, either retain the property or pay
or deliver it to the State Treasurer.

In other words, the CDs may not yet be due for reporting as Unclaimed Property. Even if
the CDs are required to be reported by the bank, it has the option to retain the CDs.
There is also the possibility that the grandchildren were named in the will, and there
may have been custodians named to manage those funds, in which case, the bank can
make the checks payable to the custodians.

Still more on the FDIC’s revisions to part 328

By John S. Burnett

In the June and July 2024 issues of Legal Briefs, I analyzed first the effects of the
FDIC’s Part 328 revisions on an insured depository institution’s (IDI’s) ATMs and other
digital deposit-and like devices (June 2024 Legal Briefs), and then other significant
changes to the regulation (July 2024 Legal Briefs). So, what else is there to discuss?

First, we learned in mid-July that the ABA, the Bank Policy Institute, and the Consumer
Bankers Association had written to the FDIC to ask that it “continue to work with
member institutions and other industry stakeholders to determine those aspects of the
final rule where comprehensive and clarifying implementation guidance is necessary for
institutions to be able to properly implement the rule, and this guidance, which could
take the form of FAQs, for example, be published by the end of 2024.” The letter went
on to request that the FDIC extend the compliance deadline by 12 months to January 1,
2026, to “provide institutions with sufficient time to comply with the rule, as clarified by
the guidance.”

Whether or not the FDIC will extend the compliance deadline is unknown. At the time
this Legal Briefs article was written, the deadline was still January 1, 2025.

Clarification and guidance in a Q&A document

The FDIC has posted “Questions and Answers related to the FDIC’s Part 328 Final
Rule,” [https://www.fdic.gov/resources/deposit-insurance/questions-and-answers-
related-to-the-fdics-part-328-final-rule.html]. The Q&A may be updated from time to
time. Make note of the “Last Updated” date (currently August 16, 2024) to see if there’s
anything added since your last review of the webpage.

What follows is taken from the FDIC’s responses in the July 16, 2024, Q&As; the
“Observations” are mine

FDIC Official Sign
Q1. Does the rule require the current FDIC official sign to be posted at new accounts
desk?

A. If a banker at a new accounts desk “usually and normally” receives and processes
deposits (e.g., processes a check deposit at the new accounts desk), then the official
sign must be posted at the new accounts desk. In a scenario where the banker at the
new accounts desk always walks the initial deposit over to the teller line, then the teller
is “receiving” the deposit and the official sign posted at the teller window is sufficient;
therefore, in that situation, an official sign would not be required at the new accounts
desk.

Observation: This is not new information. Apparently, bankers continue to ask the
question, however, so including it in this Q&A is helpful.

Q2. Are insured depository institutions (IDIs) required to provide any initial disclosures
about FDIC insurance coverage, either orally or in writing, before opening an account?

A. No. Part 328 does not require IDIs to provide “initial disclosures” about FDIC
coverage before account opening.

Observation: This is also not new information.

Q3. Is the FDIC official sign required at night drop facilities?

A. No. The official sign is required wherever deposits are usually and normally received.
FDIC staff does not view that deposits are usually and normally received by the IDI
when placed in a night depository.

Observation: Again, not new, but some banks have posted the FDIC official sign at
their night depositories. That is not prohibited, but it is unnecessary.

Q4. The new FDIC official digital sign is generally required to be displayed in the colors
navy blue and black. Does the final rule modify the physical official sign color
requirements?

A. No. The final rule does not modify color requirements for the physical FDIC official
sign. The rule continues to require use of the standard, in-branch official FDIC sign,
which is …. [the response continues with a description of the physical sign, using the
wording of section 238.3(b)(4) of the rule].

Non-Deposit Sign

Q1. Is the non-deposit sign required to be displayed in the individual offices within IDIs
where non-deposit products are offered?

A. Yes. Under 12 CFR § 328.3(c)(2), an IDI must continuously, clearly, and
conspicuously display the required non-deposit signage at each location within the
premises where non-deposit products are offered. If non-deposit products are offered in
individual offices, the non-deposit sign should be visible in those offices.

Placement and Display of Official Digital Sign

Q1. Are IDIs’ websites considered deposit-taking channels for purposes of the digital
signage requirements?

A. Under part 328, the FDIC official digital sign must be displayed on “digital deposit
taking channels,” which includes IDIs’ “websites and web-based or mobile applications
that offer the ability to make deposits electronically and provide access to deposits at
insured depository institutions.” 12 CFR § 328.5(a). If an IDI’s website is purely
informational, with no ability to make deposits or access deposits, it would not be
a digital deposit-taking channel.

Observation: And if it is not a digital deposit-taking channel, you are not required to use
the FDIC official digital sign. But don’t forget, if you promote deposit accounts on the
site, you will need to comply with new § 328.6 (Official advertising statement
requirements), as you probably have been all along.

Q2. Can the official digital sign appear only on the IDI’s “home page” and not on the
other web pages that make up the website?

A. No. The FDIC official digital sign must be displayed on the (1) initial or homepage of
the IDI’s website or application, (2) landing or login pages, and (3) pages where a
customer may transact with deposits. For example, the FDIC official digital sign should
be displayed where a mobile application allows customers to deposit checks remotely,
because this electronic space is in effect a digital teller window. 12 CFR § 328.5(d).

Q3. Where are we required to place the official digital sign on a bank webpage or app to
ensure compliance with the “clear,” “continuous,” and “conspicuous” placement of the
digital sign?

A. In general, the FDIC would expect to see official digital signs displayed on the
applicable pages in a manner that is clearly legible to all consumers to ensure they can
read it easily. The official digital sign could be displayed above the IDI’s name, to the
right of the IDI’s name or below the IDI’s name, but under all circumstances, the official
digital sign continuously displayed near the top of the relevant page or screen and in
close proximity to the IDI’s name would meet the clear and conspicuous standard under
the rule.

Here is an example:

Q4. Can the official digital sign be dismissed once a customer logs in?

A. No. The final rule requires that the official digital sign be displayed “in a continuous
manner,” which means it must remain visible on the (1) initial page or homepage of the
website or application, (2) landing or login pages, and (3) pages where the customer
may transact with deposits. 12 CFR § 328.5(d). The final rule, however, does not require the official digital sign to continue to follow the user as they scroll up or down the
screen.

Q5. Does the official digital sign need to be linked to the FDIC’s website?

A. No. Part 328 does not require the official digital sign to be linked to the FDIC’s
website. However, it may be helpful to consumers if IDIs link the official digital sign to
the FDIC’s optional online BankFind tool, so that consumers can more easily confirm
that the bank is FDIC-insured. This would help consumers better differentiate IDIs from
non-banks. Optional, downloadable versions of the FDIC official digital sign are
accessible to, and available for, bankers on FDICconnect, a secure website operated by
the FDIC that FDIC-insured institutions can use to exchange information with the FDIC.

Observation: Customers may or may not find the BankFind tool useful. Linking to it is
completely optional.

Q6. How should IDIs display the FDIC official digital sign on mobile devices with screen
resolutions that do not support the ability to display the entirety of the digital sign on one
line?

A. Generally, the FDIC official digital sign should be displayed as presented (shown
below) in the final rule at 12 CFR § 328.5(b), with no alteration to the text except for
color variation as noted in the regulation text.

However, if the image does not fit a particular device or screen, the official digital sign
can be scaled, “wrapped,” or “stacked” to fit the relevant screen and may satisfy the
“clear and conspicuous” requirement.

Observation: Scaling the image could render it illegible. I suggest you check it on a
number of mobile phones. “Wrapping” or “stacking” the text may be a better option on
narrower screens in portrait mode.

Q7. If an IDI’s name appears at the top of its website, and it also appears in the
website’s footer, does the new FDIC official digital sign need to be displayed at the top
of the page and also in the footer?

A. Under the final rule, IDIs are required to display the FDIC official digital sign “clearly
and conspicuously” in a continuous manner; the official digital sign continuously
displayed near the top of the relevant page or screen and in close proximity to the IDI’s
name would meet the clear and conspicuous standard under the rule. 12 CFR § 328.5(f).

IDIs are not required to display the FDIC official digital sign every time the IDI’s
name appears, such as in the footer of the website.

Q8. To satisfy the final rule’s official digital sign requirements, can the official digital sign
be placed in the footer of the webpage?

A. No. purposes of satisfying the final rule, IDIs are required to display the official digital
sign in a clear, continuous, and conspicuous manner. The official digital sign
continuously displayed near the top of the relevant page or screen and in close
proximity to the IDI’s name would meet the clear and conspicuous standard under the
rule. 12 CFR § 328.5(f). Therefore, placing the official digital sign in a footer of an IDI’s
webpage would not meet the clear, conspicuous, and continuous display requirement.

Observation: Questions 7 and 8 should have been combined.

Q9. If an IDI displays the FDIC official digital sign on its mobile app’s homepage and
alongside the IDI’s logo within the app, is it also necessary to include this signage on
the transaction portal before a customer completes a transaction?

A. It depends in part on what type of transaction is being completed. The FDIC official
digital sign must be displayed on the (1) initial or homepage of the bank’s website or
application, (2) landing or login pages, and (3) pages where a customer may transact
with deposits. 12 CFR § 328.5(d). For example, the FDIC official digital sign should be
displayed where an IDI’s mobile application allows customers to deposit checks
remotely, because this is an electronic space where a customer is transacting with
deposits.

However, if a consumer is completing a transaction by using an embedded third-party
payment platform that consumers: (a) access after logging into their IDI’s website; and
(b) utilize to initiate payments/move funds out of the IDI, then the official digital sign
should not be posted on those pages.

Observation: If your bank includes both of these types of transactions on the same
page, it will need to separate them as described in the FDIC’s response.

Q10. What are examples of “pages where the customer may transact with deposits” that
require the display of the FDIC official digital sign?

A. Examples of “pages where the customer may transact with deposits” that require the
display of the FDIC official digital sign include, but are not limited to: mobile application
pages that allow customers to deposit checks remotely; and, pages where customers
may transfer deposits between deposit accounts held within the same IDI (e.g.,
checking to savings or vice versa).

On the other hand, the FDIC would not expect an IDI to display the FDIC official digital sign on pages where a customer is transferring money from a deposit account to a non-deposit account.

Observation: Check your bank’s online and app pages that offer transfer capabilities to
see if some transfer types need to be set up on a separate page.

Q11. On which webpages should IDIs include non-deposit signs, and are we in
compliance if we place the non-deposit signs in the footer of the webpage?

A. With respect to which specific webpages the non-deposit signs must be displayed,
when an IDI offers both access to deposits and non-deposit products on its digital
deposit-taking channels, it must display a non-deposit sign indicating that non-deposit
products: are not insured by the FDIC; are not deposits; and may lose value. This non-
deposit sign must be displayed clearly, conspicuously, and continuously on each
page relating to non-deposit products.

With respect to whether the non-deposit signs can be placed in the footer, although
there is no requirement for the non-deposit sign to be displayed near the top of the
relevant page or screen, placing the non-deposit sign in a footer of an IDI’s webpage
would generally not meet the clear, conspicuous, and continuous display requirement.

In addition, the non-deposit products sign may not be displayed in close proximity to the
FDIC official digital sign. 12 CFR § 328.5(g)(1).

Observation: It may be “cleaner” to avoid offering or access to deposit and non-deposit
products on the same page.

Use of Advertising Statement on Digital Channels

Q1. Should IDIs include the “Member FDIC,” “Member of FDIC,” or “FDIC-Insured”
advertising statement on every page of their digital platforms?

A. The advertising statement (e.g., “Member FDIC”) must be displayed on
advertisements, consistent with 12 CFR § 328.6. It is not intended to overlap with the
official digital sign, and the advertising statement is not required on web pages where
an IDI displays the official digital sign, such as the bank’s homepage. However, an IDI is
not prohibited from displaying the advertising statement on a page that also includes the
official digital sign, so long as the use of the advertising statement on that page is
otherwise consistent with the official advertising statement requirements in 12 CFR §
328.6.

Automated Teller Machines or Like Devices

Q1. When implementing new official digital signage on ATMs, are IDIs required to
remove existing physical signs, or can both types of signage be displayed
simultaneously?

A. IDIs are not required to take down physical FDIC official signs attached to ATMs. For
an IDI’s ATM or like device that receives deposits but does not offer access to non-
deposit products, except as described below, the final rule provides flexibility to meet
the signage requirement by either (1) displaying the FDIC official digital sign
electronically on ATM screens (consistent with the image as described in 12 CFR §
328.5), or (2) displaying the physical official sign by attaching or posting it to the ATM.
However, IDIs’ ATMs or like devices that accept deposits and are put into service after
January 1, 2025, must display the official digital sign electronically (with no option to
satisfy the requirement through display of the physical official sign). 12 CFR § 328.4(e).

Observation: If an IDI’s ATM does not receive deposits, neither the official physical
sign nor the official digital sign is required to be displayed. If, however, a screen
displayed on the ATM includes an advertisement subject to § 328.6, the official
advertising statement or an optional short title or symbol should appear on that screen.

Social Media

Q1. Are IDIs required to post the new official digital sign on its social media
advertisements?

A. No. IDIs are not required to display the FDIC official digital sign on its social media
advertisements. IDIs should ensure that social media advertisements are compliant with
the official advertising statement requirements contained in 12 CFR § 328.6.
Observation: Social media are not digital deposit-taking channels.

Technical assistance

Q1. Where can IDIs obtain additional information about the final rule to support
compliance efforts?

A. The FDIC posted the slides from the FDIC’s banker webinar on Part 328 on
its website.
The FDIC issued a Financial Institution Letter and press release addressing the
issuance of the final rule.
The final rule was published in the Federal Register on January 18, 2024.

Q2. Where can IDIs obtain downloadable versions of the digital official sign?

A. The FDIC has made optional versions of the official digital sign available for IDIs
on FDICconnect, a secure website operated by the FDIC that FDIC-insured institutions
can use to exchange information with the FDIC. The requirement to display the new
FDIC official digital sign only applies to IDIs. Display of the FDIC official digital sign by
any non-bank third party would improperly imply that the non-bank is FDIC-insured and
would constitute a misrepresentation under part 328 subpart B.

Compliance and effective dates

Q1. Are there any changes that had to have been implemented by the final rule’s
April 1, 2024, effective date, or do IDIs have until January 1, 2025, to comply with all
requirements?

A. The compliance date for the amendments made to the final rule is January 1, 2025.
No changes had to be implemented by April 1, 2024, but IDIs can begin posting the
official digital sign and implementing other aspects of the regulation prior to January 1,
2025. For example, some IDIs have already posted the new official digital sign on their
websites. Similarly, some non-bank entities have updated their disclosures consistent
with the amendments to part 328 subpart B.

Advertising for Non-Deposit Products

Q1. In marketing materials that feature safe deposit boxes or credit products alongside
insured products like checking accounts, should IDIs include a disclosure stating that
these products are not FDIC-insured?

A. For the purposes of part 328, safe deposit boxes and credit products are excluded
from the definition of “non-deposit product.” Therefore, there is no requirement under
part 328 for an IDI to include such a disclosure in marketing material for these products.
Observation: Some banks have posted notices in their safe deposit areas and/or in
contracts for safe deposit service to advise customers that, despite the use of “safe
deposit” in the name of the service, the contents of a customer’s safe deposit box is not
insured by the FDIC or by the bank and that customers should consider insuring any
intrinsically valuable contents in a rider to their hazard insurance policies. These notices
are not affected by part 328.